For NRs, certain incomes, although falling within the scope of total income of the individual, may still be exempt from tax. Such income has been specified under provisions of the Act. List of such incomes are as follows:
i. Interest earned on NRE a/c provided such person is “resident outside India” as per FEMA or permitted by RBI to maintain such a/c;
ii. Interest paid to NR or to RNOR on foreign currency deposits, i.e., FCNR and RFC deposits. The exemption for interest on RFC a/c and FCNR a/c continues till such time as the a/c holder continues to be RNOR;
iii. Interest paid to NR or to RNOR on deposit made on or after April 1, 2005, in Offshore Banking Unit;
iv. Interest paid to NR by unit located in International Finance Services Centre in respect of monies borrowed by said unit from NR on or after September 1, 2019;
v. If eligible foreign currency Bonds or Global Depository Receipts (GDR) of Indian Company issued under GDR schemes or rupee denominated bond of an Indian Company (issued outside India) is transferred outside India, by one NR to another NR, then capital gains arising on such transfer are exempt from income tax;
vi. Any sum received under life insurance policy provided the policy was issued on or after April 1, 2003 but on or before March 31, 2012 and yearly premium does not exceed 20% of the sum assured. In case of a policy issued after April 1, 2012, the sum received under the policy shall be exempt if the yearly premium does not exceed 10% of the sum assured;
vii. Transfer of Government security carrying periodic payment of interest made outside India by a NR to another NR;
viii. Remuneration received by Foreign Diplomats / Consulate and their staff (subject to certain conditions);
ix. Royalty or fees received by a NR for technical services rendered in or outside India to the National Technical Research Organization;
x. Remuneration received by NR, not being a citizen of India, as employee of a foreign enterprise for services rendered by him during his stay in India, if:
• Foreign enterprise is not engaged in any trade or business in India;
• His stay in India does not exceed in aggregate a period of 90 days in such previous year; and
• Such remuneration is not liable to be deducted from the income of employer chargeable under this Act.
xi. Salary received by a NR, not being a citizen of India, 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 FY;
xii. In case of sale of units of an Equity Oriented Fund or a Business Trust, being a long-term capital asset, first Rs.1,00,000/- (Note 1) of gains arise on such sale shall be exempted provided that Securities Transaction Tax (STT) has been paid on sale of such units;
xiii. In case of sale of equity shares, being a long-term capital asset, first Rs.1,00,000/- (Note 1) of gains arise on such sale shall be exempted provided that STT has been paid on sale. Further, if the said shares are purchased after October 1, 2004 then STT is required to be paid on purchase also, subject to certain exceptions.
Income of minor child included in income of parent is exempt from tax up to Rs. 1,500/- per minor child. However, no such exemption shall be available if individual opts for offering income to tax under the new regime. Refer to Chapter on Tax liability in India for taxability under the new regime.