Ans.

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.    Any sum received (Including bonus) under life insurance policy/Unit Linked Insurance policies (ULIP(s)) upon maturity of policy, pre-mature withdrawal is Exempt provided;

• For a policy that was issued on or after April 1, 2003 but on or before March 31, 2012 and the yearly premium does not exceed 20% of the sum assured.
  
  
• For a policy issued after April 1, 2012, the yearly premium does not exceed 10% of the sum assured;  
  
  
• Any sum received on death or for any sum received under life insurance policy issued before 1 April 2003 is exempt even if the premium payment exceeds the threshold prescribed above.
  
  
• According to Finance Act, 2021, any ULIP purchased on/after February 1, 2021, qualifies for tax exemption if
  
  
• the annual premium for any financial year (FY) does not exceed 20%/10%/15%, as applicable of the sum assured and
  

• the total premium paid in any financial year does not exceed Rs. 2,50,000/-.However, in case of the policyholder’s death, the death benefit will be entirely tax-exempt
  
  
• According to Finance Act, 2023, any life insurance policies other than ULIP issued on or after April 1, 2023, the tax exemption is available if-
  
  
• the annual premium for any FY does not exceed 20%/10%/15%, as applicable of the sum assured; and
  
  
• Annual premium payable for any year during the term of policy does not exceeds Rs. 5 lakhs. If the premium is payable by a person for more than one life insurance policy, the exemption shall be available only for those life insurance policies (other than ULIPs), where the aggregate amount of premium does not exceed Rs. 5 lakhs in any FY during the term of any of those policies

However, in case of the policyholder’s death, the death benefit will be entirely tax-exempt

vi.    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;

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;

Ans. No, only Interest income earned on deposits in NRE a/c are exempt from tax. Accordingly, income on any other investments credited to NRE a/c, unless specifically exempted under the Act, would be taxable.

Ans. No.

Ans. Dividends received from shares of an Indian Company and units of mutual funds shall be taxable in the hands of non-resident w.e.f 1st April, 2020. Accordingly, dividend received in April, 2020 shall be taxable in the hands of NRI as per the provisions of the Income Tax Act or DTAA rates (whichever is more beneficial). 

Ans.

No, in case where any sum is received under life insurance policy on death of person, then entire sum received is exempt from tax.

Ans.

* Though the last four policies are eligible for exemption under Section 10(10D) but the exemption can be claimed in respect of only those policies whose aggregate premium during the year does not exceed Rs. 5 lakhs (i.e., low premium policies). The threshold limit of Rs. 5 lakhs should be exhausted for those policies first which have a higher yield, as it will, in turn, reduce the ultimate taxable income. If the income from such eligible policies is the same, the investor should consider Policy E, G and H as the aggregate premium of such policies equal to Rs. 5,00,000. If policy F is included, the limit of Rs. 5,00,000 cannot be exhausted fully.

Ans.

Ans.

Note 1:

The said limit of exemption upto Rs. 1,25,000/- is cumulative limit for gains on sale of both units of an Equity Oriented Fund or a Business Trust and Equity Shares.

- Updated 11/2024