10/05/2020
The Central Board of Direct Taxes issued a circular no. 11/ 2020 dated 08.05.2020 and gave clarification in respect of residency under section 6 of the Income-tax Act, 1961.
"Section 6 of the Income-tax Act, 1961 says that
(1) An individual is said to be resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
(b) [***]
(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.
(2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India.
(3) A company is said to be a resident in India in any previous year, if—
(i) it is an Indian company; or
(ii) its place of effective management, in that year, is in India.
(4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.
(5) If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income.
(6) A person is said to be "not ordinarily resident" in India in any previous year if such person is—
(a) an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or
(b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less."
In short, it contains provisions related to determination of residency of a person. The status of individual, as to whether he is resident in India or a non-resident or not ordinarily resident, is dependent, inter-alia, on the period for which the person is in India during a previous year or years preceding the previous year.
Various representations were made stating that there are number of individuals who had come on a visit to India during the previous year 2019-20 for a particular durational intended to leave India before the end of the previous year for maintaining their status as non-resident or not ordinary resident in India. However due to declaration of the lockdown and suspension of international flights owning to outbreak of COVID-19, they are required to prolong their stay in India. Concerns were expressed that they may involuntarily end up becoming Indian residents without any intention to do so.
In order to avoid genuine hardship in such cases, it has been decided that for the purpose of determining the residential status under section 6 of the Income-tax Act, 1961 during the previous year 2019-20 in respect of an individual who has come to India on a visit before 22.03.2020 and:
• Has been unable to leave India on or before 31.03.2020, his period of stay in India from 22.03.2020 to 31.03.2020 shall not be taken into account; or
• Has been quarantined in India on account of COVID-19 on or after 01.03.2020 and has departed on an evacuation flight on or before 31.03.2020 or has been unable to leave India on or before 31.03.2020, his period of stay from the beginning of his quarantine to his date of departure or 31.03.2020, as the case may be, shall not be taken into account; or
• Has departed on an evacuation flight on or before 31.03.2020, his period of stay in India from 22.03.2020 to his date of departure shall not be taken into account.
Further, as the lockdown continues during the Financial Year 2020-21 and 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 normalisation of international flight operations, for determination of the residential status for the previous year 2020-21 shall be issued after the said normalisation.