TaxBuddy Explainer For Non-Residents In Covid-19 Period

You are basically a Non-Resident but now you may be stuck in India because of this:
• Suspension of international travel flights from India or
• If you are placed under quarantine because of Covid-19 situation in India
TaxBuddy explains the revised rules for the Non-Residents stuck in India because of Covid-19

Q. What is the concept of tax-residence in India?
A. Income tax is to be paid by the Indian residents on their global income and NRs only on specific incomes arising in India.
• You are resident in India if you have
– Stayed for 182 days or more from 01/04/2019 to 31/03/2020 OR
– If you have stayed for 60 days or more in India in the above period but you stay in last 4 years till 31/03/2019 is 365 days or more.

Budget 2020- If a person having total income exceeding ₹ 15 lakhs (other than foreign sources), then the limit of “182 days or more in a financial year”, replaced by “120 days or more in a financial year.”

Q. So, what is the tax-risk for me if I am stuck in India and what should I do?
A. If you are stuck in India, you ran the risk of being a tax resident in India. However, the Central Government has taken away that risk by modifying the rules through Circular No. 11 of 2020 dated 08/05/2020, and hence, you’re being stuck in India because of suspension of flights will no more make you a tax resident in India.

Q. Which Financial Year are the revised rules applicable?
A. The revised rules are applicable for the financial year 2019-20 for which ITR is to be filed before 31/07/2020

Q. What about the rules in case of the current financial year 2020-21
A. In the Circular the Central Government has indicated that they may issue the new guidelines in due course considering the period of suspension of flights which is still not decided.

Q. Are these revised rules applicable to HUF?
A. No. These revised rules are applicable only to Individual taxpayers.

Q. I am stuck in India because of the suspension of flights, what should I do?
A. You count your days of stay in India for the period from 01/04/2019 to 31/03/2020. If the period is more than 182 days, then deduct 10 days from total stay, and then after deduction if your stay period is less than 182 days, the you are non-resident in India.

Example : Shri Sanket came to India on 24/09/2019 and had booked flight ticket out of India on 22/03/2020 but could not board the flight because of suspension of flights and hence he completed stay of 190 days in India and became tax resident in usual course. However, as per new rules, Sanket has to deduct 10 days from his total stay which will result to 180 days and hence Sanket is NON-RESIDENT.

Q. What are the rules for the person who is quarantined in India?
A. If you are quarantined in India on or after 01/03/2020, then the period of quarantine till 31/03/2020 or the date of departure from INDIA shall be ignored for the purpose of computation of your stay in India.

Q. I came to India on 26/09/2019 and was planning to leave on 23/03/2020 but could not go due to suspension of International flights, what should I do?
A. As per new rules, your period of stay from 22/03/2020 to 31/03/2020 shall be ignored. So, your total stays in India for FY 2019-20- would be 178 days (and not 188 days).

Q. I came to India on 21/01/2020 and was planning to leave on 15/03/2020- but could not leave since I was quarantined on 10/03/2020, so my period of stay is exceeding 60 days has exceeded 60 days, what should I do?
A. Since you were quarantined on or after 1st March, 2020 and was unable to leave India on or before 31st March, 2020, your period of stay from beginning of quarantine i.e. 10/03/2010 to 31/03/2010 shall be ignore for computing total stay duration, and your total stay period would be 49 days instead of 61 days.

Q. I came to India on 15/01/2020 and was planning to leave on 05/03/2020 but could not leave since I was quarantined on 02/03/2020 and left on 20/03/2020. What should I do?
A. Since you were quarantined on or after 01/03/2020 and left India on 20/03/2020, so the period from the beginning of quarantine i.e. 02/03/2020 to 20/03/2020 shall be ignored for computing residency status, and your total stay would be 50 days instead of 66 days.