NEW DELHI :
The Central Board of Direct Taxes (CBDT) on Wednesday assured that Indian laws and double tax avoidance treaties provide adequate protection to NRIs and expats who were stranded in India due to covid-19 from the possibility of having to pay taxes in two countries on the same income in FY21.
CBDT said in a circular issued late on Wednesday that though there does not appear a possibility of double taxation of their income in 2020-21 due to the safeguards in the domestic law and tax treaties, it would still obtain information from such persons about possible situations of double taxation. For this, CBDT has given a chance to persons who visited India in FY20 and could not return as intended due to international flight suspension to explain their situation, till end of March.
“After understanding the possible situations of double taxation, the Board shall examine whether any relaxation is required to be provided in this matter and if required, then whether general relaxation can be provided for a class of individuals or specific relaxation is required to be provided in individual cases,” CBDT said.
The apex direct tax policy-making body explained that there are less chances of persons acquiring residence status in India for tax purposes in FY21 as specific conditions are to be met–staying in India for 182 days or more this year. In the case of those with India income more than ₹15 lakh, staying in India for 120 days in FY21 and having stayed for 365 days in preceding four years will make him a resident for tax purposes.
Most of the countries have the condition of stay for 182 days or more for determining residency. So a person in most situations will be resident in only one country since there are 365 days in a year. “In fact, if general relaxation for the stay period of 182 days is provided, there may be cases of double non-residency. In such situation, a person may not become a tax resident in any country in 2020-21 even after staying for more than 182 days or more in India resulting in double non-taxation and end up not paying tax in any country,” CBDT said explaining why it was seeking extra information from individuals before it offered any relaxation.
A resident’s global income gets taxed in India while a non-resident only has to pay taxes on her India income.
CBDT had earlier excluded the period of Covid-19 related extended stay and quarantine period for tax residence calculation of FY20.