Maintaining NRI Status For Relief Under Taxation In FY 20-21

Overview

• On Wednesday, the Supreme Court heard a plea of Gaurav Baid, an UAE based NRI, for maintaining the NRI status for taxation under IT Act, 1969.
• This plea was again filed challenging the circular of CBDT released on 3rd march, 2021.
• The appellant seeks to maintain NRI status to avoid paying tax in India for his global income, however because of the pandemic laws have been made worldwide where people are to be taxed in the domestic country.
• The appellant is employed in a country that is tax neutral and therefore pleads that his status of NRI should be maintained and hence not liable to pay tax in India.

Who is a Non Resident Indian (NRI)?

• An Indian citizen residing outside India for a combined total of at least 183 days in a financial year is considered as an NRI.
• Under section 6 of IT Act,1961, a person is said to be a resident of India if he is in India in that year for a period or periods amounting in all to 182 or more or; have been in India for a period of 365 days in the proceeding 4 years or period amounting in all to 60 days or more in that year.
• Such person is liable for paying taxes on the income incurred either outside of India or in India. However, NRI’s are only liable to pay tax for the income they earn in India.

NRI Status in FY 2020-21

• The Central Board for Direct Taxation(CBDT) has issued a notice under which any person staying in India for more than 182 days will be considered as resident of India and not NRI as given under the IT Act.
• In FY 2019-20, they were given relaxation for tacation purposes under IT Act, 1961 for their extended stay in India but the same has not been granted in FY 2020-21.

Appeal filed in Supreme Court

• Gaurav Baid, NRI based in Dubai had filed a plea to maintain the status of NRI for FY 2020-21 for purpose of taxation act.
• The petitioner submitted that his stay in India was extended for more than 182 days in India only because of the COVID-19 pandemic and the lockdown not because of his own free will and hence his status as an NRI should be maintained and he should be not be made liable for paying taxes in India.
• The petitioner has previously approached the SC in feb,2021 seeking directions to central govt. to consider his representation for being treated as an NRI for FY 20-21 wherein the SC directed him to approach the CBDT with a representation, since the CBDT has dealt with a similar situation and conferred benefit in financial 2019-20.
• However, the CBDT circular on 3rd march,2021 has not provided any relief to NRI’s on the issue of being taxed on their global income because of losing their NRI status on the account there will not be any “Double Taxation” for them because of the government’s DTAA.
• The petitioner being residing in a zero tax country and this notice is only a veiled attempt by Indian Government to tax individual who otherwise would not have fallen within the tax net.
• The court has issued notice in all connected matters, returnable on 16th April, 2021.

What are your views on this, whether NRI status should be maintained or not?

Share your views with us in the comment section