Income Tax Benefits available to Non-Residents

Scope of Total Income

As per Section 5 of the Income-tax Act, 1961, unlike a resident person who is liable to pay tax on his global income, a non-resident is liable to tax in India in respect of following incomes only:
  1. Income received or is deemed to be received in India in such year; or
  2. Income accrues or arises or is deemed to accrue or arise to him in India during such year.

Provisions relating to Exemptions available to Non-residents

SectionType of Income / ParticularsExemption available to
10(4)(i)Interest on bonds or securities notified before 01-06-2002 by the Central Government including premium on redemption of such bonds.Non-residents
10(4)(ii)Interest on Non-resident (External) account in India.Person resident outside India (under FEMA Act) and person eligible to maintain NRE account
10(4B)Interest on notified savings certificates issued before 01-06-2002 by the Central Government and subscribed to in convertible foreign exchange.Non-resident individual, being a citizen of India or a person of Indian Origin
10(6)(ii)Remuneration received by Foreign Diplomats/Consulate and their staff (Subject to conditions)Individual (not being a citizen of India)
10(6)(vi)Remuneration received by non-Indian citizen as employee of a foreign enterprise for services rendered by him during his stay in India, if:
  1. Foreign enterprise is not engaged in any trade or business in India
  2. His stay in India does not exceed in aggregate a period of 90 days in such previous year
  3. Such remuneration is not liable to be deducted from the income of employer chargeable under this Act
Salaried Employee, who is not an Indian citizen
10(6)(viii)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.Non-resident Individual Salaried Employee, who is not an Indian citizen
10(6)(xi)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.Salaried Employee, who is not an Indian citizen
10(6B)Tax paid by Government or Indian concern under terms of agreement entered into before 1-6-2002 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 servicesNon-resident
10(8A)Foreign income and remuneration received by consultant (agreement relating to his engagement must be approved) out of funds made available to an international organization (agency) under a technical assistance grant agreement between that agency and the Government of a foreign State (Subject to certain conditions).Individual, being a:

a) A non-resident engaged by the agency for rendering technical services in India;
b) Non-Indian citizen; or
c) Indian citizen who is not ordinarily resident in India

10(8B)Foreign income and remuneration received by an employee of the consultant as referred to in Section 10(8A) (contract of service must be approved by the prescribed authority before commencement of service).Individual, being a:

a) Non-Indian citizen; or
b) Indian citizen who is not ordinarily resident in India

10(15)(iid)Interest on notified bonds (notified prior to 01-06-2002) purchased in foreign exchange (subject to certain conditions)Individual, being a:

a) NRI or nominee or survivor of NRI;
b) Individual to whom bonds have been gifted by NRI.

10(15)(iv)(fa)Interest payable by scheduled bank on deposits in foreign currency where acceptance of such deposit by the bank is duly approved by RBI.a) Non-resident
b) Individual or HUF being a resident but not ordinary resident
10(15)(viii)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.Person who is a non-resident or not ordinarily resident.
47(viia)Transfer of capital asset being bonds or GDR [referred to in section 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

47(viib)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' (Subject to certain conditions). (Inserted by the Finance (No. 2) Act, 2014.

No capital gains shall arise in the hands of non-resident transferor

First Proviso to Section 48Computation of capital gains when shares or debentures in an Indian Company are transferred which were acquired in foreign currency (Subject to certain conditions)

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)

115FLong-term capital gain 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 (Subject to certain conditions).

Amount of exemption shall be computed in following manner:
Amount invested in new asset X Capital gains / Net Sales consideration

Non-resident Indian

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