The Apex Court on Wednesday directed the Central Board of Direct Taxes (CBDT) to decide on income tax exemption to non-resident Indians (NRIs) within 3 weeks for the financial year 2020-21 in the wake of the COVID-19 pandemic.
The plea has been filed by Gaurav Baid, a Non Resident Indian, presently based in Dubai, United Arab Emirates. Baid came to India in March 2020 on a visit and was able to travel back after 182 days in India in 2020-21. This involuntary extended stay, the petitioner feared, may result in his losing the non-resident status under the Income Tax Act, 1961, thereby exposing his global income to tax in India. The petitioner was assessed as an NRI in 2019-20.
The plea has been filed against the Home Ministry and the Civil Aviation Ministry for suspending international air travel for most part of FY 2020-21. As a consequence, many NRIs had to extend their stay in India. This is the problem highlighted by the present petition.
According to the clarification issued by the Ministry of Finance dated 8 May 2020, for Financial Year 2019-20, on the aspect of residency under Section 6 of the Income Tax Act, various relaxations were provided to non-resident Indians who were on a visit to India at the time of imposition of the lockdown and consequently could not travel back to their country of work/residence. However, no such clarification has been provided till date for Financial Year 2020–21
Senior Advocate Mukul Rohatgi submitted that this issue is affecting hundreds and lakhs of people in the country, as the NRIs are unable to leave.
Mr. Rohatgi while requesting issuance of the notice to the government submitted that business of the NRIs will be affected and it will create havoc.
A Bench headed by Justice UU Lalit issued the directions in the plea filed by a Non-Resident Indian, seeking a direction that his “non-resident status” for purposes of Income Tax Act, be maintained for the financial year 2020-21 regardless of the number of days spent in India on account another pandemic, and he is immunized from liability to tax in India on his global income for the present financial year.
The Court noted that since in respect of the previous year 2019-20, benefits were granted by CBDT through its circulars, it would be appropriate for petitioner to approach CBDT. The petitioner has been asked to make a representation to CBDT in three days and CBDT has been directed to decide the same.
After the Supreme Court directive, it is expected that the CBDT may soon release a circular clarifying the exclusion of FY-21 for determining the residential status.
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