Direct Tax Alert

SC directed CBDT to decide on the relief to be provided to NRIs in lieu of COVID-19

February 13, 2021

The Honorable Supreme Court (SC) of India directed to the Central Board of Direct Taxes (CBDT) to decide within three weeks on reliefs to be given to Non Resident Indians (NRIs) in terms of the payment of income tax for the Financial Year (FY) 2020-21 in wake of the COVID-19 pandemic.

The Apex Court has issued directions in response to a petition filed by a NRI seeking relief in losing of the Non Residential status under the Income Tax Act, 1961 (ITA) which may expose his global income to tax in India due to his involuntary extended stay amid the outbreak of COVID-19. The Court has directed the petitioner NRI to file representation to the CBDT within three days in response to which CBDT is expected to release a circular clarifying that the involuntary stay of NRIs in India because of suspension of international air travel for most part of FY 2020-21 may be exempted for determining their residential status. The petitioner was assessed as a Non Resident (NR) in FY 2019-20 and came to India in March 2020 and was not able to travel back resulting in his prolonged stay which is in excess of the threshold limit of 120 days applicable in FY 2020-21.

Earlier, the CBDT had issued circular to provide relief to individuals (i.e. both foreign and Indian nationals) who had come on a visit to India during FY 2019-20 and remained stranded here due to lockdown and clarified that the stay between 22 March 2020 and 31 March 2020 shall not covered under the residency rules. However, no such clarification has been issued by CBDT till date for FY 2020-21. The Apex Court therefore observed that since in the FY 2019-20, the relief was provided by the CBDT, it would be appropriate for the petitioner to approach CBDT. The issuance of direction by CBDT will address the ambiguity pertaining to determination of the residential status of NRIs who could not travel back to their country of work/residence because of the lockdown and their resultant tax liability in India.

Gaurav Paliwal

Manager – Direct Tax

13 February 2021

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