Plea In SC Seeking To Maintain NRI Status For 2020-21 FY

The Petitioner, Gaurav Baid, is a Non Resident Indian, presently based in Dubai, United Arab Emirates, who came to India in the month of March 2020 on a visit and was finally able to travel back after spending upwards of 182 days in India in the Financial Year 2020 – 21. This involuntary extended stay in India, it is alleged, may result in the Petitioner losing his "non-resident status" for the purposes of the Indian Income Tax Act, 1961, thereby exposing his global income to tax in India. The Petitioner was assessed as an NRI in Financial Year 2019-20.

The Petition has been filed against the Ministry of Finance, Government of India. The Ministry of Civil Aviation and the Ministry of Home Affairs have also been arrayed as parties.

The present petition also outlines the various hardships which have occasioned to Non-Resident Indians on account of International travel restrictions imposed at various levels due to the Covid 19 pandemic specifically in the context of the "non-resident" status for taxation purposes under the provisions of the Income Tax Act.

Under Indian law, the residency status of a person is determined by the duration of his physical presence inside the Indian Territory in a given financial year. The Income Tax Act contains provisions for determining the residential status of a person. Typically, income earned in India is taxable for a Non-Resident Indian in India. However, income earned outside India is not taxable for a Non-Resident in India.

Generally, a person who qualifies to be a non-resident Indian, under the Income Tax Act, is not taxed in India qua his foreign income. In terms of the Act, amongst other things, a necessary precondition for a Non-Resident Indian to be exempt from tax in India, is that he must not spend more than a period of 182 days in India in a given Financial Year.

Various circulars have been issued by the Ministry of Home Affairs and the Ministry of Civil Aviation which have prohibited/suspended international air travel for most part of the present financial year. As a consequence of the above, many NRIs (who are already in India with the lockdown was imposed) have had to extend their stay in India. This is the root cause of the problem highlighted in the present petition.

The Ministry of Finance had issued a Clarification No. 11/2020 bearing no. F No. 370 142/18/2020 – TPL dated 8 May 2020, for Financial Year 2019-20, on the aspect of residency under Section 6 of the Income Tax Act wherein various relaxations were provided to non-resident Indians who were on a visit to India at the time of imposition of the lockdown and consequently could not travel back to their country of work/residence. No such clarification has been provided till date for Financial Year 2020 – 21.

This is essentially a community issue impacting various NRIs who have extended their stay in India in the present financial year on account of the pandemic. In most cases, NRIs in India would have crossed the 182 day limit specified in the Income Tax Act and consequently run the risk of being classified as a resident for Financial Year 2020 – 21 thereby resulting in their global income being taxed in India.

The pandemic has resulted in international travel related issues across the globe throughout the present financial year. In various countries lockdown have been imposed several times in a bid to contain the problem.

The petition has been filed by Innovatus Law.