As we know, section 10 of the Income Tax Act covers a list of income which do not form part of the total income. The present article highlights the following sections exempting interest to non-resident

1. Section 10(4)(i) – Interest from notified bonds or securities;

2. Section 10(4)(ii) – Interest from the amount standing credit in Non-Resident (External Account); and

3. Section 10(4B) – Interest on savings certificate issued before 1st June 2002.

Exemption available under section 10(4)(i) of the Income Tax Act

Category of the person eligible for exemption under section 10(4)(i) – Non-resident

Type of exemption available under section 10(4)(i)

1. Any income by way of interest received from certain notified bonds or securities; and

2. Any income by way of the premium received on the redemption of such notified bonds.

Exemption available under section 10(4)(ii) of the Income Tax Act

Category of the person eligible for exemption under section 10(4)(ii)-

1. Any individual being a person resident outside India [as defined under section 2(w) of the Foreign Exchange Management Act, 1999].

2. Any individual who is permitted by the Reserve Bank of India to maintain the Non-Resident (External Account).

Type of exemption available under section 10(4)(ii)-

Any income by way of interest received from the money standing credit in a Non-Resident (External Account).

The said Non-Resident (External Account) should be in any bank in India, and it should be in accordance with the Foreign Exchange Management Act, 1999 and the rules made thereunder.

Understanding exemption available under section 10(4B) of the Income Tax Act

Category of the person eligible for exemption under section 10(4B)-

Any individual, being a person of Indian origin or a citizen of India, who is a Non-Resident.

It should be noted here that the Explanation (a) to section 10(4B) states that the person shall be deemed to be of the Indian origin if either he or any of his parents or any of his grandparents were born in undivided India.

Type of exemption available under section 10(4B)-

Any income by way of interest received from interest on savings certificate issued before 1st June 2002.

Further, it is mandatory that in order to claim the exemption, the individual should have subscribed to such savings certificate in convertible foreign exchange remitted from the country outside India. Such remittance should be in accordance with the provisions of the Foreign Exchange Management Act, 1999 and the rules made thereunder.

Table – Articles on Section 10 Exemptions

Sr. No. Particulars
1 Section 10(1)– Exemption to Agricultural Income
2 Section 10(2) Exemption to amount received by co-parcener from HUF
3 Section 10(2A) Exemption towards share of income from firm/LLP
4 Exemptions towards interest to non-residents | Section 10(4) & 10(4B)
5 Exemption on Tax paid by Govt or Indian concern on certain income of a foreign company
6 Section 10(7) Perquisites/allowances exemption to Govt employees serving outside India
7 Exemption- Section 10(8A) & section 10(8B) of Income Tax Act
8 Exemption towards commuted value of pension Section 10(10A)
9 Exemption towards retrenchment compensation received by workman Section 10(10B)
10 Section 10(10BC) Exemption towards compensation received on account of any disaster
11 Section 10(10C) Exemption of amount received on voluntary retirement
12 Exemption towards tax paid by employer on non-monetary perquisites: Section 10(10CC)
13 Section 10(10D) Exemption towards amount received under a Life Insurance Policy
14 Exemption for amount received from Statutory & Recognized PF
15 Exemption for payment from approved superannuation fund Section 10(13)
16 Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)
17 Section 10(15) Exemption- Interest on Bonds, Debentures, Securities
18 Scholarship exemption | Section 10(16) | Income Tax Act 1961
19 Exemption towards income for administration of Charitable or Religious Institution
20 Section 10(32) Exemption | Income of minor clubbed with parent
21 Exemption for dividend income received from Indian Company | Section 10(34)
22 Section 10(34A) Exemption towards income received by a shareholder on buy back of shares
23 Section 10(35) Exemption towards income received from units
24 Section 10(37) Exemption towards Capital Gain arising on Compulsory Acquisition of Urban Agricultural Land

 

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