Page 25 - Budget_2020

Union Budget 2020
To amend Sec 6 to provide the following: -
 Stateless / Tax less citizen: An Indian citizen who is not liable for tax in any country, for any reason
(residence/domicile etc), shall be deemed to be resident of India
 The number of days for person of Indian origin or a citizen visiting India, shall be reduced from 182 days
to 120 days
 The two conditions for not ordinarily resident shall be replaced with following new condition for both
individual and HUF-
- Individual: if he/she is a non-resident in India in 7 out of 10 preceding years
- HUF: if manager/karta is a non-resident in India in 7 out of 10 preceding years

AY 2021-22 and subsequent AYs

Mr. A, visited India for 121 days in FY 2020-21. Mr. A usually stays in India for a period of 50 days every year
in the past 10 FY. His residential status for the AY 2021-22 will be as follows: -
Period of stay during the FY 2020-21 is 121 days
As per the erstwhile provision, Mr. A would have been regarded as non-resident as stay was less than 182 days
but on account of proposed amendment, Mr. A shall be regarded as resident for the FY 2020-21 as he stayed
in India for more than 120 days.
Further, the test of resident but not ordinarily resident will now be determined, based on a condition that he
must be non-resident in India in 7 out of 10 preceding years. Mr. A is a non-resident in India for the last 10
preceding years as he has stayed in India only for 50 days in a year. Therefore, Mr. A will be a resident but not
ordinarily resident in India for the AY 2021-22.
As per press release dated 02.02.2020, it has been clarified that when an Indian citizen who becomes deemed
resident under the proposed provision, income earned outside India shall not be taxed in India unless it is
derived from an Indian business or profession.
It is humbly submitted that the above press release just repeats the stated position of law which was always
in existence u/s 9, however unless the language of the law is amended, we are in for some serious litigation.
Further deeming stateless citizens residents in India may now make all merchant navy employees subject to
tax India and non-resident businessmen being liable to tax in India on their global income. Basis this
amendment, we are in for a flight of wealthy and mobile Indian citizens surrendering their passport fearing
harassment in implementation of this section.

Rationalisation of Provisions Relating to Trust, Institution and Funds
 It is proposed to allow entities holding registration u/s 12A/12AA to apply for exemption u/s 10(46),
which talks about exemption for specified institutions
 The same analogy shall apply in case of exemption u/s 10(23C)
 It is proposed that approval for specified organisations and institutions shall be granted for a period of 5
years, after which, the entities shall be required to re-apply

 The approval shall be renewed only if the specified conditions in terms of genuineness, compliance,
objects, etc. are met
 Deduction u/s 80G/Sec 80GGA shall be allowed to a donor only if a statement is furnished or certificate

is issued by the donee (correction is possible)
 Failure of non-furnishing or non-issue shall attract late filing fee of Rs. 200 per day which shall not exceed
the amount for which failure has happened. Continuing failure shall attract penalty of Rs. 10,000 increasing
upto Rs. 1 lakh
 Cash donation u/s 80GGA shall be restricted to Rs. 2,000 only (reduced from erstwhile Rs 10,000)

1st June 2020

Trusts and institutions now are required to re-register under the new regime. At the time of re-registration
their objectives could be challenged in the light of the present decisions. Further expecting trusts to update
returns like any commercial institution, about donation receipts, given their skeletal infrastructure could be
practically challenging. In many cases, going forward, the donee might eventually end up foregoing the benefit
u/s 80G.

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