Section 10(6) of the Income Tax Act, 1961 provides tax exemptions for certain types of remuneration received by individuals who are not citizens of India. Specifically, Section 10(6)(ii) deals with exemptions for remuneration received by officials of foreign embassies, high commissions, and other diplomatic missions in India.
Key Provisions of Section 10(6)(ii)
The exemption under Section 10(6)(ii) applies to:
- Remuneration received by an individual who is not a citizen of Indiaas:
- An official or member of staff of an embassy, high commission, legation, consulate, commission, or trade representation of a foreign state
- A trade commissioner or other official representative in India of a foreign government
- A member of the staff of any such officials
- Conditions for exemption:
- The individual must not be an Indian citizen (though they may be of Indian origin)
- The country they represent must provide similar tax exemptions to corresponding Indian government officials in that country (reciprocity condition)
- The individual should not engage in any other business, profession, or employment in India outside their official duties
- For staff members, they must be subjects of the country they represent
Practical Examples
Example 1: Eligible for Exemption
Mr. John Smith, a UK citizen and UK tax resident, is appointed as a senior official at the British High Commission in New Delhi. He earns a remuneration of ₹25 lakh during FY 2024-25.
Analysis:
- He is not an Indian citizen (fulfills citizenship condition)
- UK provides similar tax exemptions to Indian diplomats in UK (reciprocity condition met)
- He doesn’t engage in any other business in India
- His salary is fully exempt under Section 10(6)(ii)
Example 2: Not Eligible for Exemption
Mr. Rohit Sharma is an Indian citizen but UK tax resident since 2010. He is appointed as a senior official of the UK embassy in India, earning ₹20 lakh during FY 2024-25.
Analysis:
- He is an Indian citizen (fails the citizenship condition)
- Even if other conditions are met, his salary is fully taxable in India as Section 10(6)(ii) exemption is only for non-citizens
Example 3: Staff Member Case
Ms. Emma Watson, a Canadian citizen and staff member at the Canadian Trade Commission in Mumbai, earns ₹15 lakh annually. All Canadian staff in India are Canadian citizens.
Analysis:
- She’s not an Indian citizen
- Canada provides similar benefits to Indian staff in Canada
- She’s a subject (citizen) of the country she represents
- She doesn’t engage in other Indian business
- Her salary is fully exempt under Section 10(6)(ii)
Important Considerations
- Scope of Covered Positions: The exemption covers not just ambassadors/diplomats but also various staff members working in these institutions
- Reciprocity Requirement: The exemption is contingent on the foreign country providing similar tax benefits to Indian officials posted there. Without this reciprocal treatment, the exemption wouldn’t apply
- Exclusive Employment: The individual cannot have any other source of income in India beyond their official duties with the foreign mission
- Documentation: While not explicitly stated in the Act, in practice, individuals claiming this exemption would need to provide documentation proving their employment status, citizenship, and evidence of reciprocal treatment by their home country.
