Effect of Covid related restrictions on tax residency

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Sachin

Biz

23 Points Posted on 22 April 2020

I want to know what effect covid related restrictions will have on Tax residency. Kindly consider the scenario,

A person is leaving India for permanent settlement abroad for the first time this year. Per Section 6, Clause 1C, of Income Tax rules related to residency, the person will be resident of India for tax purposes as no outgoing flights are available until June this year. which would mean he/she has to stay >60 days in India and due to which all income (incl. global) will be taxed.

Where the stay in India is extended beyond one's control and due to restrictions imposed by the government; What are the implications for the person in consideration. can he/she request to be considered as NRI and ask for exclusion of days during whichÂ travel was restricted?

Kindly also refer to this particular case decided by Delhi CourtÂ https://assets.kpmg/content/dam/kpmg/pdf/2015/06/Suresh-Nanda-1.pdf

Thanks.

Replies (2)

SUSHANT BIDAYE

721 Points Posted on 22 April 2020

There is no such provision presently.

if the government amends the act, for such contingencies

debora M

BUSINESS DEVELOPMENT MANAGER

1697 Points Posted on 05 June 2020

Under Indian Income Tax Law, there are several provisions which stipulate physical presence-based tests not just to determine tax residency for individuals, but also tax exposure for foreign entities—be it tax residency on account of their place of effective management (POEM) being in India or tax exposure on account of their permanent establishment (PE) in India. Many other jurisdictions have similar physical presence thresholds.

There have been many occasions where nonresident Indians came to India (as their usual practice) prior to the Covid-19 outbreak, to manage their family affairs and investments, and because of the Covid-19 outbreak, their Indian stay (for testing whether they have become “resident” for Indian income tax purpose) has crossed the prescribed threshold number of days for FY2019–20. This is critical from a tax perspective because if one becomes a resident, the scope of income which can be taxed in India widens and there are other requirements for local tax filings, etc.