Exempt Income of Non-Residents and Foreign Companies: Schedule IV of the Income Tax Act 2025

Schedule IV of the Income-tax Act, 2025 lists income that is left out of the total income of non-residents, foreign companies and certain other persons, such as interest on an NRE account, pay earned during a short stay in India, and income of a foreign company from specified government-backed arrangements. Each entry has an eligible person and conditions. If the conditions are met for the tax year, the income is not taxed. If they are not, the income is taxed as usual (section 11(2)).

This guide explains how the Schedule works, walks through the common entries (Sl. Nos. 1, 3 and 4 in detail, the rest in a table), and shows two day-count examples and two real-life scenarios. Everything below comes from section 11 and Schedule IV as amended by the Finance Act, 2026. Last reviewed against that text on 10 November 2026.

What does section 11 say about exempt income?

Section 11(1) says that in computing the total income of any person for a tax year, income listed in Schedules II, III, IV, V and VI is not included, subject to fulfilment of the conditions specified there. Schedule IV is the one for eligible non-residents, foreign companies and other such persons. Schedule VII works differently: it lists persons (not income) who are not chargeable to tax on their total income if they meet the conditions (section 11(3)).

Two rules sit underneath all of this:

• Section 11(2): if the conditions are not satisfied in a tax year for an income in the Schedules, that income is charged to tax for that tax year.
• Section 11(5): the Central Government can make rules or issue notifications for the purposes of the section, as the Schedules specify. Several Schedule IV entries depend on such a notification.

The test is applied year by year. An entry that qualifies in one tax year can fail in the next.

How do I check whether an income qualifies under Schedule IV?

Every Schedule IV entry has three parts: the income (column B), the eligible person (column C) and the conditions (column D). All three must match.

Is interest on an NRE account exempt?

Sl. No. 1 exempts any income by way of interest if it is on money standing to the credit of the person in a Non-Resident (External) Account in any bank in India under the Foreign Exchange Management Act and its rules. The eligible person is either:

• an individual who is a resident outside India as defined in section 2(w) of the Foreign Exchange Management Act, 1999; or
• an individual permitted by the Reserve Bank of India to maintain the account.

Interest on an ordinary savings or fixed deposit account that is not an NRE account does not fall in this entry.

Is pay for a short stay in India exempt for a foreign employee?

Sl. No. 3 covers remuneration received by an employee of a foreign enterprise, who is not a citizen of India, for services rendered during his stay in India. All three conditions must hold:

1. the foreign enterprise is not engaged in any trade or business in India;
2. his stay in India does not exceed ninety days in aggregate in that tax year; and
3. the remuneration is not liable to be deducted from the income of the employer chargeable under the Act.

Sl. No. 4 is similar for a non-resident, non-citizen individual earning salary for services on a foreign ship: his total stay in India must not exceed ninety days in aggregate in the tax year.

Worked example 1: the 90-day count (tax year 2026-27)

Assumptions: Hans is a non-citizen employee of a foreign engineering firm that does no trade or business in India. His salary is paid by that firm, and it is not deducted from any income of the firm that is taxable in India. He visits India three times in tax year 2026-27 (1 April 2026 to 31 March 2027) to supervise a project. Days are counted in aggregate across all visits.

Visit	Days in India
First visit	30
Second visit	28
Third visit	25
Aggregate	83

83 does not exceed 90, and the other two conditions hold, so the remuneration for these services falls under Sl. No. 3 and is not included in his total income for 2026-27.

Worked example 2: the same facts, one visit longer

Take the same visits but add a fourth visit of 9 days.

Step	Working	Result
1. Add the visits	30 + 28 + 25 + 9	92 days
2. Compare with the limit	92 against 90	Exceeds by 2 days
3. Apply section 11(2)	Condition (b) of Sl. No. 3 fails	Remuneration is charged to tax for 2026-27 as per the other provisions of the Act

The condition is on the aggregate stay in the tax year, so the exemption is lost for the remuneration for the whole year, not only for the extra days. The Schedule does not provide a day-by-day split. Which remuneration is then taxable, and how, depends on the rest of the Act, so confirm the position for a specific case.

What are the other Schedule IV entries?

Sl. No.	Income	Eligible person	Key condition
2	Remuneration for service as an official	Official of an embassy, high commission, legation, commission, consulate or trade representation of a foreign State, or staff, not a citizen of India	Similar exemption is enjoyed in that country; staff are subjects of the represented country and not otherwise engaged in business, profession or employment in India
5	Remuneration as an employee of a foreign Government	Employee of a foreign State Government, not a citizen of India	Received during stay in India for training in a Government, PSU, statutory corporation or wholly Government-financed society establishment
6	Royalty or fees for technical services	Foreign company	Notified by the Central Government; income under an agreement with the Central Government for projects connected with the security of India
7	Royalty or fees for technical services	Non-resident non-company, or a foreign company	Royalty received from, or technical services rendered to, the National Technical Research Organisation
8	Interest received	Non-resident or a person not ordinarily resident	Received in India on a deposit made on or after 1 April 2005 in an Offshore Banking Unit under the Special Economic Zones Act, 2005
9	Lease rentals of cruise ship	Foreign company	Received from a specified company operating the ship in India; both are subsidiaries of the same holding company; relevant tax year begins on or before 1 April 2029
10	Interest, dividends or capital gains on investments	European Economic Community	Investments out of its funds under a scheme notified by the Central Government
11	Income received in India in Indian currency	Foreign company	Sale of notified goods (such as crude oil) or services to a person in India under a notified agreement or arrangement; no other activity in India
12 and 13	Storage and sale of crude oil in an Indian facility, and sale of leftover stock	Foreign company	Agreement or arrangement entered into or approved by, and notified by, the Central Government

What are the newer entries (13A to 13G) in Schedule IV?

The Schedule now includes several newer entries, inserted from 1 April 2026 or 1 October 2026. Each has its own eligible person, conditions and sunset date.

Sl. No.	Income	Eligible person	Time limit and notes
13A	Providing capital goods, equipment or tooling to a contract manufacturer (an Indian company)	Foreign company supplying them for electronic manufacturing in India	Available up to tax year 2040-2041. Ownership stays with the foreign company; the goods are under the control of the contract manufacturer in a customs bonded area; the contract manufacturer makes specified electronic goods for it
13B	Income accruing or arising outside India and not deemed to accrue or arise in India	Individual who was a non-resident for five consecutive tax years before the year he first visits India to render services under a notified scheme	Not beyond five consecutive tax years from the first tax year of the visit; other prescribed conditions
13C	Income from procuring data centre services from a specified data centre	Foreign company	Available up to the tax year ending 31 March 2047. The company must not own or operate the data centre's physical infrastructure, and all sales to users in India must go through an Indian company reseller
13D	Interest on a Government security and capital gains on its sale, exchange or transfer	Foreign Institutional Investor	Information must be furnished in the prescribed form and manner
13E	Same as 13D	Bank for International Settlements	Same information condition
13F	Income on sale of rough diamonds	Foreign company that mines diamonds, is a sightholder, or is a broker, aggregator or tender and auction entity	Sale in a notified special zone; available up to the tax year ending 31 March 2041. Inserted with effect from 1 October 2026
13G	Storage of components in a warehouse in a customs bonded area	Foreign company supplying components to a contract manufacturer	Available up to the tax year ending 31 March 2041. Inserted with effect from 1 October 2026
14	Income under certain clauses of section 10 of the Income-tax Act, 1961 as listed in the entry	As in those clauses	Subject to the conditions specified in those clauses

"Specified electronic goods" for 13A and 13G means mobile phones, laptops, all-in-one personal computers and tablets, servers and ultra small form factor devices, sub-assemblies to those finished goods, and hearables, wearables and related accessories (Note 2A). Rough diamonds are defined in Note 5 by reference to specific Customs Tariff headings and a Kimberley Process Certificate.

Does the scheme-visitor exemption (Sl. No. 13B) cover income earned in India?

No. Sl. No. 13B covers only income that accrues or arises outside India and is not deemed to accrue or arise in India. The person must have been a non-resident for the five consecutive tax years immediately before the tax year of the first visit, must render services in India under a notified Central Government scheme, and gets the exemption for at most five consecutive tax years from the first year of visit, subject to prescribed conditions. Pay for the work done in India is not within this entry.

Real-life example 1: Meena, an NRI with two bank accounts

Meena is an individual resident outside India for FEMA purposes. She has an NRE fixed deposit with an Indian bank and a regular fixed deposit that she opened before she moved abroad and which was never converted. Interest on the NRE deposit is on money in a Non-Resident (External) Account, so Sl. No. 1 applies and it is not part of her total income. Interest on the other deposit is not on an NRE account. It is not covered by Sl. No. 1 and is treated like any other income under the Act.

Real-life example 2: Ravi's company and the notified arrangement

A foreign company sells goods to an Indian buyer and receives payment in Indian rupees in India. The company wants to rely on Sl. No. 11. The entry only works if the goods or services are notified by the Central Government, the receipt is under a notified agreement or arrangement, and the foreign company does nothing else in India beyond the activity producing that income. Ravi, the company's Indian adviser, checks the notification list first. Without a notification, the entry is not available, however large the sale.

Quick reference: the conditions that decide most cases

Test	Where it appears	Limit
Stay in India, foreign enterprise employee	Sl. No. 3(b)	Not more than 90 days in aggregate in the tax year
Stay in India, foreign ship employee	Sl. No. 4	Not more than 90 days in aggregate in the tax year
OBU deposit date	Sl. No. 8	Deposit made on or after 1 April 2005
Cruise ship lease rentals	Sl. No. 9(c)	Relevant tax year begins on or before 1 April 2029
Scheme visits	Sl. No. 13B	Five consecutive tax years from the first year of visit
Data centre services	Sl. No. 13C	Up to the tax year ending 31 March 2047

Common mistakes

• Counting days per visit instead of in aggregate. Sl. Nos. 3 and 4 test the total stay in the tax year across all visits.
• Assuming the exemption carries to the next year. Conditions are tested every tax year, and a failure makes that year's income taxable (section 11(2)).
• Treating every interest income of an NRI as exempt. Sl. No. 1 covers interest on an NRE account only.
• Using an entry that needs a notification without checking that one exists. Sl. Nos. 6, 11, 12 and 13 depend on notified companies, goods or arrangements.
• Missing the information condition. Entries 13C to 13G require information to be furnished in the prescribed form and manner (13B and 13A have other prescribed or stated conditions), and the exemption is subject to it.
• Reading the Schedule as an exemption from filing. Schedule IV excludes income from the total income. Whether a return is required is a separate question.

Where this is in the Act

• Section 11(1) and (2): income in Schedules II to VI not included in total income, subject to conditions; taxed where conditions fail
• Section 11(3) and (4): persons in Schedule VII not chargeable to tax, subject to conditions
• Section 11(5): rules and notifications for the Schedules
• Schedule IV, Table Sl. Nos. 1 to 14, and Notes 1 to 6
• Section 2(w) of the Foreign Exchange Management Act, 1999: meaning of resident outside India (used in Sl. No. 1)
• Section 210(6)(a): meaning of Foreign Institutional Investor (used in Note 4)

How do CA firms track NRI and foreign-company client conditions?

For a CA firm, the hard part is the evidence behind each condition: passport stamps and travel logs for the 90-day count, bank certificates for NRE status, and copies of notifications. Finexo's practice management software lets you keep that client-wise checklist and its deadlines in one place. It does not decide whether an exemption applies.

For a related Schedule that deals with another class of exempt income, see our guide to the exemption on agricultural land transfer.

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026). It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.