Global Employer Services Newsletter May 2020

Relaxation of residency conditions for individuals stranded in India

The taxability of income in India depends upon the taxpayer’s residence status. The Income-tax Act, 1961 (‘the IT Act’) provides the necessary conditions for determining the residence status of an individual with the main criteria being the length of stay in India.

With the Corona Virus pandemic outbreak, the Indian Government has taken various unprecedented measures such as declaring a nationwide lockdown, implementing strict quarantine requirements, suspension of international flights, etc. Due to these measures, a number of individuals who were visiting India during Fiscal Year (FY) 2019-20 for a particular duration and intended to leave India before the end of the FY were forced to extend their stay in India. Consequently, their stay has exceeded beyond the period of their visit and thus they may be regarded as resident/not ordinarily resident. The Central Board of Direct Taxes (CBDT) has recently issued Circular [1] to provide relaxation in the methodology of computing the ‘number of days’ of stay in India for the purpose of section 6 of the IT Act.  This is summarised below.

The Circular provides that for the purpose of determining residential status under section 6 of the IT Act for FY 2019-20 in respect of an individual who has come to India on a visit before 22 March 2020, following days shall be excluded:

Sr. No.

Category of person

Exclusion period


  • Unable to leave before 31 March 2020
  • 22 March 2020 to 31 March 2020


  • Quarantined in India on account of COVID-19 on or after 1 March 2020 and
  • Departed on an evacuation flight; or
  • unable to leave India
  • on or before 31 March 2020
  • Period beginning of his quarantine to:
  • departure date; or
  • 31 March 2020


  • Departed on an evacuation flight on or before 31 March 2020
  • 22 March 2020 to departure date

This is a welcome move by the CBDT as it provides much needed clarity in determining the residence status for FY 2019-20 of individuals who are forced to stay in India during the lockdown period. However, such individuals would be required to maintain sufficient documents with respect to the date of quarantine in India, date of arrival and departure from India, etc. in order to establish their residency before the tax authorities at a later stage.

Soon after issuing the circular, CBDT also issued further guidance for determining residence status for FY 2020-21.  While the circular has clarified and granted relief on conditions prescribed for determining residence status, it is silent on whether such days’ exclusion would apply for claiming short stay exemption by such individuals.

Deepashree Shetty