By TII News Service

NEW DELHI, FEB 01, 2020: THE Finance Bill 2020 acknowledges that the issue of stateless persons has been a hot topic for tax regimes across the world. One cannot overlook the possibility of being able to arrange affairs in such a manner so as to evade taxation in any country or jurisdiction, in a particular year. The incumbent rules governing tax residence enable High Net Worth Individuals (HNWI), who may not be Indian citizens, to not be liable to tax anywhere else. Such circumstances cannot be accepted, considering that avenues for double non-taxation are systematically being closed.

This category of persons has been carved out essentially to ensure that a non-resident is not suddenly faced with the compliance requirement of a resident, merely because he spends more than specified number of days in India during a particular year. The conditions specified in the present law in respect of this carve out have been the subject matter of disputes, amendments and further disputes. Further, due to reduction in number of days, as proposed, for visiting Indian citizen or person of Indian origin, there would be need for relaxation in the conditions.

It is worth mentioning that such category of persons was carved out essentially to ensure that a non-resident is not suddenly faced with the compliance requirement of a resident, merely because he spends more than specified number of days in India during a particular year. The conditions specified in the present law in respect of this carve out have been the subject matter of disputes, amendments and further disputes. Further, due to reduction in number of days, as proposed, for visiting Indian citizen or person of Indian origin, there would be need for relaxation in the conditions.

In such circumstances, the Government proposes that the exception provided in clause (b) of Explanation 1 of sub-section (1) to section 6 for visiting India in that year be decreased to 120 days from existing 182 days. It further proposed that an individual or an HUF shall be said to be not ordinarily resident in India in a previous year, if the individual or the manager of the HUF has been a non-resident in India in seven out of ten previous years preceding that year. This new condition to replace the existing conditions in clauses (a) and (b) of sub-section (6) of section 6. Another proposition to remedy the situation is that an Indian citizen who is not liable to tax in any other country or territory shall be deemed to be resident in India.

Such amendment would take effect from April 01, 2021 and would, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.