Some of the common exemptions are as follows:
S.No. | Details of income |
1 | Agricultural income |
2 | Share from income of HUF |
3 | Share of profit from firm |
4 | Minor's income clubbed with individual up to Rs.1,500 per minor child |
5 | Dividends from Indian companies, income from units of MFs or UTI. |
6 | Interest, premium on redemption, other payments received from notified securities, bonds (up to notified amounts only) |
7 | Other exemptions available to residents in respect of salary |
8 | Interest and capital gains arising on transfer of Provident funds |
Exemptions as to investment incomes of NRIs:
Ø The entire income accruing or arising to a NRI investing in the units of the Unit Trust of India is free of income tax provided the units purchased by them are out of the amount remitted from abroad or from their Non-resident (External) Account.
Ø Income arising from investment in notified savings certificates obtained by NRIs is exempt from tax provided the certificates are subscribed to in convertible foreign exchange remitted from a foreign country in accordance with FEMA.
Ø Income from NRI Bonds 1988 and NRI Bonds (Second Series) purchased by NRIs in foreign exchange is exempt from tax. This exemption continues to be available to a Non-resident Indian even after he becomes resident. This exemption is also available to the nominee or survivor of the NRI and also to the donee, who gets a gift of such bonds from the NRI.
Exemptions specifically applicable to non-residents: In order to attract investments from non-residents, certain reliefs and exemptions have been provided with respect to certain incomes earned by NRIs. Chapter XIIA of the IT Act contains special provisions relating to NRIs.
These provisions are applicable to non-residents in addition to the other general provisions.
Foreign exchange assets:
The term 'Foreign Exchange Asset' means any of the following assets acquired, purchased or subscribed to in convertible foreign exchange in accordance with FEMA.
Ø Shares in Indian company
Ø Debentures issued by a public limited company
Ø Deposits in a Public Ltd. Co.
Ø Securities of the Central Government
Ø Any other notified asset.
Tax rates relating to Foreign exchange assets:
Ø a) Dividend income - fully exempt
Ø b) Long term capital gains arising on transfer - 10%
Ø c) Other incomes - 20%
Other relevant points relating to foreign exchange assets:
Ø No deduction in respect of related expenditure or allowance shall be allowed in respect of such incomes
Ø Where NRI has income only from such foreign exchange assets and tax has been deducted from such incomes, the assessee need not file his return of income for that previous year.
Ø The non-resident also has the facility to avail these special rates of tax even after he becomes a resident. To avail this, the assessee has to file a declaration that he wishes to continue availing the special rates of tax, along with his return of income.
Ø It should be noted that the non-resident has an option of not availing the above mentioned provisions. In such case the non-resident has to file a declaration with his return of income, that that these provisions would not be applicable to him. In such case normal provisions of IT Act would be applicable with respect to the above mentioned investment incomes.
Exemption for bank deposit accounts:
The accounts which qualify for exemption for all non-residents under this head are:
Ø Foreign currency ordinary non-repatriable account (FCNR)
Ø Non-Resident external account (NR(E))
Exemptions for bonds and deposits:
This exemption is applicable on interest from specified savings certificates subscribed by the assessee in 'convertible foreign exchange' remitted from a country outside India, in accordance with the Foreign exchange regulation act The certificates specified by the Central Government are the NSC VI and VII issues.
Other exemptions:
Tax on royalty or technical fees paid to a foreign company under an agreement approved by the Central Government. This exemption is available only if the payee is a foreign company.