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Deduction under section 80DD: a cousin does not qualify as a dependent for claiming the deduction.
The statutory dependent definition limits eligible relatives to spouse, children, parents, brothers, sisters, spouse's siblings, and parents' siblings; a cousin (daughter of mother's sister) is excluded, so expenses for her maintenance and medical treatment cannot be claimed as a deduction.
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Disabled dependent eligibility for income tax deductions requires relatives or HUF members to be wholly or mainly dependent.
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Definition of disability for income-tax deductions under sections 80DD and 80DDB follows the Persons with Disabilities Act, 1995, listing impairments such as blindness, low vision, leprosy-cured, hearing impairment, locomotor disability, mental retardation, mental illness, autism, cerebral palsy and multiple disabilities; a person is considered disabled when impairment is not less than 40%, and severe disability is an impairment of 80% or more, which determine eligibility for the specified deductions.
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Health insurance deduction allowed when employee bears premium paid non-cash and obtains employer certificate confirming the deduction.
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Deduction under section 80D is available only where the payment is made out of income chargeable to tax; payments from tax-exempt income or from borrowed funds do not qualify for the deduction.
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Medical insurance deduction under 80D varies by parental senior citizen status, affecting combined family and parental premium allowances.
Deduction under 80D allows an individual who pays medical insurance premiums other than in cash to claim a deduction for premiums for the assessee, spouse and dependent children as one component and for parental premiums as a separate component; the total allowable deduction depends on whether any parent is a senior citizen, with a higher combined deduction if a parent is a senior citizen.
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Deduction under 80CCG limited by eligible investment percentage and income threshold, with recapture on scheme violation.
Deduction under the Rajiv Gandhi Equity Savings Scheme is computed as a percentage of eligible investments in listed equity shares and equity oriented fund units but is restricted by a monetary ceiling; sale of previously qualifying units can breach scheme conditions and cause partial recapture as taxable income; exceeding the prescribed gross total income threshold disqualifies the taxpayer from claiming the deduction for that year.
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Deduction under section 80CCE limits combined 80C and 80CCC claims for contributions to savings instruments.
Contributions to Public Provident Fund and an annuity policy eligible under Section 80CCC are deductible but subject to the aggregate ceiling under Section 80CCE; when combined eligible deductions across Sections 80C and 80CCC exceed the statutory limit, the deductible amount is restricted to that ceiling and any excess is disallowed.
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Aggregate deduction under section 80CCE limits combined 80C and 80CCC contributions to the statutory overall ceiling.
Contributions to a public provident fund and annuity policy premiums are aggregated and the deductible amount is the lesser of the combined eligible contributions and the statutory aggregate ceiling; when the combined total exceeds that ceiling, the deduction is restricted to the statutory limit.
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Deduction under 80C: eligible life insurance premiums allowed up to policy ceilings; excess disallowed; one policy's maturity taxable.
Deduction under Section 80C allows life insurance premiums up to policy wise ceilings based on a percentage of the sum assured. Policy A (sum assured 200,000) with a ceiling of 20% permits the full 25,000 premium as deductible; Policy B (sum assured 100,000) with a ceiling of 10% permits only 10,000 of the 12,000 premium as deductible. The total deduction equals the aggregate of eligible premiums, and Policy B's maturity proceeds are not exempt from tax.
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Deduction under 80C: spouses can separately claim education-related deductions based on their individual contributions and limits.
Spouses who each make genuine payments toward a child's education may separately claim a deduction under deduction u/s 80C based on their respective contributions, with each spouse's claim limited by the statutory individual ceiling; the wife may claim her actual payment and the husband may claim up to the maximum permissible individual deduction.
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Deduction under section 80C for adopted child's school fees permitted where the statute is silent on biological status.
Because 80C does not specify that the child must be biological, deductions for school fees paid for an adopted child are treated as permissible under the provision; the operative legal point is the statute's silence regarding the child's biological status.
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Tuition fee deduction under 80C covers institutional tuition but excludes transport, hostel, library and private tuition charges.
Deduction under Section 80C allows tuition fee claims only for amounts paid to recognised educational institutions, including pre nursery, play school and nursery class fees; excluded are transport, hostel, mess, library and vehicle stand charges, late fees, part time and distance learning course fees, and private tuition.
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Residence test for individuals sets presence and prior year stay thresholds determining resident status for income tax assessment.
Rule of residence for individuals for the assessment year 2015-16 uses presence-based thresholds and cumulative prior year conditions to determine resident in India status. Individuals are classified by category-those leaving for employment, visitors who are citizens or persons of Indian origin, and all other individuals-with each category subject to the single year presence test and, where applicable, an additional short term presence requirement plus multi year aggregation criteria assessing residence across preceding years.
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Relief under Section 89(1): compare tax on receipt and accrual bases to determine relief for salary arrears and adjust current tax payable.
Relief for salary received in arrears or advance is determined by computing tax on the aggregate income on the receipt basis and comparing it with tax computed as if the income had been charged to the earlier year(s); the relief equals the difference. The example aggregates salary and arrears, applies standard and specified deductions, computes net income and tax for the years on receipt and accrual bases, and derives the relief amount which is then deducted from current year tax payable.
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Perquisite valuation: employer sale of movable assets to employees taxed as written down value less sale consideration.
Taxable perquisite on employer sale of movable assets to employees is the difference between the employer's written down value (after applying depreciation to cost to reach the balance on the relevant date) and the sale consideration; the document demonstrates this by computing successive depreciated written down values for a car, computer and fridge and subtracting the sale prices to determine the perquisite amounts.
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Use of movable assets perquisite taxed at prescribed annual percentage with pro rata computation for period of employer-provided use.
Use of moveable assets provided by an employer is a taxable perquisite valued by applying a prescribed annual percentage of the asset's cost, with a pro rata adjustment for the actual days of employee use within the year (annual percentage of cost x days of use/365).
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Perquisite valuation for motor car under Rule 3(2): employer reimbursements reduced by official-use deduction, affecting taxable perquisite.
Valuation of a motor car perquisite requires deducting the official-use portion from employer reimbursements before treating the balance as a taxable perquisite; absent a log book a fixed deduction method is applied, while contemporaneous usage evidence permits apportionment of the reimbursement by the documented official-use percentage.

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Comparison of SCHEDULE IV "INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF ELIGIBLE NON-RESIDENTS, FOREIGN COMPANIES AND OTHER SUCH PERSONS" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

18 September, 2025

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SCHEDULE IV - INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF ELIGIBLE NON-RESIDENTS, FOREIGN COMPANIES AND OTHER SUCH PERSONS

Income-tax Act, 2025

At a Glance

Schedule IV (Old Version) to the Income Tax Bill, 2025 lists categories of income that shall not be included in the total income of specified eligible non-residents, foreign companies and other persons (see section 11 reference). It matters for non-resident individuals and foreign entities interacting with India (embassies, foreign enterprises, foreign companies, European Economic Community etc.). Effective date or decision date: Not stated in the document.

Background & Scope

Statutory hook: SCHEDULE IV is framed under "See section 11" of the Bill. The Schedule sets out tabulated exemptions (column A: serial number; B: income not to be included; C: eligible persons; D: conditions). The Schedule covers diverse categories including interest on NRE accounts, diplomatic remuneration, employees of foreign enterprises, incomes linked to foreign ships, government trainees, royalties/fees for technical services to specified security agencies, offshore banking unit deposits, cruise ship lease rentals, investments by the European Economic Community, and specified crude-oil related receipts to foreign companies. Definitions or explanatory notes: Note 1 (Sl. No. 9) defines "specified company", "holding company" and "subsidiary company"; Note 2 defines "European Economic Community". No other standalone definitions are provided within the Schedule.

Statutory Provision Mode

Text & Scope

The Schedule operates by excluding from computation of total income certain enumerated receipts of eligible non-residents and foreign companies, subject to conditions. Each serial entry specifies (i) the class of income, (ii) the class of eligible person(s), and (iii) conditions that must be satisfied for the income to be excluded. The exclusions are limited to the headings set out in the Table. The Schedule cross-references other statutory instruments: section 2(w) of the Foreign Exchange Management Act, 1999 (for residency definition), section 2(u) of the Special Economic Zones Act, 2005 (for Offshore Banking Unit), and sections of the Income-tax Act, 1961 (for certain sub-sections listed at Sl. No. 14).

Interpretation

Legislative intent, as discernible from textual structure: to provide targeted exemptions for certain foreign-sourced or diplomatically connected incomes, strategically significant commercial arrangements (e.g., crude oil storage/sale by notified foreign companies), and to maintain reciprocity for diplomatic personnel. The Schedule uses notification powers (Central Government) and pre-conditions (e.g., residence outside India, RBI permission, aggregate days of stay) as mechanisms to limit the benefit to particular factual situations. The text indicates that the exemption is conditional rather than absolute, requiring specified factual predicates and administrative notifications.

Exceptions/Provisos

Carve-outs and conditions appear in column D against each serial number. Notable conditions include:

  • Sl. No. 1: interest on moneys in a Non-Resident (External) Account in Indian banks as per FEMA and rules.
  • Sl. No. 2: diplomatic/trade commissioner exemption conditioned on reciprocity and staff status (not engaged in business/profession in India).
  • Sl. No. 3 and 4: time-bound presence (90 days aggregate in tax year) and absence of employer's taxable presence in India.
  • Sl. No. 6-7: notifications by Central Government and specified recipient being National Technical Research Organisation for certain royalties/fees.
  • Sl. No. 8: deposit date threshold (on or after 1 April 2005) and Offshore Banking Unit reference.
  • Sl. No. 9: intra-group cruise ship lease rental conditions, and temporal limitation to tax years beginning on or before 1 April 2029.
  • Sl. Nos. 11-13: Central Government notification and agreements/arrangements entered into or approved by Central Government, with national interest consideration, and limitations on activities of the foreign company in India.
  • Sl. No. 14: incomes falling under specified sections of the Income-tax Act, 1961 subject to conditions specified therein.

Illustrations

  • Example 1: An individual non-resident holding a Non-Resident (External) Account with interest earned thereon - the interest is excluded from total income if the account is maintained as per FEMA and rules. (Directly consistent with text.)
  • Example 2: A non-citizen employee of a foreign enterprise who visits India for 60 aggregate days in the year to provide services for a foreign employer that has no trade or business in India - his remuneration for services rendered during the stay is excluded provided the remuneration is not taxable to the employer under the Act. (Consistent with Sl. No. 3.)
  • Example 3: A notified foreign company stores crude oil in India under a Central Government-approved arrangement and sells the oil to an Indian resident as per the agreement - the income accruing from storage and sale is not included in total income subject to notification. (Consistent with Sl. Nos. 12-13.)

Interplay

The Schedule expressly interacts with: FEMA, 1999 (residency definition and NR(E) accounts); Special Economic Zones Act, 2005 (Offshore Banking Units); and referenced sections of the Income-tax Act, 1961 for Sl. No. 14 exemptions. Several exemptions depend on Central Government notification or agreements entered into/approved by the Central Government, indicating administrative coordination between tax authorities and executive departments. No rules or notifications beyond these cross-references are reproduced in the document.

Differences between SCHEDULE IV - Income-tax Act, 2025 (Document 1) and Income Tax Bill, 2025 - Old Version (Document 2)

  • Textual corrections and punctuation: Document 1 contains minor editorial differences (for example, punctuation and phrasing around clauses (a)-(d) under Sl. No. 11 and Sl. No. 12 are slightly more concise).
    • Practical impact: purely editorial; no substantive change in scope or meaning appears from the texts provided.
  • Minor wording differences on eligibility phrases: e.g., Document 2 in Sl. No. 8 specifies "Non-resident or a person who is not ordinarily resident in India," whereas Document 1 uses "Non-resident or a person who is not ordinarily resident."
    • Practical impact: nominal; contextually both identify same classes of persons; if interpreted strictly, omission of "in India" could raise an interpretive question but the intent remains the same.
  • Variation in presentation of Sl. No. 11 and 13 wording: Document 1 states that the Central Government may notify "any person in India" and that the foreign company and the agreement are notified "having regard to the national interest"; Document 2 requires that "such agreement is entered with the foreign company, having regard to the national interest, and the agreement or arrangement is notified."
    • Practical impact: Document 1 frames notification of the company and agreement slightly differently; both require Central Government notification and national-interest consideration. Substantively the scope of exemption is governed by Central Government notification; any difference is stylistic unless read to alter the sequencing of notification vs. entry of agreement - not expressly stated as a legal difference in the texts.
  • Formatting and small textual insertions: Document 2 contains a stray full stop after the clause in Sl. No. 7(b) and some additional bracket spacing in Sl. No. 14.
    • Practical impact: typographical; no substantive legal consequence discernible from the provided materials.

Practical Implications

  • Compliance and risk areas: taxpayers and foreign entities must ensure that qualifying conditions (residency status, period of stay, RBI permission, Central Government notification/approval, and absence of trade or business in India) are satisfied and documented before claiming the exclusion. Failure to meet stated conditions risks disallowance and tax exposure.
  • Record-keeping/evidence: maintenance of residency documentation (FEMA definitions), RBI permissions for NR(E) accounts, travel and stay records (to evidence the 90-day threshold), copies of Central Government notifications/agreements, and employer payroll records to show whether employer's income is chargeable in India. For Sl. No. 9, intra-group corporate documentation establishing holding/subsidiary relationships as per Note 1 is relevant.

Key Takeaways

  • Schedule IV enumerates limited classes of income excluded from "total income" for particular non-residents and foreign entities, subject to explicit conditions and administrative notifications.
  • Most exemptions require factual predicates (residency status, period of presence, non-engagement in business in India) and/or Central Government notification or agreement.
  • Several exemptions are purpose-specific (diplomatic reciprocity, security projects, national-interest crude oil arrangements, cruise ship group structures, EEC investment schemes).
  • Document differences between the Act version and the Bill old version are largely editorial and typographical; no substantive changes are discernible from the texts provided.
  • Taxpayers and advisers should retain documentary evidence of qualifying conditions and track Central Government notifications/approvals relevant to the Schedule.

Full Text:

SCHEDULE IV - INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF ELIGIBLE NON-RESIDENTS, FOREIGN COMPANIES AND OTHER SUCH PERSONS

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