Arrival &Departure Dates for Taxation

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Download the Tribunal verdict on Arrival/Departure dates:-Fausta_C._Cordeiro,vs_IT Depart

An individual is taxed in India based on his tax residential status — which, in turn, depends on the number of days he is in India during a tax year (April 1 to March 31).

Non Resident is taxed in India primarily on income sourced in India. It is vital to correctly determine an individual’s tax residential status for a particular tax year — if not, he/she could end up paying tax on their worldwide income in India

How do you count the number of days in India?

Does one consider calendar days, or is every 24 hours spent on Indian soil counted as one day? Is only a full day spent in India counted as a day, or is a fraction of the day also counted? If a fraction of the day is to be counted as a whole day, are the days of arrival and departure both counted as days in India? What happens if one spends less than 24 hours in India during a trip?

The Income Tax Act and Rules do not offer any answers. However, this issue has previously been a subject of litigation, and one can draw guidance from the judicial authorities’ interpretation of the term ‘days in India’.

The departmental practice is to go by the passport reckoning both the date of arrival and date of departure as stay in India. In fact, the time of arrival or departure is not noted in the passport. The issue had become subject matter of some controversy. Sec. 9 of the General Clauses Act provides for reckoning the prescribed time under any law where time limit is prescribed by excluding the first day.

In the case of Manoj Kumar Reddy, the Bangalore Tribunal noted that while computing the period for which an assessee is in India, the count should begin from the date of arrival of the assessee in India to the date he leaves the country. The Tribunal drew guidance from the provisions of the General Clauses, Act and concluded that in counting days in this manner, the first day should be excluded. Hence, when counting the ‘days’, the day of arrival should be ignored.

The Bangalore Tribunal’s view was followed by the Mumbai Tribunal in the case of Fausta C. Cordeiro, wherein it held that the arrival date is to be excluded from the count, particularly when the assessee arrived late in the day.

Based on the Tribunals’ views, one may consider counting on the basis of calendar days, excluding the day of arrival but including the day of departure, even if it is a fraction of a day.

Thus, if an individual arrives in the evening and leaves the next morning, he would have been in India (for tax purposes) for one day.

A word of caution: tax officials tend to count both the day of arrival and day of departure as ‘days in India’, irrespective of whether it is a full day or a few hours.

If you are served with notice from IT Department considering, the arrival and departure dates are counted as days in India, you can submit following Tribunal verdict to support your case.

Download the Tribunal verdict:-Fausta_C._Cordeiro,vs_IT Depart

 

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