Exemption towards perquisites or allowances paid by the Government to its employees serving outside India

Section 10(7) of the Income Tax Act exempts any perquisites / allowances which are paid or allowed, outside India, by the Government to its employees for providing services outside India.

The current article explains the exemption provisions of section 10(7) and also covers the necessary conditions to be satisfied for claiming exemption under section 10(7).

Exemption available under section 10(7) of the Income Tax Act

Provisions of section 10(7) provide exemption towards any perquisites or allowances either paid or allowed, as such, outside India. The said perquisites or allowances should have been paid, to a citizen of India, by the Government towards rendering services outside India.

Mandatory conditions to be satisfied for availing exemption under section 10(7) of the Income Tax Act

All the following conditions need to be satisfied in order to claim an exemption under section 10(7)

1. Income should be in the form of perquisites or allowances being chargeable under the head ‘Salaries’.

2. The payer of the income should be the Government.

3. The recipient of the income should be an Indian citizen.

4. The service should have been rendered outside India.

If all the above conditions are satisfied, the perquisite / allowances paid outside India by the Government to an Indian citizen would be exempt under section 10(7).

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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One Comment

  1. Himanshu says:

    I was on deputation to MHPA hydro project bhutan from Indian public sector company since jan 2017 and drawing complete salary from MHPA bhutan beung credited in bhutan bank account. In oct 2019 i got repatriated. My question is whether my entire salary including basic and allowances shall be exempted under section 10(7) for FY 2019-20 or only allowances

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