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CBDT issues clarification in respect of residential status of certain individuals under Income-Tax Act, 1961 - (04 Mar 2021)

Direct Taxation

The Central Board of Direct taxes (CBDT) issues clarification in respect of Residency under the Income tax Act, 1962 (IT Act). The Board has received various representations for 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 COVID-19 pandemic and suspension of international flights. In order to avoid hardship faced by individuals in genuine cases, a detailed Circular No.2 of 2021 dated 4th March has been issued.

Section 6 of the IT Act contains provisions relating to determination of residency of a person. The status of an individual, as to whether he is resident in India or a non-resident or not ordinarily resident, is dependent, on the period for which the person is in India during a previous year or years preceding the previous year. A resident person in India shall be entitled to claim credit of the taxes paid in any other country in accordance with the Rule 128 of the Income-tax Rules, 1962.

The said Circular provided that, 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 31st March, 2021. This form is to be submitted electronically to the Principal Chief Commissioner of Income-tax (International Taxation). It is to be noted that, The Organisation for Economic Co-operation and Development (OECD) 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, there does not appear a possibility of the double taxation of the income for PY 2020-21.


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