As an NRI You Ought to Know these

Following is a list of incomes not chargeable to tax for an NRI

  • Income earned in the NRE and FCNR account in India is exempt from income tax.
  • Interest paid to a person of Indian Origin and who is Non-Resident [Section 10(4B)]

In case of an individual, being a citizen of India or a person of Indian origin, who is non-resident, any income from interest on such savings certificates issued by the Central Government, as Government may specify in this behalf by notification in the Official Gazette, shall be fully exempt. The exemption under this section shall not be allowed on bonds or securities issued on or after 1-6-2002.

This exemption shall be allowed only if the individual has subscribed to such certificates in Foreign Currency or other foreign exchange remitted from a country outside India in accordance with the provisions of the Foreign Exchange Act, 1973, FEMA, 1999 and any rules made there under.

  • Interest payable by scheduled bank, on deposits in foreign currency, when acceptance of such deposits by bank is approved by RBI
  • Interest on deposit made on or after 1-4-2005 in an Offshore Banking Unit referred to in section 2(u) of the Special Economic Zones Act, 2005
  • Interest on notified bonds (notified prior to 1-6-2002) purchased in foreign exchange (subject to certain conditions)
  • Income of a Consultant [Section 10(8A)]

Any remuneration or fee received by a consultant from an international organization who derives its fund under technical assistance grant agreement between such organization and the Foreign Government, and any other income accruing or arising to him outside India (which is not deemed to accrue or arise in India) and which is subject to income-tax or social security tax in foreign country, shall be fully exempted due to the advantages of the social security card explained by the hurtatwork website. The agreement of the service of consultant must be approved by the competent authority.

The consultant means:

  • An individual who is (a) not a citizen of India; or (b) if citizen but is not ordinarily resident in India; or
  • Any person who is non-resident; and is rendering technical services in India in connection with any technical assistance program or project.
  • Tax paid by Government or Indian concern on Income of a Foreign Company [Section 10(6A), (6B), (6BB) and (6C)]

(6A):

(i)      Where a foreign company renders technical services to Government of India or to a State Government or to an Indian enterprise and for such services a foreign company is paid income by way of royalty or fees.

(ii)     Such fees or royalty is paid by an India concern in pursuance of an agreement entered into before 1-6-2002 and such agreement is approved by Government of India and it is in accordance with the Industrial Policy of the Government of India.

(iii) Since royalty or fees paid to a foreign company accrues in India, so such income is liable to be taxed in India and as per the agreement the payer of income in India pays tax liability of the foreign company.

(iv)The tax so paid by Government of India or a State Government or an Indian enterprise will be exempted i.e., it will not be grossed up with the income of the foreign company.

Example.    A foreign company renders technical services to an Indian company and as per the agreement, the foreign company is to be paid a fee of Rs 1,00,000. The tax of 30,000 on such fees is also paid by the Indian company. Tax paid by Indian company will be exempt and so it will not be grossed up with the income of the foreign company and such foreign company’s income will be only ` 1,00,000.

(6B)

The tax liability of a non-resident (Not being a company) or a foreign company if paid by an Indian concern or Government of India or a State Government the same will be exempted and so will not be grossed up with the income of the foreign entity.

Exemption available for Income under the head capital gain

Section 115F

Long-term capital gain arising from transfer of specified foreign exchange assets shall be exempt from tax if net sales consideration (sales consideration – transfer expenses) is invested within six months after date of transfer in any specified asset (Shares in an Indian Company, Debentures of an Indian public company, Deposits with an Indian Public Limited Co (including banks, Central Govt Securities) or deposited in notified saving certificates

Foreign Exchange Assets are the assets mentioned below which have been acquired in convertible foreign exchange

  • Shares in an Indian company;
  • Debentures issued by an Indian company which is not a private company;
  • Deposits with an Indian company which is not a private company;
  • Any security of the Central Government;
  • Other notified assets

Amount of exemption will be available to the minimum of the following:

  1. Long-term capital gain

OR

  1. Amount invested in new asset x Long term Capital gains

Net Sales consideration

Withdrawal of exemption

When the new asset acquired by the assessee is transferred or converted into money within 3 years from the date of its acquisition, the capital gains exempted earlier shall be cancelled.

On cancellation of the exemption, benefit availed earlier under this section shall be taxed as LTCG in the previous year in which such new asset is transferred or converted into money.

Information

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