Covid-19: India Shields Non Residents From Additional Tax Liability 
An aircraft operated by IndiGo is seen from a control tower as it takes off at Indira Gandhi International Airport in Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Covid-19: India Shields Non Residents From Additional Tax Liability 

India has issued a circular to shield non-residents from additional tax liability due to their extended stay in the country on account of the national lockdown and travel curbs imposed to counter the outbreak of Covid-19. The exemption applies for the financial year 2019-20.

This comes after the government received several representations requesting relaxation in the residency requirements. Foreigners and non-resident Indians could have attracted additional tax liability in the absence of such notification.

Individuals can be classified as “resident” or “non-resident” under the Indian tax law on the basis of the duration of their stay in the country during a financial year. The threshold for this stay was revised from 182 days to 120 days in this year’s Budget. Once classified as a resident, the person’s global income becomes liable to tax. The present circular will prevent such taxation.

As per the circular, the specified period spent by foreigners and non-residents in India won’t be counted for determining their tax residency. Accordingly:

  • The period between March 22 to March 31, 2020 will not be taken into account if the person was unable to leave India before March 31.
  • If they were quarantined in India due to Covid-19, the period from the beginning of the quarantine till the date of departure or March 31 won’t be counted for determining tax residency.
  • For persons who left on an evacuation flight, the period of their stay between March 22 to the date of departure won’t be counted.

Tax experts welcomed the government’s move.

The circular was much awaited and takes cognizance of concerns of NRIs and other foreigners who arrived in India before March 22, but could not return on account of various reasons, Shailesh Kumar, director, Nangia Andersen Consulting, told BloombergQuint. One may expect a similar circular for FY 2020-21, he added.

Sameer Jain, partner at PSL Advocates and Solicitors, pointed out that the circular is line with similar notifications issued by countries like the U.S., Singapore and Australia . “This is a very forward looking approach and reflects on the Government’s resolve to provide sops during troubled times.”

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