Indian Income Tax | Non-Resident Exemptions

Section 10(6B): Exemption for Tax Paid on Certain Non-Resident Income

Section 10(6B) of the Income-tax Act, 1961 provides a specific exemption where the Government of India or an Indian concern bears the Indian income tax on certain income of a non-resident or foreign company under qualifying agreements made before 1 June 2002.

Key distinction: The exemption covers the income tax paid on behalf of the recipient, not automatically the underlying income itself. Salary, royalty and fees for technical services are expressly excluded from this clause.

What does Section 10(6B) provide?

Where a qualifying non-resident derives eligible income from the Government or an Indian concern under a specified intergovernmental or international-organisation agreement, and the Indian payer is required to pay the tax to the Central Government, the tax so paid is excluded from the recipient's total income, subject to the statutory conditions.

Eligible assessee	A non-resident person other than a company, or a foreign company.
Nature of income	Income derived from the Government or an Indian concern, excluding salary, royalty and fees for technical services.
Amount exempt	The entire qualifying amount of Indian income tax paid by the Government or Indian concern on behalf of the recipient.
Agreement deadline	The relevant agreement between the Central Government and the foreign government or international organisation must have been entered into before 1 June 2002.
Relevant law	Section 10(6B), Income-tax Act, 1961, for years to which that Act applies.

Conditions for claiming the exemption

Qualifying recipient: The income must be received by a non-resident who is not a company, or by a foreign company.
Qualifying payer: The income must arise from the Government or an Indian concern.
Qualifying agreement: The income must arise pursuant to an agreement entered into before 1 June 2002 by the Central Government with the government of a foreign State or an international organisation.
Tax-bearing obligation: Under that agreement, or another related agreement approved by the Central Government before 1 June 2002, the Government or Indian concern must be liable to pay the tax on that income to the Central Government.
Excluded categories: The underlying income must not be salary, royalty or fees for technical services.

Meaning of important terms

Non-resident

A person who does not satisfy the applicable conditions for residence in India under the income-tax law for the relevant year. Residence is determined under the statutory rules, not merely by citizenship.

Foreign company

For this exemption, the expression follows the statutory definition referred to in the Explanation to section 10(6A), which also applies to section 10(6B). The relevant definition must be read with the law applicable to the year concerned.

Royalty and fees for technical services

The Explanation shared by sections 10(6A) and 10(6B) refers to the definitions of royalty in Explanation 2 to section 9(1)(vi) and fees for technical services in Explanation 2 to section 9(1)(vii). Those receipts are not covered by section 10(6B); different provisions may govern them.

How does the exemption work?

Suppose an eligible foreign enterprise receives taxable project income under a qualifying pre-June 2002 agreement and the Indian concern is contractually required to bear the Indian income tax. The underlying project income remains subject to the applicable tax rules, but the qualifying tax paid by the Indian concern is not treated as additional taxable income of the recipient under section 10(6B). The exact treatment depends on the agreement, tax character of the receipt and applicable law.

Does Section 10(6B) apply to new agreements?

No. The statutory cutoff is before 1 June 2002. A newly executed agreement cannot independently qualify under this provision. The clause may still be relevant to payments under qualifying older arrangements, subject to all statutory requirements.

Records to keep

The agreement between the Central Government and the foreign government or international organisation, including its execution date.
Any related agreement and evidence of the required Central Government approval before the cutoff date.
Documents establishing the recipient's non-resident or foreign-company status.
Invoices, payment records, tax computations and proof of tax deposited by the Government or Indian concern.

Official legal references

Applicable-law note: The Income-tax Act, 2025 applies from 1 April 2026, subject to transition and savings provisions. This article explains the historical section 10(6B) exemption under the 1961 Act; for a tax year beginning on or after 1 April 2026, check the corresponding provision and transitional rules in the 2025 Act before claiming relief.