Govt may offer relief to NRIs/foreign visitors over residency status

New Delhi, Jan 25 (IANS) The government proposes to offer relief to individuals who have been facing difficulty with the status of their residency in India under the provisions of the Income Tax Act due to the lockdown and suspension of international flights.
Sources privy to the development said that the Central Board of Direct Taxes may issue a fresh circular excluding the period of stay of individuals up to the date of normalisation of international flight operations in the financial year 2020-21 as well for the determination of their residential status.
The measure may be announced as part of the Budget proposals, giving relief to non-resident Indians (NRIs) and other foreign visitors who were forced to prolong their stay in India owing to the outbreak of Covid-19 and the ensuing lockdowns after March 31, 2020.
As per the existing regulations, a person is treated to be a resident of India for income tax purposes if he/she is in India for 182 days or more during a financial year or if he/she is in India for at least 365 days during the four years preceding that year and at least 60 days in that year.
While the rule is quite flexible, giving ample time to the visitors not to face a change in their residency status, due to the pandemic and the lockdowns, several overseas visitors had to overstay in India in FY21. This meant that all their earnings during the stay in the country would qualify to be taxed as per the rates applicable to an Indian resident. This has become a big disincentive for visitors from low tax countries.
The changes that CBDT may consider through the new circular will exempt extended stay of foreign visitors and NRIs in India due to the lockdown in April and few days thereafter for determining their residential status. This will allow overseas visitors not to be clubbed as Indian residents in FY21 for tax purposes.
“This would be a big relief to the NRI community and facilitate their larger participation in India investment. The government had given exemption to overseas visitors for their stay in India post March 22 to March 31 earlier. But as the lockdown continued after that and international flight services resumed a lot later, similar exemption is required even for FY21,” said an expert from Deloitte.
At the time of extending relief for March in August last year, the Finance Ministry had said that a circular excluding the period of stay of these individuals up to the date of normalisation of international flight operations, for determination of the residential status for the financial year 2020-21, shall be issued after the flights are resumed.

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