Section 10(6) of the Income Tax deals with Exemption to Non Indian Citizens like Diplomats. The Exemption under section 10(6) of Income Tax Act has four clauses of exemptions. The first clause of Section 10(6) deals with Exemption on Remuneration paid to Diplomats. The Second provision of Section 10(6) Income Tax Act deals with exemption on Remuneration paid to Foreign Individuals. Section 10(6)(iii) lays down provisions for exemption on payments made to Employee on a foreign ship. And finally, The Fourth Provision of Section 10(6) deals with Remuneration of employee of foreign Government during his training in India.
(i) Remuneration of Diplomats etc. [Section 10(6)(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.
However, 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.
Further 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.
(ii) Remuneration received by foreign individual [Section 10(6)(vi)]:
The remuneration received by a foreign individual in his capacity as an employee of a foreign enterprise for the services rendered by him during his stay in India would be exempt if the following conditions are fulfilled:
- The foreign enterprise is not engaged in any trade or business in India.
- The total period of stay of the individual in India during the previous year does not exceed 90 days.
- Such remuneration is not liable to be deducted from the income of the employer chargeable to tax in India under the Income-tax Act.
(iii) Non-resident employee on a foreign ship [Section 10(6)(viii)]:
Income chargeable under the head ‘Salaries’ received by or due to any non-resident individual as remuneration for the services rendered by him in connection with his employment on foreign ship is exempt from tax where the total period of his stay in India does not exceed a period of 90 days during the previous year.
(iv) Remuneration of employee of foreign Government during his training in India [Section 10(6)(xi)]:
The remuneration received by an individual being a foreign citizen 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:
- The government; or
- Any company in which the entire paid-up 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
- Any company which is a subsidiary of a company referred to in (b); or
- Any corporation established by or under a Central, State or Provincial Act; or
- Any society registered under the Societies Registration Act, 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 partly by the Central Government and partly by one or more State Governments.
SECTION 10(6A) of Income Tax Act
Under clause (6A), where income is derived by a foreign company 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 Indian concern after March 31, 1976 which is approved by the Central Government or where the agreement relates to matter included in the industrial policy of the government for the time being in force and tax on such income is payable, under the terms of such agreement by the government or the Indian concern to the Central Government, the tax so paid will not be included in computing the total income of the foreign company.
This exemption is not available under Section 10(6A) if the agreement is entered into on or after 1.6.2002, as amended by Finance Act, 2002. In other words, the exemption is available for the agreements entered into up to 31.5.2002 only.
Allowance Payable Outside India SECTION 10(7)
Allowances or perquisites paid or allowed as such outside India by the Central Government to a citizen of India for his services rendered outside India, would be wholly exempt from income-tax