A good practice is to keep the passport stampings handy, which will help in case of questions from the tax authorities.
By Amarpal S. Chadha
Till a few months ago, people would fly down to a foreign country for a business meeting and fly back home on the same day without even a second thought. There were many working 5 days at a neighbouring country and spending weekends back home. With international travel restrictions coming into effect, things have changed to such an extent that, forget about the cross-border movement, even domestic travel has been impacted. This has led to a situation where people have been stranded in different locations, spending days, weeks or months in places which were not originally on their itinerary. To add to the complications, people stranded in India continue to work for their foreign projects/employer.
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Unplanned days of physical presence in India have led to various implications from an income-tax point of view. For example, days of unexpected stay in India do influence the residential status and thereby influence the scope of income chargeable to tax, which in turn will further influence income tax return filing (ITR) in India. There is an obligation to file ITR in India, if the individual’s total income exceeds maximum amount not chargeable to tax, i.e., above the basic exemption limit.
Visit to India
If you are an Indian citizen settled outside India, who had come on a visit to India and due to the travel restrictions are now working from India for your foreign employer, the salary income attributable for the period of service in India could be taxable in India (subject to exemption under the Double Taxation Avoidance Agreement between countries) even though the salary is paid into a bank account outside India. This again could influence the scope of income chargeable to tax in India and thereby crossing the basic exemption limit and attracting tax filing requirement.
Even if total income does not exceed basic exemption limit, if the individual holds any foreign asset and also qualifies as an ordinarily resident, he/she will still be required to file ITR in India. Foreign assets include foreign bank accounts, foreign properties, financial assets, signing authority, etc.
Relaxations in residential status
While the government has announced relaxations in determining residential status for FY 2019-20, by excluding numbers of days spent (subject to certain conditions) in India between March 22, 2020 to March 31, 2020, similar relaxations are yet to be announced for the FY 2020-21. Accordingly, once it is ascertained that you have a filing requirement in India, you should ensure that you have a Permanent Account Number (PAN), else it can be applied through the portal of NSDL/UTITS. Also, once the PAN is obtained, an account needs to be created in the e-filing portal of the income tax authorities in order to file the tax return using appropriate ITR form.
Hence, it is of utmost importance that individuals stranded in India keep a check on the number of days he/she has spent or would spend in India. A good practice is to keep the passport stampings handy, which will help in case of questions from the tax authorities. If tax filing obligation is triggered, proactive measures would help being compliant in India/ foreign country and ensure there is minimal/no double taxation.
(The writer is tax partner & India mobility leader, EY India. Views expressed are personal.)