1. Agricultural Income [Section 10(1)]
As per section 10(1), agricultural income earned by the taxpayer in India is exempt from tax. Agricultural income is defined under section 2(1A) of the Income-tax Act. As per section 2(1A), agricultural income generally means:
- Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.
- Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.
- Any income attributable to a farm house subject to satisfaction of certain conditions specified in this regard in section 2(1A).
- Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.
2. Amount received by a member of the HUF from the income of the HUF, or in case of impartible estate out of income of family estate [Section 10(2)]
As per section 10(2), amount received out of family income, or in case of impartible estate, amount received out of income of family estate by any member of such HUF is exempt from tax.
Example-1. HUF earned Rs. 5,00,000 during the previous year and paid tax on its income. Mr. A, a co-parcener is an employee and earns a salary of Rs. 20,000 p.m. During the previous year Mr. A also received Rs.1,00,000 from HUF. Mr. A will pay tax on his salary income but any sum of money received from his HUF is not chargeable to tax in Mr. A’s hands.
HUF earned Rs.90,000 during the previous year 2016-17 and it is not chargeable to tax. Mr. A, a co-parcener is earning individual income of Rs. 20,000 p.m. Besides his individual income, Mr. A receives Rs.30,000 from his HUF.
Mr. A will pay tax on his individual income but any sum of money received by him from his HUF is not chargeable to tax in the hands of co-parcener whether the HUF has paid tax or not on that income.
3. Share of profit received by a partner from the firm [Section 10(2A)]
As per section 10(2A), share of profit received by a partner from a firm is exempt from tax in the hands of the partner. Further, share of profit received by a partner of LLP from the LLP will be exempt from tax in the hands of such partner. This exemption is limited only to share of profit and does not apply to interest on capital and remuneration received by the partner from the firm/LLP.
4. Certain Interest to Non-Residents [Section 10(4)]
As per section 10(4)(i), in the case of a non-resident any income by way of interest on certain notified securities or bonds (including income by way of premium on the redemption of such bonds) is exempt from tax.
As per section 10(4)(ii), in the case of an individual, any income by way of interest on money standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Management Act, 1999, and the rules made thereunder is exempt from tax.
Exemption under section 10(4)(ii) is available only if such individual is a person resident outside India as defined in clause (q) of section 2 of the said Act or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account.
5. Interest to Non-Resident on Non-Resident (External) Account [Section 10(4)]
Any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India shall be exempt from tax in case of an individual who is a person resident outside India or is a person who has been permitted by the RBI to maintain the aforesaid account.
The person residing outside India shall have the same meaning as defined under Foreign Exchange Regulation Act, 1973, FEMA, 1999. This exemption shall not be available on any income by way of interest paid or credited on or after 1-4-2005.
6. Travel Concession or Assistance received by an Individual from his Employer [Section 10(5)]:
The employee is entitled to exemption under section 10(5) in respect of the value of travel concession or assistance received by or due to him from his employer or former employer for himself and his family, in connection with his proceeding—
- on leave to any place in India.
- to any place in India after retirement from service or after the termination of his service.
7. Remuneration to persons who are Not Citizens of India [Section 10(6)]
8. Income of Foreign Companies providing Technical Services in Projects connected with Security of India [Section 10(6C)]
Any income arising to a notified foreign company, by way of royalty or fees for technical services rendered in pursuance of an agreement entered into with the Government for providing services in or outside India in projects connected with security of India, shall be exempt from tax.
9. Royalty and fees for technical services (FTS) payment by NTRO to a non-resident to be tax-exempt [Section 10(6D)
The Bill has inserted clause (6D) under section 10 so as to provide that the income arising to non-resident, not being a company, or a foreign company, by way of royalty from, or fees for technical services rendered in or outside India to, the NTRO will be exempt from income tax.
Consequently, NTRO will not be required to deduct tax at source on such payments.
10. Allowances or Perquisites Outside India [Section 10(7)]:
Any allowances or perquisites paid or allowed, as such, outside India by the Government to a citizen of India, for rendering services outside India, are exempt.
11. Death-cum-Retirement Gratuity Received by an Employee [Section 10(10)]:
Gratuity is a payment made by the employer to an employee in appreciation of the past services rendered by the employee. Gratuity can either be received by:
- the employee himself at the time of his retirement; or
- the legal heir on the event of the death of the employee.
However, in both the above cases, according to section 10(10) gratuity is exempt upto a certain limit. Therefore, in case gratuity is received by employee, salary would include only that part of the gratuity which is not exempt under section 10(10).
12. Payment in Commutation of Pension Received by the Employees [Section 10(10A)]:
|Govt. employees, employees of local authorities and employees of statutory corporations
Any other employee
- If gratuity is not received Commuted value of half of pension which he is normally entitled to receive.
- If gratuity is also received Commuted value of 1/3rd of pension which he is normally entitled to receive.
13. Exemption of leave encashment at the time of retirement [Section 10(10AA)]
|Govt. employee i.e. Central and State Govt. employees
Any other employee
Minimum of the following four limits:
- Leave encashment actually received; or
- 10 months average salary; or
- Cash equivalent of un-availed leave calculated on the basis of maximum 30 days leave for every year of actual service rendered; or
- Rs. 3,00,000
Meaning of salary :
- Basic salary plus D.A. to the extent the terms of employment so provide plus Commission, if fixed percentage of turnover.
- Average salary of last 10 months immediately proceeding the date of retirement.