The Central Board of Direct Taxes (CBDT) on Wednesday has sought information from Non-Resident Indians (NRIs) facing double taxation due to forced stay in India. This is part of clarification issued in respect of residential status under Income-tax Act.
This stand has come after the Supreme Court, on February 10, asked the board to decide within three weeks on reliefs to be granted to NRIs on payment of income-tax for the financial year 2020-21 in the wake of the Covid-19 pandemic. Now, the board has said that it received various representations requesting relaxation in determination of residential status for previous year 2020-21 from individuals who had come on a visit to India during the previous year 2019-20 and intended to leave India but could not do so due to suspension of international flights. The matter has since been examined by CBDT.
DTAA
“If any individual is facing double taxation even after taking into account the relief provided by the relevant Double Taxation Avoidance Agreement (DTAA), he/she may furnish the specified information by March 31, 2021 in Form–NR,” the board said in a circular. This form is to be submitted electronically to the Principal Chief Commissioner of Income-tax (International Taxation).
On May 8 2020, CBDT issued a clarification for FY 2019-20, on the aspect of residency under Section 6 of the I-T Act wherein various relaxations were provided to NRIs who could not travel back to their country of work/residence because of the lockdown. NRIs sought similar clarification to be provided for FY 2020-21.
In its circular now, the CBDT said that OECD (The Organisation for Economic Co-operation and Development) as well as most of the countries have clarified that in view of the provisions of the domestic income tax law read with the DTAAs, (Double Taxation Avoidance Agreement) there does not appear a possibility of the double taxation of income for FY 2020-21. “The possibility of double taxation does not exist as per the provisions of the Income-tax Act, 1961 read with the DTAAs,” it said.
However, CBDT said, in order to understand the possible situations in which a particular taxpayer is facing double taxation due to the forced stay in India, it would be in the fitness of things to obtain relevant information from such individuals. “After understanding the possible situations of double taxation, the Board shall examine that, – whether any relaxation is required to be provided in this matter; and if required, then whether general relaxation can be provided for a class of individuals or specific relaxation is required to be provided in individual cases,” the tax body said.