For non-residents, understanding how income is taxed in India can often feel confusing. The good news is that the Income Tax Act, 1961, along with Double Taxation Avoidance Agreements (DTAAs), provides several exemptions and reliefs to avoid paying tax twice on the same income. These exemptions cover areas like interest, dividends, capital gains, and certain types of services. Knowing about these benefits can help non-residents plan their finances better and make informed decisions. In this article, I break down the main exemption benefits available, explained in a way that is easy to understand through tabular presentation for grasping it within seconds.
| Particulars | Limit of exemption or deduction or Computation of income |
| EXEMPT INCOME | |
| 1. Section 10(4)(i) | |
| Eligible assessee – Non-resident
Interest on bonds or securities notified before 01-06-2002 by the Central Government including premium on redemption of such bonds. |
Interest amount |
| 2. Section 10(4)(ii) | |
| Eligible assessee – Person resident outside India under FEMA Act and person who has been permitted to maintain said account by RBI
Interest on money standing to the credit in a NRE account in India. |
Interest amount |
| 3. Section 10(4B) | |
| Eligible assessee – Individual, being a citizen of India or a person of Indian Origin, who is a non resident
interest on notified savings certificates issued before 01-06-2002 by the Central Government and subscribed to in convertible foreign exchange. |
Interest amount |
| 4. Section 10(4C) | |
| Eligible assessee – Non-resident person or foreign company
Interest on RDB (under Section 194LC) issued outside India during the period 17.09.2018 to 31.03.2019 by an Indian company/business trust |
Interest amount |
| 5. Section 10(4D) | |
| Eligible assessee – Specified Fund
Income accrued or arisen or received by specified fund which is attributable to units held by a non-resident (not being a PE in India) or to the investment division of offshore banking unit. Such exemption is allowed in respect of the following incomes: (a) Income from transfer of a capital asset as referred to in Section 47(viiab) on a recognised stock exchange located in IFSC and consideration is paid or payable in ‘convertible foreign exchange’ (b) Income arising from transfer of securities [other than shares in a company resident in India] (c) Income from securities issued by a non-resident [not being a PE of a non-resident in India] and where such income otherwise does not accrue or arise in India; or (d) Income from a securitization trust which is chargeable under the head ‘Profits and gains from business or profession’ to the extent such income accrued or arisen to or is received, is attributable to units held by non-resident [not being the permanent establishment of NR] or is attributable to the investment division of offshore banking unit. |
Capital Gain / PGBP |
| 6. Section 10(4E) | |
| Eligible assessee – Non-resident
Transfer of non-deliverable forward contracts or offshore derivative instruments or over the counter derivative or income distributed on the offshore derivative instruments entered into with an offshore banking unit of IFSC as referred in section 80LA(1A) and fulfils prescribed conditions |
Entire income |
| 7. Section 10(4F) | |
| Eligible assessee – Non-Resident
Income on account of leasing of aircraft or a ship in a previous year, paid by a unit of an IFSC unit as referred to in section 80LA(1A), if unit has commenced operations on or before the 31.03.2025 |
Royalty or interest income |
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| 8. Section 10(4G) | |
| Eligible assessee – Non-Resident
Income by way of portfolio of securities or financial products or funds which is managed or administered by a portfolio manager on behalf of a non-resident in an account maintained with an Offshore Banking unit in an IFSC as referred in section 80LA(1A) |
Income from portfolio services |
| 9. Section 10(4H) | |
| Eligible assessee – Non-Resident or a unit of IFSC
Income earned by a non-resident or Unit of an IFSC as referred to in section 80LA(1A). The exemption shall be allowed subject to the following conditions: (a) Non-resident or Unit of an IFSC must be engaged primarily in the business of leasing of an aircraft (b) Income should be in the nature of capital gains arising from the transfer of equity shares of a domestic company (c) Domestic company must be a Unit of an IFSC as referred in 80LA(1A) (d) Domestic company must be engaged primarily in the business of leasing of an aircraft (e) Domestic company must commence its operations up to 31.03.2026 (f) Equity shares of the domestic company must be transferred within 10 years of commencing of its operations. However, if the domestic company commenced its operations before 01.04.2025, the 10-year time limit shall be counted from 01.04.2025. [For the above purposes “aircraft” means an aircraft, helicopter, an engine or part of an aircraft or a helicopter] |
Income from Capital Gains:
Transfer of equity shares of a domestic company PGBP: Engaged in the business of leasing an aircraft |
| 10. Section 10(6)(ii) | |
| Eligible assessee – Non-Indian citizen Individual
Remuneration received by Foreign Diplomats/Consulate and their staff |
Remuneration |
| 11. Section 10(6)(vi) | |
| Eligible assessee – Non-Indian citizen Individual (Salaried)
Remuneration received by non-Indian citizen as employee of a foreign enterprise for services rendered by him during his stay in India, if: a) Foreign enterprise is not engaged in any trade or business in India b) His stay in India does not exceed in aggregate a period of 90 days in such previous year c) Such remuneration is not liable to be deducted from the income of employer chargeable under this Act |
Remuneration |
| 12. Section 10(6)(viii) | |
| Eligible assessee – Non-citizen, non-resident Individual (Salaried)
Salary received by a non-resident, for services rendered in connection with his employment on a foreign ship if his total stay in India does not exceed 90 days in the previous year. |
Salary |
| 13. Section 10(6)(xi) | |
| Eligible assessee – Non-Indian citizen Individual (Salaried)
Remuneration received by an Individual, who is not a citizen of India, as an employee of the Government of a foreign state during his stay in India in connection with his training in any Government Office/Statutory Undertaking, etc. |
Remuneration |
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| 14. Section 10(6A) | |
| Eligible assessee – Foreign Company
Tax paid by Government or Indian concern on royalty or FTS from Government or Indian concern under agreement made before 01.06.2002 which either relates to a matter included in the industrial policy of the Government and is in accordance with that policy or is approved by Central Government |
Tax liability of foreign company borne by taxpayer |
| 15. Section 10(6B) | |
| Eligible assessee – Non-resident
Tax paid by Government or Indian concern under terms of agreement entered into before 01.06.2002 by Central Government with Government of foreign State or international organization on income derived from Government or Indian concern, other than income by way of salary, royalty or fees for technical services |
Tax liability of non-resident borne by taxpayer |
| 16. Section 10(6BB) | |
| Eligible assessee – Government of foreign State or foreign enterprise
Tax paid by Indian company, engaged in the business of operation of aircraft, who has acquired an aircraft or its engine on lease, under an approved agreement entered into between 31.03.1997 and 01.04.1999, or after 31.03.2007, on lease rental/income |
Tax liability so borne by Indian Company |
| 17. Section 10(6C) | |
| Eligible assessee – Notified Foreign Company
Income by way of royalty or fees for technical services rendered in India or abroad in projects connected with security of India pursuant to agreement with Central Government |
Royalty and fee for technical services |
| 18. Section 10(6D) | |
| Eligible assessee – Non-resident or Foreign Company
Income by way of royalty or FTS for services rendered in or outside India to the National Technical Research Organization. |
Entire Income |
| 19. Section 10(15)(iid) | |
| Eligible assessee – NRI Individual or nominee or survivor of NRI and Individual to whom bonds is gifted by NRI
Interest on notified bonds [notified prior to 01.06.2002] purchased in foreign exchange |
Interest Amount |
| 20. Section 10(15)(iii) | |
| Eligible assessee – Issue Department of Central Bank of Ceylon
Interest on securities |
Interest amount |
| 21. Section 10(15)(iiia) | |
| Eligible assessee – Bank incorporated abroad
Interest on deposits made with scheduled bank with approval of RBI |
Interest amount |
| 22. Section 10(15)(iiib) | |
| Eligible assessee – Nordic Investment Bank
Interest payable to Nordic Investment Bank on a loan advanced to a project approved by the Central Government. |
Interest amount |
| 23. Section 10(15)(iiic) | |
| Eligible assessee – European Investment Bank
Interest payable to the European Investment Bank on loan granted by it in pursuance of framework agreement dated 25-11-1993 for financial corporation between Central Government and that Bank |
Interest amount |
| 24. Section 10(15)(iv)(b) | |
| Eligible assessee – Approved foreign financial institution
Interest received from industrial undertaking in Indian on money lent to it under a loan agreement entered into before 01-06-2001 |
Interest amount |
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| 25. Section 10(15)(iv)(fa) | ||
| Eligible assessee – Resident but not Ordinarily resident Individual and HUF and any Non-resident
Interest payable by scheduled bank on deposits in foreign currency where acceptance of such deposit by the bank is duly approved by RBI. |
Interest amount | |
| 26. Section 10(15)(viii) | ||
| Eligible assessee – Any person non-resident or Resident but not ordinarily resident
Interest on deposit made on or after 01.04.2005 in an offshore Banking Unit referred to in Section 2(u) of the Special Economic Zones Act, 2005. |
Interest amount | |
| 27. Section 10(15)(xi) | ||
| Eligible assessee – Non-resident
Any interest payable in respect of money borrowed by a unit located in IFSC on or after 01.09.2019 |
Interest amount | |
| 28. Section 10(15B) | ||
| Eligible assessee – Foreign Company
Income from the lease rental received from cruise ships operating in India |
Lease rental income | |
| 29. Section 10(23BBB) | ||
| Eligible assessee – European Economic Community
Income of European Economic Community from interest, dividends or capital gains from investment of funds under specified scheme |
Specified interest, dividends or capital gains | |
| 30. Section 10(23BBC) | ||
| Eligible assessee – SAARC Fund for Regional Projects
Income of SAARC Fund for Regional Projects set up by Colombo Declaration issued on 21.12.1991 |
Entire income | |
| 31. Section 10(23FBC) | ||
| Eligible assessee – Unit holder
Income from specified fund or transfer of unit in specified fund referred in 10(4D) |
Entire income | |
| 32. Section 10(23FE) | ||
| Eligible assessee – Specified person
Income of a specified person [Specified person means: a) Wholly owned subsidiary of Abu Dhabi Investment Authority, which is resident of UAE and makes investment, directly or indirectly, out of the fund owned by the Government of the Abu Dhabi. b) Sovereign wealth fund and pension fund which satisfies prescribed conditions.] |
Dividend, interest, any sum referred to in section 56(2)(xii), or LTCG arising from an investment made in India | |
| 33. Section 10(23FF) | ||
| Eligible assessee – Non-resident
Income on transfer of shares of a company resident in India, by the resultant fund or specified fund if prescribed conditions are satisfied |
Capital gain | |
| 34. Section 10(34B) | ||
| Eligible assessee – IFSC engaged in the business of leasing aircrafts
Dividend income earned by an IFSC unit primarily engaged in aircraft leasing business. However, the exemption is subject to the condition that the company paying the dividend should also be an IFSC unit and engaged in the aircraft leasing business. |
Dividend Income | |
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| 35. Section 10(48) | |
| Eligible assessee – Foreign Company
Any income received in India in Indian currency by a foreign company on account of sale of crude oil or any other goods or rendering of services as may be notified by the Central Government, to any person in India under an approved and notified agreement or arrangement |
Specified Income |
| 36. Section 10(48A) | |
| Eligible assessee – Foreign Company
Any income accruing or arising to a foreign company on account of storage of crude oil in a facility in India and sale of crude oil therefrom to any person resident in India |
Entire income |
| 37. Section 10(48B) | |
| Eligible assessee – Foreign Company
Any income arising to a foreign company on account of sale of leftover stock of crude oil from the facility in India after expiry of the agreement referred to in 10(48A) or on termination of the said agreement |
Entire Income |
| 38. Section 10(50) | |
| Eligible assessee – Non-resident
Any income which is chargeable to equalization levy under Chapter VIII of the Finance Act, 2016. |
Entire income |
| INCOME UNDER THE HEAD PGBP | |
| 1. Section 44B read with section 172 | |
| Eligible assessee – Non-resident engaged in shipping business
Income from shipping business shall be computed on presumptive basis |
7.5% of specified sum shall be deemed to be the presumptive income |
| 2. Section 44BB | |
| Eligible assessee – Non-resident engaged in activities connected with exploration of mineral oils
Income of a non-resident engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils shall be computed on presumptive basis |
10% of specified sum shall be deemed to be the presumptive income |
| 3. Section 44BBA | |
| Eligible assessee – Non-resident engaged in the business of operating of aircraft
Income of a non-resident engaged in the business of operation of aircraft shall be computed on presumptive basis |
5% of specified sum shall be deemed to be the presumptive income |
| 4. Section 44BBB | |
| Eligible assessee – Foreign Company
Income of a foreign company engaged in the business of civil construction or the business of erection of plant or Machinery or testing or commissioning there of, in connection with a turnkey power projects shall be computed on presumptive basis |
10% of specified sum shall be deemed to be the presumptive income |
| 5. Section 44BBC | |
| Eligible assessee – Non-Resident
Presumptive taxation scheme for the business of operation of cruise ships by non-residents |
20% of the specified amounts shall be deemed to be the presumptive income. |
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| 6. Section 44C | |
| Eligible assessee – Non-Resident
Deduction for Head office Expenditure [If adjusted total income is a loss, adjusted total income shall be substituted by average adjusted total income Adjusted total income or average adjusted total income shall be computed after prescribed adjustments i.e. unabsorbed depreciations, carry forward losses, etc] |
Lower of following:
a) 5% of adjusted total income or b) Head office expense as attributable to business or profession of taxpayer in India |
| 7. Section 44DA | |
| Eligible assessee – Non-Resident (non-company) or Foreign Company
Deduction of expenditure from royalty and FTS received under an agreement made after 31-03-2003 which is effectively connected to the Permanent establishment of non-resident in India |
Expenditure incurred wholly and exclusively for the business of Permanent establishment or fixed place of profession in India shall be allowed as deduction. |
| INCOME UNDER THE HEAD CAPITAL GAINS | |
| 1. Section 47(via) | |
| Eligible assessee – Foreign amalgamating company
Transfer of a capital asset being shares in an Indian company by the amalgamating foreign company to the amalgamated foreign company [in scheme of amalgamation] shall not be treated as ‘transfer’ |
No capital gains shall arise in the hands of foreign amalgamating company due to transfer of capital assets. |
| 2. Section 47(viab) | |
| Eligible assessee – Foreign amalgamating company
Transfer of share of a foreign company [which derives, directly or indirectly, its value substantially from the share or shares of an Indian company] held by a foreign company to another foreign company under a scheme of amalgamation shall not be regarded as transfer |
No capital gains shall arise in the hands of foreign amalgamating company |
| 3. Section 47(viiab) | |
| Eligible assessee – Non-resident
Transfer of bonds or GDRs as referred to in Sec. 115AC(1) or RDB of Indian Company or Derivative or any other specified security by a non-resident on a recognized stock exchange located in any IFSC and where the consideration is paid in foreign currency |
No capital gains shall arise in the hands of non-resident |
| 4. Section 47(vic) | |
| Eligible assessee – Foreign demerged company
Transfer of a capital asset being shares in an Indian company by the demerged foreign company to the resulting foreign company [in scheme of demerger] shall not be treated as ‘transfer’ |
No capital gains shall arise in the hands of foreign demerged company due to transfer of capital assets. |
| 5. Section 47(vicc) | |
| Eligible assessee – Foreign demerged company
Transfer of share of a foreign company [which derives, directly or indirectly, its value substantially from the share or shares of an Indian company] held by a demerged foreign company to resulting foreign company pursuant to demerger shall not be regarded as transfer |
No capital gains shall arise in the hands of foreign demerged company |
| 6. Section 47(viia) | |
| Eligible assessee – Non-resident
Transfer of capital asset being bonds or GDR in 115AC(1) outside India by one non-resident to another non-resident shall not be treated as ‘transfer’. |
No capital gains shall arise in the hands of non-resident transferor |
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| 7. Section 47(viiaa) | |
| Eligible assessee – Non-resident
Transfer of capital asset being RDB of an Indian company issued outside India by 1 non-resident to another non-resident is not treated as ‘transfer’. |
No capital gains shall arise in the hands of non-resident transferor |
| 8. Section 47(viiac) | |
| Eligible assessee – Non-resident
Transfer of a capital asset by the original fund to the resultant Fund, in relocation, shall not be considered as a transfer for capital gain tax purpose |
Amount of capital gain |
| 9. Section 47(viiad) | |
| Eligible assessee – Non-resident
Transfer of capital asset being share or unit or interest held by shareholder or unit holder in original fund, in consideration for share or unit or interest in resultant fund [Explanation to section 10(viiad) contains meaning of original fund, relocation & resultant fund] |
Amount of capital gain |
| 10. Section 47(viib) | |
| Eligible assessee – Non-resident
Transfer of a capital asset, being a Government security carrying a periodic payment of interest, made outside Indian [through an intermediary dealing in settlement of securities] by a non-resident to another non-resident shall not be treated as ‘transfer’ |
No capital gains shall arise in the hands of non-resident transfer |
| 11. First proviso to Section 48 | |
| Eligible assessee – Non-resident
Computation of capital gains when shares or debentures in an Indian Company are transferred which were acquired in foreign currency |
Capital gain shall be computed in same foreign currency [utilized for acquiring shares or debentures] which shall be reconverted into Indian currency [without providing benefit of indexation] |
| 12. Section 115F | |
| Eligible assessee – Non-resident Indian
LTCG arising from transfer of specified foreign exchange assets shall be exempt from tax if net consideration is invested within six months after date of transfer in any specified asset or deposited in notified saving certificates |
Exemption amount:
Amount invested in new asset * Capital gains / Net Sales consideration |
| EXTRA PROVISIONS | |
| 1. Section 90 | |
| Eligible assessee – Non-resident
A non-resident can apply either provisions of the Act or the relevant DTAA [India has entered into with counterpart foreign country], whichever is more beneficial. |
Beneficial provisions of DTAA or the Income-tax Act |
| 2. Section 95 | |
| Provisions of GAAR shall be applicable in respect of any AY starting from 01.04.2018 | Not applicable |
| 3. Section 115G | |
| Eligible assessee – Non-resident Indian
A non-resident Indian shall not be required to file his return of income if his total income consists only following incomes and tax has been deducted therefrom: a) Income from investment in foreign exchange assets b) LTCG arising from transfer of foreign exchange assets. |
Exemption from filing of return of income |
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| 4. Section 192 | |
| Eligible assessee – Non-resident Individual
If net taxable income [being income from employment] is less than basic exemption limit, no tax shall be deducted at source. |
No deduction of tax at source from salaries |
| 5. Section 245N and 245Q | |
| Eligible assessee – Non-resident
A non-resident applicant can apply before Authority for Advance Ruling for determination of tax liability that may arise out of a business carried out in India |
Non-resident can file application for Advance Ruling |
| 6. Section 245-OB | |
| Eligible assessee – Non-resident
The Central Government to constitute one or more Board for Advance Rulings for giving advance rulings on and after the notified date. |
Non-resident can file application for Advance Ruling |
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