Central Board of Direct Taxes (CBDT) issued a clarification in respect of residency under the Income Tax Act, 1961 vide Circular No.2 of 2021 dated March 3. If any individual is facing double taxation even after taking into account the relief provided by the relevant Double Taxation Avoidance Agreement (DTAA), they now have a solution.
In the circular CBDT stated, “The Central Board of Direct Taxes has received various representations for relaxation in determination of residential status of previous year 2020-21 from individuals who has come on a visit to India during the previous year 2019-2o and intended to leave India but could not do so due to suspension of international flights. The matters has since been examined by CBDT”.
In this context, Circular No.2 has been issued b CBDT which stated 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 March 31, 2021 in Form -NR annexed to the circular.
As per the CBDT, this form is to be submitted electronically to the Principal Chief Commissioner of Income-tax (International Taxation). The circular can be accessed on the Income Tax Department official website.
It is worth noting that if you qualify as “resident and ordinarily resident” in India, your worldwide income will be taxable in India and you are required to report assets held outside India as also foreign incomes in the India income tax return. Accordingly, any income earned outside will be taxable in India.
In case of double taxation, you may claim benefit under the Double Taxation Avoidance Agreement (DTAA) between India and the US. The benefit (either foreign tax credit of US taxes or exemption of US income) under the DTAA will be based on your residential status in the US and residential status under the DTAA between India and the US.
In February this year, Budget 2021 has also announced that in order to remove genuine hardship faced by returning Indians on retirement funds held outside India due to mismatch in taxation, rules will be notified to reduce the double taxation of income arising on such foreign retirement funds…Read more>>