The Finance ministry will issue a circular to provide clarity on the residency status of NRIs and foreign nationals stuck in India in the current fiscal due to the coronavirus pandemic. For the fiscal ended on March 31, 2020, the ministry, in May last year, clarified that the period of stay of Non-Resident Indians (NRIs) and foreign nationals in India during the lockdown period would not be counted for the purpose of determining their residency status for the purpose of taxation.
"About the circular on residency, we had already issued a circular for previous financial year (2019-20) and for current financial year (2020-21) it would be issued sometime in future," Finance Ministry, Joint Secretary (Tax Policy and Legislation), Kamlesh Varshney said at a PHDCCI event on Thursday.
There were expectations that the government would clarify on the residency status of these individuals in the 2021-22 Budget, which was presented on February 1.
Commercial international flights were suspended when the nationwide lockdown was imposed on March 25, 2020. Later, such flights were allowed in a restricted manner under bilateral Air Bubble agreements and the services are yet to resume fully. As a result, many NRIs and foreign nationals had to prolong their stay in India.
There were apprehensions that this extended stay could lead to these individuals being considered as Indian residents as per Section 6 of the Income Tax Act for taxation purposes.