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FM announces Relief for Stranded NRIs due to COVID Lockdown

 

FM announces Relief for Stranded Non-Resident Indians and Foreign Nationals for NRI tax rules due to COVID Lockdown. On Friday, Indian Finance Ministry allowed discounting of prolonged stay period in India to determine residency status amid the lockdown. In a much anticipated and awaited relief for Non-Resident Indians and foreign visitors to the country, FM Nirmala Sitharaman on Friday allowed discounting of prolonged stay period in India to determine residential status amid the lockdown and prohibition of international travel. Due to the COVID-19 pandemic and the lockdown, people have been forced to prolong their stay in India. The situation has modified the status of their residency, having a direct impact on their taxability in India, under provisions of the Indian Income Tax Act Laws. This has cleared some air around NRI taxation and NRI tax rules.

The Finance Ministry has now decided not to include an extended stay of foreign visitors and NRIs in India due to lockdown in determining their residential status shedding light on NRI tax rules.

“Considering various representations received from people who had to prolong their stay in India due to lockdown and suspension of international flights, expressing concerns that they will be required to file tax returns as Indian residents, Finance Minister Nirmala Sitharaman on Friday allowed discounting of prolonged stay period in India to determine residency status.”

The Finance Ministry further stated that as the lockdown continues during the financial year 2020-21, it is not yet clear as to when international flight operations would resume.  A circular excluding the period of stay of these individuals up to the date of normalization of global flight operations, for determination of the residential status for the financial year 2020-21 will be issued after the flights are resumed.

The Central Board of Direct Taxes (CBDT) has issued a necessary circular to this effect. The circular makes it clear that any period of stay in India post March 22 to March 31 will not be included for calculation of the number of days required to determine residency status for tax purposes. Visitors who had to be quarantined for a period even before March 22 will also get relief. Thus the NRI services in India have elucidated the NRI tax rules in this COVID situation.

Even if an individual has departed on an evacuation flight on or before March 31, 2020, his period of stay in India from March 22 to his date of departure shall not be taken into account as per the Ministry. The status of an individual, whether he is resident in India or a non-resident, or not ordinarily resident; is dependent on the period for which the person is in India during a year.

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NRI: Planning to Come Back to India for Good? Check-Points Explained

 

An individual chooses to stay outside India and work day and night away from family and social circle for years and decades. The intentions are to have better living standards by earning more, looking at opportunities available vis-a-vis in his own home country. The apparent intentions of a person looking to become Non-Resident Indian (NRI) is to have a better capability to deliver for family needs, education of children and have a good and comfortable post-retirement life.

After having lived for years outside India being NRI, the moment of thought is sure to pop up, thinking let us go back to India. It is the call of the motherland, to take a break from work and now to enjoy post-retirement life.

The second thought triggers, is that there is a lot to be done before going back to India. The planning and preparations take a lot of energy and time, especially when they are planning for going back for good.

One of the points of consideration or botheration is NRI taxation. It is essential to know and to be aware of the implications that would arise post moving back to India. The laws of the land, the compliances, and concerns that are required to be addressed and all. That too, it is important when someone is planning to move back to India has had not complied to filing tax for NRI returns for years for reasons like no tax liability, awareness, the requirement of the case, or having been used to living in countries having no direct tax liability as such on income earned like in UAE or other gulf countries. People out there are habitual because of the prevailing income tax rules and being in their comfort zone.

The points that need to be assessed have been discussed in brief point by point:

1. Residential Status

Taxation of an Individual in India is based on an assessment method followed looking upon the number of days stayed in India and outside India. There are two acts, which govern the taxation and investment provisions for NRIs, i.e. Income Tax Act, 1961 and Foreign Exchange Management Act, 1999.

As per the Income Tax Act, in all, there are three major classifications of the status of an individual, which define him are Resident, Non-Resident and Resident But Not Ordinary Resident (RNOR). Based on the status, taxation of various source of income is defined.

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Cost Inflation Index for Financial Year 2020-21 Notified  Central Board of Direct Taxes (CBDT) the premier body regulating tax laws in India on Friday, June 12th 2020 published Cost Inflation Index (CII) for Financial Year 2020-2021 or Assessment Year 2021-2022 vide  Notification No. 32/2020. Cost Inflation Index helps taxpayer calculation Long Term Capital Gain on sale of Long Term Capital Assets.  
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