Deduction in respect of profits and gains from projects outside India

When an Indian firm or a person (other than a corporation) who is a resident of India is an assessee, and their gross total income includes any earnings and gains from the business of:-

(a) the completion of a foreign project that the assessee undertook in accordance with a contract he engaged in, or

(b) the performance of any job he performs that is a component of a foreign project carried out by another party in accordance with a contract agreed into by that party,

with the Government of a Foreign State, any Statutory and other Public Authority or Institution in a Foreign State, or a Foreign Enterprise, in calculating the assessee's total income, a deduction will be permitted from such earnings and gains of an amount equivalent to:-

(i) 40% of this amount for the assessment year commencing on April 1, 2001;

(ii) 30% of this amount for the assessment year commencing on April 1, 2002;

(iii) 20% of the amount for the assessment year commencing on April 1, 2003;

(iv) 10% of the said amount for the assessment year commencing on April 1, 2004,

and for the assessment year starting on April 1, 2005, as well as any later assessment years, no deduction shall be permitted.

Fetch more data at 80g exemption list.

There is a lot to know about tax deduction. As long as payment for the consideration for carrying out the project or, as the case may be, the work is made in convertible foreign currency. "Convertible foreign exchange" refers to foreign currency that is now considered as such by the Reserve Bank of India for the provisions of the Foreign Exchange Management Act, 1999 (42 of 1999), as well as any rules enacted thereunder.

"Foreign project" refers to a project for any building, road, dam, bridge, or other structure to be constructed outside of India; for any machinery or plant to be assembled or installed outside of India, or for any other work (of whatever form may be required).

Only if the assessee keeps separate bank accounts for the profits and gains from the business of carrying out the foreign project, or, as the case may be, from the work created as part of the foreign project undertaken by him, and if the taxpayer is a person other than the Indian company or a co-operative society, such accounting entries have been audited by an accountant, will the deduction under this section be permitted.

A good piece of stuff for tax exemption under section 80g.