In a bid to attract overseas talent and provide tax certainty, the Budget has proposed a five-year tax exemption for overseas income earned by non-residents who are visiting India to render services, under govt-notified schemes. The tax-exempt status begins from the year of their first visit to India for rendering services. It will apply only to income that accrues or arises outside India. To qualify, the individual must have been a non-resident for five consecutive tax years immediately preceding the year of first visit.
CA Himank Singla, Partner at SBHS & Associates Chartered Accountants, comments that:
This proposal is clearly aimed at providing tax certainty and improving India’s attractiveness for short- to medium-term foreign talent engagement linked to Government-notified schemes. By granting a five-year exemption on foreign-sourced income to a non-resident individual visiting India for the first time, the law now wants to recognise that occasional physical presence in India for specific projects should not automatically trigger a wider tax exposure.
Also read: Latest income tax slabs for FY 2026-27: Check announcements made in Budget 2026 by Nirmala Sitharaman
A few points stand out: First, the exemption is not blanket, but it is carefully ring-fenced. Only income accruing or arising outside India (and not deemed to accrue or arise in India) qualifies. This ensures that India retains its taxing rights over India-sourced income while removing ambiguity over global income taxation during the engagement period.
Second, the condition that the individual must be a non-resident for five consecutive years preceding the year of first visit is significant. It prevents misuse by frequent visitors or returning residents and ensures the benefit is targeted at genuinely new foreign expertise.
Third, the linkage to notified Central Government schemes and compliance with prescribed conditions shows that this is a policy-notified incentive, not a general NR tax holiday. The Government retains control over scope, sectors, and eligibility, allowing flexibility without opening floodgates.
Overall, the real impact will depend on how narrowly or widely the notified schemes are defined and how cleanly the rules are implemented.
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