In today’s globalised economy, people frequently cross borders for employment, business, and professional engagements. However, tax laws can be complex when foreign nationals work in India or Indian citizens work abroad. Section 10(6) of the Income Tax Act is one such provision that offers relief to certain individuals from paying tax on specific income.
This section provides a list of incomes exempt from taxation, especially for foreign nationals employed in India under specific agreements & for Indian citizens earning abroad in certain cases. It also provides relief to salaried professionals to avoid double taxation and encourage cross-border collaborations.
What is Section 10(6) of the Income Tax Act?
Section 10(6) falls under the broader Section 10 exemptions that deal with incomes not included in total taxable income. Specifically, Section 10(6) provides relief to salaried professionals and other individuals in special situations where taxation in India is either unfair or unnecessary.
One of the notable features is that exemption under Section 10(6) is available only to an individual who is not a citizen of India in certain cases—such as foreign nationals working with a foreign enterprise but rendering services in India.
This provision helps in promoting international trade relations, cultural exchange, and technical expertise by ensuring tax compliance without overburdening expatriates."
Applicability of Section 10(6)
Section 10(6) can apply in several scenarios:
- Foreign nationals employed by foreign enterprises but working in India – Income from such employment may be exempt if specific conditions are met.
- Diplomatic & consular staff – Certain incomes earned in India by diplomats or consular officials are exempt.
- Remuneration earned by non-citizens in India under cooperative agreements – For example, foreign technicians employed under bilateral agreements.
- Exemption to Indian citizens working outside the country on their remuneration – In certain rare cases, Indian citizens posted abroad may also enjoy exemption benefits.
Key Conditions for Availing the Exemption
While the scope of Section 10(6) is broad, not every foreign national or Indian citizen automatically qualifies. The following conditions generally apply:
- Exemption under Section 10(6) is available only to an individual who is not a citizen of India, except in specific provisions that cover Indian citizens abroad.
- The employment contract or assignment must fall under approved categories or government-notified agreements.
- The duration of stay in India must be within the limits prescribed in the section.
- Taxes should either be paid in the home country or exempt under reciprocal agreements.
Also Read: The Silent Rule That Decides Whether You Pay Tax in India—or Not
List of Incomes Exempt Under Section 10(6)
Section 10(6) provides a list of incomes exempt from taxation, which can include:
- Remuneration received by foreign diplomatic and consular staff.
- Remuneration earned by employees of foreign enterprises not engaged in Indian business activities.
- Payments received under cooperative technical assistance agreements.
- Certain allowances & benefits provided to foreign nationals working in India.
How Section 10(6) Provides Relief to Salaried Professionals
For salaried individuals—especially foreign nationals—working in India for a short duration, Section 10(6) ensures that they are not unnecessarily taxed in India for income that is already taxed elsewhere. This provides relief to salaried professionals from the burden of double taxation and makes India a more attractive destination for foreign talent.
Practical Example
Case 1: Foreign Engineer on a Short-Term Project
A UK-based engineer is sent to India for four months to work on a technical installation for a UK company. Since he is not a citizen of India & his stay does not exceed the prescribed period, his remuneration may qualify for exemption under Section 10(6).
Case 2: Diplomatic Staff
An embassy official posted in India receives a salary from his home government. Under diplomatic agreements, such remuneration is exempt from Indian income tax under this section."
How Indian Citizens Working Abroad Can Benefit
While most provisions under Section 10(6) cater to non-citizens, there are cases where exemption to Indian citizens working outside the country on their remuneration applies. These are usually in scenarios where India has reciprocal arrangements with the host country or when the Indian government issues specific notifications.
Documentation Required to Claim Exemption
To claim benefits under Section 10(6), individuals may need:
- Passport and visa details.
- Employment contract or assignment letter.
- Proof of stay duration in India.
- Tax residency certificate (for foreign nationals).
- Relevant government approvals or bilateral agreement references.
Why Section 10(6) Matters for Businesses and Professionals
For multinational corporations, this provision allows easier deployment of foreign talent without creating excessive tax complications. For professionals, it means fewer hurdles when accepting cross-border assignments in India.
It also strengthens India’s economic diplomacy by aligning tax treatment with international norms & agreements.
Also Read: The PAN–Aadhaar Link That Could Save You from Higher Taxes
Recent Trends & Compliance
The Indian tax department has increased scrutiny on cross-border employment arrangements to ensure that exemptions are claimed legitimately. While Section 10(6) offers genuine relief, misuse can lead to penalties, reassessment, and reputational damage."
Conclusion
Section 10(6) of the Income Tax Act is a vital tool in India’s tax framework that provides relief to salaried professionals, especially foreign nationals, by ensuring fair tax treatment. It provides a list of incomes exempt from taxation, applies in specific employment or diplomatic situations, and in limited cases, extends exemption to Indian citizens working outside the country on their remuneration.
By understanding and applying it correctly, individuals and businesses can stay compliant while maximising legitimate tax benefits.
💡 Heading for a foreign posting or hiring an expatriate for your Indian operations? Let Callmyca.com handle your tax exemptions and compliance so you can focus on work without worrying about the paperwork.
