INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME (CHAPTER-III)

SECTION-10-Incomes not included in total income.

Section 10 of the Income Tax Act, 1961 in India outlines various incomes that are exempt from being included in the total income of an individual or entity. These exemptions are granted for specific reasons and under certain conditions.

Section 10(1) provides that agricultural income is not to be included in the total income of the assessee. The reason for total exemption of agricultural income from the scope of central income tax is that under the Constitution, the Central Govt. has no power to levy a Tax on Agricultural Income.

“Agricultural income"2 means—

(a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes;

(b) any income derived from such land by agricultural operation.

As per Section 2 (1A) (c ) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :

Provided that—

(i) the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and

(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated—

Please refer the link for detail explanation on agricultural income- https://valuationandtaxation.blogspot.com/2023/08/chapter-i-of-income-tax-act-preliminary.html

Example of agriculture income and non-agricultural income

Apportionment of income between business income and agricultural income

Rules 7 , 7A, 7B, & 8 of Income Tax Rules 1962 provide the basis of apportionment of income between business income and agricultural income

Rule -7 –Income from growing and manufacturing of any product

Rule 7 of the Income Tax Rules, 1962 (IT Rules) deals with the deduction of the market value of agricultural produce used as raw material in a business.

The rule states that where an assessee derives income from a business which is partly agricultural and partly non-agricultural, and the agricultural produce raised by the assessee or received by him as rent-in-kind is utilized as raw material in the business, then the market value of such agricultural produce shall be deducted from the total income of the business.

The deduction under Rule 7 is available only if the agricultural produce is utilized as raw material in the business. If the agricultural produce is not utilized as raw material in the business, then the deduction is not available.

The market value of the agricultural produce is to be determined on the basis of the prevailing market price on the date of its utilization in the business.

The deduction under Rule 7 is allowed only once. If the agricultural produce is sold by the assessee, then the deduction cannot be claimed again.

Here is an example of how Rule 7 would be applied:

Suppose an assessee owns a poultry farm and also runs a poultry feed manufacturing unit. The assessee raises chicken feed on the poultry farm and uses it in the poultry feed manufacturing unit. The assessee also sells some of the chicken feed to other poultry farmers.

In this case, the assessee would be able to claim a deduction under Rule 7 for the market value of the chicken feed that is utilized in the poultry feed manufacturing unit. The assessee would not be able to claim a deduction for the market value of the chicken feed that is sold to other poultry farmers.

Rule-7A-Income from growing and manufacturing of any rubber

Rule 7A of the Income Tax Rules, 1962 (IT Rules) deals with the presumptive taxation of income from the manufacture of rubber.

The rule states that where an assessee derives income from the manufacture of rubber from field latex or coagulum obtained from rubber plants grown by the seller in India, then the income shall be computed as if it were income derived from business, and 35% of such income shall be deemed to be income liable to tax.

The presumptive taxation under Rule 7A is available only if the following conditions are met:

👉The rubber plants are grown by the seller in India.

👉The rubber is manufactured from field latex or coagulum obtained from the rubber plants.

👉The income from the manufacture of rubber is the only income of the assessee.

If the above conditions are not met, then the assessee cannot claim the presumptive taxation under Rule 7A.

The presumptive taxation under Rule 7A is a simplified method of computing income from the

manufacture of rubber. It is beneficial for assessees who cannot maintain proper records of their income and expenses.

Here is an example of how Rule 7A would be applied:

Suppose an assessee grows rubber plants in India and manufactures rubber from the latex obtained from the plants. The assessee does not maintain proper records of his income and expenses.

In this case, the assessee would be able to claim the presumptive taxation under Rule 7A. The assessee's income would be computed as if it were income derived from business, and 35% of such income would be deemed to be income liable to tax.

Rule-7B-Income from growing and manufacturing of coffee.

Rule 7B of the Income Tax Rules, 1962 (IT Rules) deals with the presumptive taxation of income from the sale of coffee grown and cured by the seller in India.

👉(1) The rule states that where an assessee derives income from the sale of coffee grown and cured by the seller in India, then the income shall be computed as if it were income derived from business, and 25% of such income shall be deemed to be income liable to tax under head “ Profit and gains from business or profession”, and the balance 75% is agricultural income and is exempt.

👉(1A) Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavouring ingredients, shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.

Explanation : For the purposes of sub-rules (1) and (1A) “curing” shall have the same meaning as assigned to it in clause (d) of section 3 of the Coffee Act, 1942 (7 of 1942).]

(2) In computing [the incomes referred to in sub-rules (1) and (1A)], an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income.]

Rule-8-Income from the manufacture of tea.

Rule 8. (1) Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.

(2) In computing such income an allowance shall be made in respect of the cost of planting bushes in replacement of bushes that have died or become permanently useless in an area already planted, if such area has not previously been abandoned [, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (30) of section 10, is not includible in the total income.]

SUMMARY OF RULES FOR AGRICULTURAL INCOME

Amount received by a member from the income of the HUF. {Section-10(2)}

Sec-10(2) subject to the provisions of sub- section (2) of section 64, any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family.

Share income of a partners-Sec-10 (2A)

Sec-10 (2A) in the case of a person being a partner of a firm which is separately assessed as such, his share in the total income of the firm.

Explanation. —For the purposes of this clause, the share of a partner in the total income of a firm separately assessed as such shall, notwithstanding anything contained in any other law, be an amount which bears to the total income of the firm the same proportion as the amount of his share in the profits of the firm in accordance with the partnership deed bears to such profits

The CBDT has clarified that the income of a firm is to be taxed in the hand of the firm only even if the income chargeable to tax becomes NIL in the hands of the firm. Circular No-8/2014 Dated 31.03.2014

Certain Interest to Non resident {Section-10(4)}

Section-10 (4) (i) in the case of a non-resident, any income by way of interest on such securities or bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf, including income by way of premium on the redemption of such bonds :

Provided that the Central Government shall not specify, for the purposes of this sub-clause, such securities or bonds on or after the 1st day of June, 2002;

(ii) in the case of an individual, any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Management Act, 1999 (42 of 1999), and the rules made thereunder :

Provided that such individual is a person resident outside India as defined in clause (w) of section 2 of the said Act or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account.

Interest on notified saving certificate {Sec-10(4B)}

As per Sec-10 (4B) in the case of an individual, being a citizen of India or a person of Indian origin, who is a non-resident, any income from interest on such savings certificates issued before the 1st day of June, 2002 by the Central Government as that Government may, by notification in the Official Gazette, specify in this behalf:

Provided that the individual has subscribed to such certificates in convertible foreign exchange remitted from a country outside India in accordance with the provisions of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder.

Explanation. —For the purposes of this clause, —

(a) a person shall be deemed to be of Indian origin if he, or either of his parents or any of his grandparents, was born in undivided India;

(b) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder.

Interest payable to a non-resident by way of issue of rupee denominated bond {Section-10(4C)}

Any income by way of interest payable to a non-resident, not being a company, or to a foreign company, by any Indian company or business trust in respect of monies borrowed from a source outside India by way of issue of rupee denominated bond, as referred to in clause (ia) of sub-section (2) of section 194LC, during the period beginning from the 17th day of September, 2018 and ending on the 31st day of March, 2019.

Income accrued or arisen to, or received by a specified fund & attributable to units held by non-resident {Section-10(4D)}

Any income accrued or arisen to, or received by a specified fund as a result of transfer of capital asset referred to in clause (viiab) of section 47, on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange or as a result of transfer of securities (other than shares in a company resident in India) or any income from securities issued by a non-resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India or any income from a securitisation trust which is chargeable under the head "Profits and gains of 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 a non-resident in India) [or is attributable to the investment division of offshore banking unit, as the case may be,] computed in the prescribed manner.

Explanation. —For the purposes of this clause, the expression—

(a) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder;

[(aa) "investment division of offshore banking unit" means an investment division of a banking unit of a non-resident located in an International Financial Services Centre, as referred to in sub-section (1A) of section 80LA and which has commenced its operations on or before the 31st day of March, 2024;]

(b) "manager" shall have the meaning assigned to it in clause (q) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(ba) "permanent establishment" shall have the same meaning assigned to it in clause (iiia) of section 92F;

(bb) "securities" shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and shall also include such other securities or instruments as may be notified by the Central Government in the Official Gazette in this behalf;

(bc) "securitisation trust" shall have the same meaning assigned to it in clause (d) of the Explanation to section 115TCA;

[(c) "specified fund" means,—

(i) a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate,—

(I) which has been granted a certificate of registration as a Category III Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or [regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022, made under the] International Financial Services Centres Authority Act, 2019 (50 of 2019);

(II) which is located in any International Financial Services Centre; and

(III) of which all the units other than unit held by a sponsor or manager are held by [non-residents :

Provided that the condition specified in this item shall not apply where any unit holder or holders, being non-resident during the previous year when such unit or units were issued, becomes resident under clause (1) or clause (1A) of section 6 in any previous year subsequent to that year, if the aggregate value and number of the units held by such resident unit holder or holders do not exceed five per cent of the total units issued and fulfil such other conditions as may be prescribed; or]

(ii) investment division of an offshore banking unit, which has been—

(I) granted a certificate of registration as a Category-I foreign portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and which has commenced its operations on or before the 31st day of March, 2024; and

(II) fulfils such conditions including maintenance of sepa-rate accounts for its investment division, as may be prescribed;]

(d) "sponsor" shall have the meaning assigned to it in clause (w) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(e) "trust" means a trust established under the Indian Trusts Act, 1882 (2 of 1882) or under any other law for the time being in force;

(f) "unit" means beneficial interest of an investor in the fund and shall include shares or partnership interests;

Income on transfer of non-deliverable forward contracts entered into with an offshore banking unit of IFSC {Section 10(4E)}

Any income accrued or arisen to, or received by a non-resident as a result of transfer of non-deliverable forward contracts [or offshore derivative instruments or over-the-counter derivatives,] entered into with an offshore banking unit of an International Financial Services Centre as referred to in sub-section (1A) of section 80LA, which fulfils such conditions as may be prescribed;

Following clause (4E) shall be substituted for the existing clause (4E) of section 10 by the Finance Act, 2023, w.e.f. 1-4-2024 :

(4E) any income accrued or arisen to, or received by a non-resident as a result of—

(i) transfer of non-deliverable forward contracts or offshore derivative instruments or over-the-counter derivatives; or

(ii) distribution of income on offshore derivative instruments,

entered into with an offshore banking unit of an International Financial Services Centre referred to in sub-section (1A) of section 80LA, which fulfils such conditions as may be prescribed;

Royalty or interest income by a non-resident on account of lease of an aircraft [or a ship] {Section-10(4F)}

Any income of a non-resident by way of royalty or interest , on account of lease of an aircraft 45[or a ship] in a previous year, paid by a unit of an International Financial Services Centre as referred to in sub-section (1A) of section 80LA, if the unit has commenced its operations on or before the 31st day of March 2024.

Explanation. —For the purposes of this clause, —

👉 "aircraft" means an aircraft or a helicopter, or an engine of an aircraft or a helicopter, or any part thereof

👉 "ship" means a ship or an ocean vessel, engine of a ship or ocean vessel, or any part thereof

Income received by a non-resident from portfolio managerial services. {Section-10(4G)}

Any income received by a non-resident from portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such non-resident, in an account maintained with an Offshore Banking Unit in any International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India.

Explanation.—For the purposes of this clause, "portfolio manager" shall have the same meaning as assigned to it in clause (z) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021, made under the International Financial Services Centres Authority Act, 2019 (50 of 2019);]

Following clauses (4G) and (4H) shall be substituted for the existing clause (4G) of section 10 by the Finance Act, 2023, w.e.f. 1-4-2024.

any income received by a non-resident from,—

(i) portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such non-resident; or

(ii) such activity carried out by such person, as may be notified by the Central Government in the Official Gazette,

in an account maintained with an Offshore Banking Unit in any International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India.

Explanation. —For the purposes of this clause, "portfolio manager" shall have the same meaning as assigned to it in clause (z) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021, made under the International Financial Services Centres Authority Act, 2019 (50 of 2019);

Income by way of capital gains arising from the transfer of equity shares of domestic company (lease of an aircraft) {Section-10(4H)}

Any income of a non-resident or a Unit of an International Financial Services Centre as referred to in sub-section (1A) of section 80LA, engaged primarily in the business of leasing of an aircraft, by way of capital gains arising from the transfer of equity shares of domestic company, being a Unit of an International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, engaged primarily in the business of lease of an aircraft which has commenced operations on or before the 31st day of March, 2026:

Provided that the provisions of this clause shall apply for capital gains arising from the transfer of equity shares of such domestic company in a previous year relevant to an assessment year falling within the—

(a) period of ten assessment years beginning with the assessment year relevant to the previous year in which the domestic company has commenced operations: or

(b) period of ten assessment years beginning with the assessment year commencing on the 1st day of April, 2024, where the period referred to in clause (a) ends before the 1st day of April, 2034.

Explanation. —For the purposes of this clause, "aircraft" means an aircraft or a helicopter, or an engine of an aircraft or a helicopter, or any part thereof

Leave Travel Concession {Section-10(5)}

In the case of an individual, the value of any travel concession or assistance received by, or due to, him, —

(a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;

(b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,

subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government :

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel:

[Provided further that for the assessment year beginning on the 1st day of April, 2021, the value in lieu of any travel concession or assistance received by, or due to, such individual shall also be exempt under this clause subject to the fulfilment of such conditions (including the condition of incurring such amount of such expenditure within such period), as may be prescribed.]

👉 [Explanation 1]. —For the purposes of this clause, "family", in relation to an individual, means—

(i) the spouse and children of the individual ; and

(ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.

👉 [Explanation 2. —For the removal of doubts, it is hereby clarified that where an individual claims exemption and the exemption is allowed under the second proviso in connection with the prescribed expenditure, no exemption shall be allowed under this clause in respect of such prescribed expenditure to any other individual;]

👉Conditions for the purpose of section 10(5).

As per Rule 2B of Income Tax Rule 1962 (1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding, —

(a) on leave to any place in India;

(b) to any place in India after retirement from service or after the termination of his service,

shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely :—

[(i) where the journey is performed on or after the 1st day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination;

(ii) where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and

(iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be :—

(A) where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and

(B)where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.]

1[(1A) For the assessment year beginning on the 1st day of April, 2021, where the individual referred to in sub-rule (1) avails any cash allowance from his employer in lieu of any travel concession or assistance, the amount exempted under the second proviso to clause (5) of section 10 shall be the amount, not exceeding thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less, subject to fulfilment of the following conditions, namely:-

(i) the individual has exercised an option to avail exemption under the second proviso of clause (5) of section 10, in lieu of the exemption under clause (5) of section 10 in respect of one unutilised journey during the block of four calendar years commencing from the calendar year 2018;

(ii) the payment in respect of the specified expenditure is made by the individual or any member of his family to a registered person during the specified period;

(iii) the payment in respect of the specified expenditure is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA; and

(iv) the individual obtains a tax invoice in respect of specified expenditure from the registered person referred in clause (ii).

Explanation 1- For the purpose of this sub-rule, -

(i)"tax invoice" means an invoice issued by the registered person under section 31 of the Central Goods and Services Tax Act, 2017 (No. 12 of 2017);

(ii)"registered person" shall have the meaning assigned to it in clause (94) of section 2 of the Central Goods and Services Tax Act, 2017 (No. 12 of 2017);

(iii)"specified expenditure" means expenditure incurred by an individual or a member of his family during specified period on goods or services, which are liable to tax at an aggregate rate of twelve per cent. or above under various Goods and Services Tax (GST) laws and goods are purchased or services procured from GST registered vendors or service providers.

(iv) "specified period" means the period commencing from the 12th day of October 2020 and ending on the 31st day of March, 2021.

Explanation 2 For the removal of doubt, it is hereby clarified that if the amount received by or due to an individual, as per the terms of his employment, from his employer in relation to himself and member of his family, in connection with the specified expenditure is in excess of the thirty six thousand rupees per person, for the individual and the member of his family, the exemption under this sub-rule would be restricted to thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less.

Explanation 3 It is hereby clarified that the clarification issued by the Department of Expenditure, Ministry of Finance, vide OM F. No 12(2)/2020-EII (A) Dated 12th October, 2020 and any subsequent clarifications, if any, issued in this regard shall apply mutatis mutandis to the exemption under this sub-rule.

(1B) Where an exemption under the second proviso to clause (5) of section 10 is claimed and allowed, sub-rule (2) shall have effect as if for the words "two journeys" , the words "one journey" has been substituted]

(2) The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986 :

[Provided that nothing contained in this sub-rule shall apply to the benefit already availed of by the assessee in respect of any number of journeys performed before the 1st day of April, 1989 except to the extent that the journey or journeys so performed shall be taken into account for computing the limit of two journeys specified in this sub-rule.]

(3) Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first calendar year of the immediately succeeding block of four calendar years shall be eligible for exemption.

Explanation: The amount in respect of the value of the travel concession or assistance referred to in this sub-rule shall not be taken into account in deter-mining the eligibility of the amount in respect of the value of the travel con-cession or assistance in relation to the number of journeys under sub-rule (2).]

[(4) The exemption referred to in sub-rule (1) shall not be available to more than two surviving children of an individual after 1st October, 1998 :

Provided that this sub-rule shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child.]

Remuneration received by specified diplomats and their staff {Section 10(6)(ii)}

(6) in the case of an individual who is not a citizen of India,—

👉(ii) the remuneration received by him as an official, by whatever name called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or as a member of the staff of any of these officials, for service in such capacity:

Provided that the remuneration received by him as a trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country :

Provided further that such members of the staff are subjects of the country represented and are not engaged in any business or profession or employment in India otherwise than as members of such staff.

👉 (iii) to (v) [Sub-clause (ii) substituted for sub-clauses (ii) to (v) by the Finance Act, 1988, w.e.f. 1-4-1989;]

👉(vi) the remuneration received by him as an employee of a foreign enterprise for services rendered by him during his stay in India, provided the following conditions are fulfilled—

(a) the foreign enterprise is not engaged in any trade or business in India ;

(b) his stay in India does not exceed in the aggregate a period of ninety days in such previous year ; and

👉(viii) any income chargeable under the head "Salaries" received by or due to any such individual being a non-resident as remuneration for services rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate a period of ninety days in the previous year.

👉 (xi) the remuneration received by him as an employee of the Government of a foreign State during his stay in India in connection with his training in any establishment or office of, or in any undertaking owned by,—

(i) the Government ; or

(ii) any company in which the entire paid-up share capital is held by the Central Government, or any State Government or Governments, or partly by the Central Government and partly by one or more State Governments ; or

(iii) any company which is a subsidiary of a company referred to in item (ii) ; or

(iv) any corporation established by or under a Central, State or Provincial Act ; or

(v) any society registered under the Societies Registration Act, 1860 (21 of 1860), or under any other corresponding law for the time being in force and wholly financed by the Central Government, or any State Government or State Governments, or partly by the Central Government and partly by one or more State Governments

Tax paid on behalf of foreign company deriving income by way of royalty or fees for technical services {Section 10(6A)}

As per Section 10-(6A) where in the case of a foreign company deriving income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976 but before the 1st day of June, 2002 and, —

(a) where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, such agreement is in accordance with that policy ; and

(b) in any other case, the agreement is approved by the Central Government,

the tax on such income is payable, under the terms of the agreement, by Government or the Indian concern to the Central Government, the tax so paid.

Explanation.—For the purposes of this clause and clause (6B),—

(a) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;

(b) "foreign company" shall have the same meaning as in section 80B ;

Tax paid on behalf of foreign company or non-resident in respect of other income {Section 10(6B)}

As per Section-10(6B) where in the case of a non-resident (not being a company) or of a foreign company deriving income (not being salary, royalty or fees for technical services) from Government or an Indian concern in pursuance of an agreement entered into before the 1st day of June, 2002 by the Central Government with the Government of a foreign State or an international organisation, the tax on such income is payable by Government or the Indian concern to the Central Government under the terms of that agreement or any other related agreement approved before that date by the Central Government, the tax so paid

Tax paid on behalf of foreign Government or foreign enterprise deriving income by way of lease of aircraft or aircraft engine {Section 10(6BB)}

As per Section-10(6BB) where in the case of the Government of a foreign State or a foreign enterprise deriving income from an Indian company engaged in the business of operation of aircraft, as a consideration of acquiring an aircraft or an aircraft engine (other than payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease under an agreement entered into after the 31st day of March, 1997 but before the 1st day of April, 1999, or entered into after the 31st day of March, 2007 and approved by the Central Government in this behalf and the tax on such income is payable by such Indian company under the terms of that agreement to the Central Government, the tax so paid.

Explanation. —For the purposes of this clause, the expression "foreign enterprise" means a person who is a non-resident

Technical fees received by a notified foreign company {Section 10(6C}

As per Section -any income arising to such foreign company, as the Central Government may, by notification in the Official Gazette, specify in this behalf, by way of royalty or fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India.

Royalty/Fees received by non-resident from National Technical Research Organisation {Section 10(6D)}

As per Section-10(6D) any income arising to a non-resident, not being a company, or a foreign company, by way of royalty from, or fees for technical services rendered in or outside India to, the National Technical Research Organisation

Allowances or perquisites given to a citizen of India {Section-10(7)}

Any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India.

Income of foreign Government employee under co-operative technical assistance programme {Section 10(8)}

In the case of an individual who is assigned to duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of a foreign State (the terms whereof provide for the exemption given by this clause)—

(a) the remuneration received by him directly or indirectly from the Government of that foreign State for such duties, and

(b) any other income of such individual which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such individual is required to pay any income or social security tax to the Government of that foreign State :

[Provided that nothing contained in this clause shall apply to such remuneration and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;]

Any remuneration or fee received by any individual as a consultant/any individual under technical assistance programme of Govt {Section 10(8A) / (8B)}

(a) Any remuneration or fee received by him or it, directly or indirectly, out of the funds made available to an international organisation [hereafter referred to in this clause and clause (8B) as the agency] under a technical assistance grant agreement between the agency and the Government of a foreign State ; and

(b) any other income which accrues or arises to him or it outside India, and is not deemed to accrue or arise in India, in respect of which such consultant is required to pay any income or social security tax to the Government of the country of his or its origin:

[Provided that nothing contained in this clause shall apply to such remuneration, fee and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023.]

Explanation.—In this clause, "consultant" means—

(i) any individual, who is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; or

(ii) any other person, being a non-resident,

engaged by the agency for rendering technical services in India in connection with any technical assistance programme or project, provided the following conditions are fulfilled, namely :—

(1) the technical assistance is in accordance with an agreement entered into by the Central Government and the agency ; and

(2) the agreement relating to the engagement of the consultant is approved by the prescribed authority for the purposes of this clause ;

As per Section-10(8B) in the case of an individual who is assigned to duties in India in connection with any technical assistance programme and project in accordance with an agreement entered into by the Central Government and the agency—

(a) the remuneration received by him, directly or indirectly, for such duties from any consultant referred to in clause (8A) ; and

(i) the individual is an employee of the consultant referred to in clause (8A) and is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; and

(ii) the contract of service of such individual is approved by the prescribed authority before the commencement of his service :

[Provided that nothing contained in this clause shall apply to such remuneration and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;]

Income of any member of the family of any such individual as is referred in clause 8/8A/8B of Section 10 {Section-10(9)}

The income of any member of the family of any such individual as is referred to in clause (8) or clause (8A) or, as the case may be, clause (8B) accompanying him to India, which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such member is required to pay any income or social security tax to the Government of that foreign State or, as the case may be, country of origin of such member:

[Provided that nothing contained in this clause shall apply to such income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;]

Continuing......

Source-CBDT -Income Tax Act, Rules, Circular, Notification & Etc...

Regards

CA Arun Kumar Mohanty (FCA)

TAXATION & IT & Valuation