Due to the Novel Corona Virus (COVID-19) outbreak and consequent fallout like lock down, quarantine, cancellation of international flights, limited operation of evacuation flights, many individuals coming on visit to India were stranded in India. The forced stay in India impacts the residential status of individuals, as the residential status is generally based on physical stay in India.
Accordingly, to avoid genuine hardship for the tax year 2019-20, the Central Board of Direct Taxes (CBDT) vide Circular 11/2020 dated 8 May 2020 provided relaxation by announcing exclusion of period of overstay in India from 22 March 2020 to 31 March 2020 for determining the residential status in India.
As the COVID-19 outbreak continues even for the tax year 2020-21, the CBDT received various representations from individuals who had come on a visit to India during the tax year 2019-20 and intended to leave but could not do so due to the suspension of international flights. Such individuals requested for relaxation in determining residential status on the lines of relaxation announced for tax year 2019-20.
Pursuant thereto, the CBDT has issued Circular 2/2021 (Circular) dated 3 March 2021 (accompanied with a press release) in the light of changed circumstances of prolonged disruption. The Circular explains how there are lesser chances of double taxation risk for such individuals in view of the interplay of Indian domestic tax rules with Double Taxation Avoidance Agreements (DTAA/treaty) entered with other countries. But it also provides opportunity to impacted individuals to provide relevant information to the CBDT by 31 March 2021 on the risk of double taxation faced by them in order to enable the CBDT to announce a general or case-by-case individual relief.
