The Central Board of Direct Taxes (CBDT) has asked non-resident Indians (NRIs) and foreign nationals who have been forced to overstay in the country because of the pandemic and the suspension of international flights to submit their details if they are facing double taxation.
They have been told to furnish this information by the end of the month. In a circular issued on Wednesday, the CBDT said that any individual facing double taxation even after the Double Taxation Avoidance Agreement (DTAA) is taken into account can furnish the information to the Principal Chief Commissioner of Income-tax (International Taxation). The DTAA is a tax agreement signed between two or more countries so that taxpayers are not taxed twice for the same income.
The form by the CBDT to be filled asks for details about whether income from Indian sources exceeds Rs 15 lakh in the previous year, the nature of income being subjected to double taxation, taxable income, reasons for double taxation and more.
The board said that it received various representations that requested a relaxation in rules that determine residential status for the 2020-21 year from people who had come on a visit to India during 2019-20 and wanted to leave the country but could not do so.
This move comes after apprehension that being forced to stay back in the country would lead to them being counted as Indian residents. Last May, for FY20, the Ministry had said that the period from March 22, 2020 (the day when international flights were suspended) to March 31, 2021, would not be counted to determine residency status for taxation purposes.
One would be considered an Indian resident if one resides here for 182 days, but there are exceptions to the same.
The CBDT said that most countries have levied the condition that an individual has to be in the country for over 182 days to determine if they are a resident, and so a person will only be a resident of one country as there are only 365 days in one year. However, there are cases where one can become a resident even without staying for 182 days.
It said that if a general relaxation for the 182-day period is provided, there may be cases of double non-residency. “In such a situation, a person may not become a tax resident in any country in PY 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,” it said. It added that in case there is a situation of dual residency, the individual will become a resident of only one country as per the tiebreaker rule in the DTAA.
“...the possibility of double taxation does not exist as per the provisions of the Income-tax Act, 1961 read with the DTAAs [Double Tax Avoidance Agreement]. However, in order to understand the possible situations in which a particular taxpayer is facing double taxation due to the forced stay in India, it would be in the fitness of things to obtain relevant information from such individuals,” the board said in its circular.
Depending on the situation, the board said it would examine if any relaxation is required, and if it is, it will see whether general relaxation can be provided for a class of individuals or specific relaxation is required to be provided in individual cases.