Govt Clarifies Residential Status of NRIs in India during Lockdown

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Central Board of Direct Taxes (CBDT) has recently clarified on the residential status of NRIs staying in India during Lockdown.

The COVID-19 lockdown has not only brought businesses to a halt but has also changed the way of life. Besides, some important legislative changes have taken place in the past few days. Recently a change has been made to Section 6 of the Income-Tax Act, 1961, which determines the residential status of an individual in India. This Act has been modified to give the residential status to some NRIs or Non-Residential Indians who have stayed in India during Lockdown due to Coronavirus.


1. What does Section 6 of the Income-Tax Act state?

According to the Income-tax Act 1961, the residential status of an individual is dependent on the number of days he has stayed in India in the previous year or the year preceding it. In simple words, it means that a person who has lived in India for 182 days or more, during the previous financial year will be declared as a resident of India.

During COVID-19 lockdown, Section 6 of the Act, has posed a slight problem for the non-residents of India, who have come to stay in India.


2. What problems are the non-residents facing?

In accordance with the CBDT circular regarding the issue, it is noted that:-

  • There have been many individuals who had visited India in the previous FY 2019-20 for a definite period and had left or had planned to leave India before the conclusion of the fiscal year to retain their status as a Non-Residential Indian.
  • However, due to the Novel Coronavirus pandemic and the lockdown that followed soon after, international flights have been cancelled barring them from their pre-intended travel plans.
  • As such concerns have been raised regarding this law, since they are unsure about the proceedings and are concerned they might be affirmed as citizens of India, as per Section 6 of the Act.


3. What change is made to Section 6 of the Income-tax Act?

In light of the above issue, the Central Board of Direct Taxes (CBDT) has issued a change in the act. It has decided that to determine the residential status of an individual who has come to India on a visit before 22nd March 2020, they will be eligible for certain legal rights-

  • If an individual is unable to depart from India on or before 31st of March 2020, his term of stay in India from 22nd to 31st March 2020, won’t be considered.
  • The same applies to those individuals who were quarantined in India due to Corona Virus i.e., COVID-19, on or after 1st March 2020; they have boarded an evacuation flight on or before the 31st of March 2020 or were unable to leave India on or before 31st of March 2020. The total period of this stay from the beginning of his quarantine period till his date of departure, won’t be taken into account.
  • The law includes those individuals who have boarded the evacuation flight on or before 31st March 2020. Hence, this will include the duration of his stay in India from the 22nd March of 2020, to his date of departure. Accordingly, the taxability of his income shall be decided while Income Tax Return filing for FY 2019-20.

Also, read the CBDT circular.

Indeed, this is a much-needed change that has now made in the Income-tax law. This has brought immense relief to the Non-Resident taxpayers who were hitherto confused regarding their residential status in India. The change in this law has provided them respite in these problematic times.

If you require any sort of guidance with respect to Income tax return filing, and other tax compliance, please feel free to contact our business advisors at 8881-069-069.

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