The Central Board of Direct Taxes (CBDT) on Wednesday obtained information from Non-Resident Indians (NRIs) who face double taxation due to being forced to reside in India. This is part of the clarification regarding residential status under the Income Tax Act.
That position came after the Supreme Court asked the Board of Directors on February 10 to rule within three weeks on relief to be granted to NRIs after payment of income tax for fiscal year 2020-21 following the Covid-19 pandemic. Now the board has announced that it has received various statements from people who came to visit India in the past year 2019-20 and wanted to leave India, but were unable to do so, in order to relax the residential status for the previous year 2020-21 therefore because of the suspension of international flights. The matter has since been examined by CBDT.
DTAA
“If a person is exposed to double taxation even after taking into account the relief granted by the corresponding double taxation agreement (DTAA), they can submit the information provided in Form-NR by March 31, 2021,” said the board in a circular. This form must be sent electronically to the Chief Commissioner for Income Tax (International Taxes).
On May 8, 2020, CBDT issued a clarification for fiscal year 2019-20 on the aspect of residence under Section 6 of the IT Act, in which NRIs who were unable to return to their country of work / residence due to the lockdown were granted various relaxations . NRIs sought a similar clarification for the 2020-21 fiscal year.
In its circular, the CBDT now stated that the OECD (Organization for Economic Cooperation and Development) as well as most countries have made it clear that in view of the provisions of the domestic income tax law with the DTAAs (double taxation avoidance agreement) appears for the 2020 financial year -21 there is no possibility of double taxation of income. “The possibility of double taxation does not exist under the provisions of the Income Tax Act of 1961, which was read with the DTAAs,” it said.
However, CBDT said in order to understand the possible situations in which a particular taxpayer may face double taxation due to being forced to reside in India, it would be in the fitness of things to obtain relevant information from these individuals. “After understanding the potential double taxation situations, the Board of Directors examines the following: – Whether there is a need for relaxation on this matter; and if necessary, a general relaxation for a class of people or a specific relaxation must be provided in individual cases, ”said the tax authority.