In a circular, the CBDT said that if any individual is facing double tax even after taking into account the relief offered by the relevant Double Taxation Avoidance Contract (DTAA), he/she may provide the defined info electronically by 31 st March, 2021, to the Principal Chief Commissioner of Income-tax (Worldwide Tax).
The Central Board of Direct Taxes ( CBDT) has actually asked non-resident people facing double tax on income for FY 020-21 due to the fact that of required overstay in India due to Covid-19 related travel limitations to provide the particular info by March 31,2021
The Board will think about providing either a general relaxation or specific relaxation in individual cases depending upon the info it obtains from people, it stated in a circular released Wednesday.
Information consisting of the nature of income, the quantity that ends up being taxable and the factors of double taxation, have been looked for from the affected taxpayers through a form which can be sent digitally.
The Board stated that Indian income tax laws along with the double taxation avoidance arrangements (DTAAs) need to remove the occurrence of double taxation.
” The possibility of double taxation does not exist as per the provisions of the Income-tax Act, 1961 checked out with the DTAAs. In order to comprehend the possible scenarios in which a particular taxpayer is facing double tax due to the forced stay in India, it would be in the fitness of things to obtain pertinent info from such people,” it stated.
The CBDT has gotten representations for relaxation in decision of domestic status for 2020-21 by individuals who had begun a visit to India throughout 2019-20 and meant to leave India but could not do so due to suspension of worldwide flights.
For FY 2019-2020, the Board had stated in May in 2015 that it would discount the days from March 22, 2020 when global flights were suspended, till March 31 where an individual had actually not had the ability to leave India.
The circular issued Wednesday specified that a short stay will not result in Indian residency because an individual will end up being resident in India for the PY 2020-21 just if he remained in India for 182 days or more.
Besides, the Board added that the majority of nations have the condition of stay for 182 days or more for identifying residency, therefore an individual will be resident in just one nation because there are 365 days in a year.
” In truth, if general relaxation for the stay duration of 182 days is provided, there might be cases of double non-residency … leading to double non-taxation and end up not paying tax in any nation,” the Board added.
In case a scenario of double residency does arise, the tie-breaker guideline in Double Taxation Avoidance Agreement ( DTAA) will use, such that a person will end up being resident of just one nation.
” Even in cases where an individual ended up being a local in India due to remarkable scenarios, he would more than likely become not generally resident in India and for this reason his foreign sourced income will not be taxable in India unless it is stemmed from company managed in or profession established in India,” the Board added.
The Board further stated that a resident individual in India shall be entitled to claim credit of the taxes paid in any other country.
CBDT said that Organisation for Economic Co-operation and Development also acknowledged that DTAAs contain required arrangements to deal with cases of dual residency emerging due to Covid-19 related restrictions. Globally, various countries have actually taken various measures.
For instance, the United States and UK have actually provided relief of a maximum of 60 days on a case to case basis, while Germany has actually not supplied any relief.
” As the Union Spending plan did not give any specific relief to individuals stranded in India on account of tax residency, this clarification in residency guidelines was expected. The 182 days condition is kept as it is, use of tie breaker guideline and OECD guidance on tax residency getting integrated in the circular will be of much help to the taxpayers,” stated Amit Maheshwari, partner at AKM Global.
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