Guide to .. Tax Management ,Tax Planning and Tax Saving
 

List of Exempted Incomes (Tax-Free) Under Section-10

 

1. Agriculture 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: (a)      Any rent or revenue derived from land which is situated in India and is used for agricultural purposes. (b)      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.
(c)      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. Any sum received by a Co-parcener from Hindu Undivided Family (H.U.F.) [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 `. 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 `.20,000 p.m. During the previous year Mr. A also received `.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.

Example-2. HUF earned `.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 `. 20,000 p.m. Besides his individual income, Mr. A receives `.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 Income 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.  Interest paid to Non-Resident [Section 10(4)(i)]

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)(ii)]

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.  Interest paid to a person of Indian Origin and who is Non-Resident [Section 10(4 B)]

In case of an individual, being a citizen of India or a person of Indian origin, who is nonresident, any income from interest on such savings certificates issued by the Central Government, as Government may specify in this behalf by notification in the Official Gazette, shall be fully exempt. The exemption under this section shall not be allowed on bonds or securities issued on or after 1-6-2002.

This exemption shall be allowed only if the individual has subscribed to such certificates in Foreign Currency or other foreign exchange remitted from a country outside India in accordance with the provisions of the Foreign Exchange Act, 1973, FEMA, 1999 and any rules made there under.

For this purpose, a person shall be deemed to be of Indian origin if he or either of parents or any of his grandparents, was born in India or in undivided India.

7.  Leave Travel Concession or Assistance (LTC/LTA) to an Indian Citizen Employee [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—
(a)      on leave to any place in India.
(b)      to any place in India after retirement from service or after the termination of his service.

The exemption shall be allowed subject to the following:
(i)       where journey is performed by air — Maximum exemption shall be an amount not exceeding the air economy fare of the National Carrier by the shortest route to the place of destination;
(ii)      where places of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air — Maximum exemption shall be an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and
(iii)     where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed between such places — The amount eligible for exemption shall be:

(A)     where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and
(B)      where no recognised public transport system exists, an amount equivalent to the airconditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.

Exemption will, however, in no case exceed, actual expenditure incurred on the performance of journey.
HOW MANY TIMES CAN EXEMPTION BE CLAIMED?

  • The assessee can claim exemption in respect of any two journeys in a block of 4 years. For this purpose, the first block of 4 years was calendar years 1986-89, second block was 1990-93, third block was 1994-97, fourth block was 1998-2001, fifth block was 2002-05 sixth block was 2006-09, seventh block is 2010 to 2013, eight block is 2014-2017 and ninth block will be 2018-2021.
  • If the assessee has not availed of the exemption of LTC in a particular block, whether for both the journeys or for one journey, he can claim the exemption of first journey in the calendar year immediately succeeding the end of the block of four calendar years. In other words, maximum one journey can be carried forward and that too only for the first journey in the following calendar year unless the period is otherwise extended. Such journey undertaken during the extended period will not be taken into account for determining the tax exemption of two journeys for the succeeding block.

Exemption available only in respect of two children
The exemption relating to LTC shall not be available to more than two surviving children of an individual after 1.10.1998.
Exception: The above rule will not apply in respect of children born before 1.10.1998 and also in case of multiple birth after one child.

IMPORTANT NOTES :

1. In case the LTC is encashed without performing the journey, the entire amount received by the employee would be taxable.

2. Family for this purpose includes:
(a) the spouse and children of the employee;
(b) parents, brothers & sisters of the employee, who are wholly or mainly dependent upon him
.

3. The exemption can be availed for the journey undertaken while on leave during the tenure of service or even after retirement/termination from service.

4. The exemption is allowed only in respect of fare. Expenses incurred on porterage, conveyance from residence to the railway station/airport/bus stand and back, boarding and lodging or expenses during the journey will not qualify for exemption.

5. Exemption is available in respect of shortest route. Where the journey is performed from the place of origin to different places in a circular form or in any other manner, the exemption for that journey will be limited to what is admissible for the journey from the place of origin to the farthest point reached, by the shortest route.

8.  Remuneration received by an individual who is not a citizen of India [Section 10(6)]

The following incomes are exempt when received by an individual who is not a citizen of India:

(i)       Remuneration [U/s 10(6)(ii)].
(a)      The remuneration received by an ambassador or other officials of the Embassy, High Commission or Legation of a foreign State in India.
(b)      The remuneration by a consular officer of a foreign State in India.
(c)      The remuneration received by a trade commissioner or other official representative in India of a foreign State, provided corresponding officials of the Government of India in that country are given a similar concession.
(d)      The remuneration received by a member of the staff of any of the officials referred to in (a), (b) and (c) above.
If the person mentioned above in (a) to (d) is a subject of the country represented, is not engaged in any business, profession or employment in India (otherwise than as a member of such staff), and the country represented gives similar concession to the members of the staff of corresponding officials of the Government of India.

(ii)      Remuneration received by him as an employee of foreign enterprise [U/s 10(6)(vi)]
(e.g., technician deputed by a foreign firm to work in India), for service rendered by him during his stay in India provided the following conditions are fulfilled—(a) the foreign enterprise is not engaged in any trade or business in India ; (b) his stay in India does not exceed in the aggregate a period of 90 days in such previous year ; and (c) such remuneration is not liable to be deducted from the income of the employer chargeable under the Act.

(iii)     Employment on a foreign ship [U/s 10(6)(viii)].
Any income chargeable under the head “Salaries” received by or due to any such individual being a non-resident, as remuneration for service rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate of a period of 90 days in the previous year.

(iv)     Remuneration received by an employee of foreign govt. during his stay in India for his training in India [U/s 10(6)(xi)].
Such remuneration shall be fully exempted if he is taking training in any of the following concern
(a)      Institution owned by govt
(b)      A company wholly owned by Central or State govt. or partly owned by Central and partly by State govt
(c)      A subsidiary Co. of company referred at point (b) above
(d)      Any corporation established by or under Central, State or Provincial Act
(e)      Any society registered under Societies Registration Act; 186Q and which is wholly financed by Central or State govt.

9.    Tax paid by Government or Indian concern on Income of a Foreign Company [Section 10(6A), (6B), (6BB) and (6C)]

(6A) :
(i)       Where a foreign company renders technical services to Government of India or to a State Government or to an Indian enterprise and for such services a foreign company is paid income by way of royalty or fees.
(ii)      Such fees or royalty is paid by an India concern in pursuance of an agreement entered into before 1-6-2002 and such agreement is approved by Government of India and it is in accordance with the Industrial Policy of the Government of India.
(iii)     Since royalty or fees paid to a foreign company accrues in India, so such income is liable to be taxed in India and as per agreement the payer of income in India pays tax liability of the foreign company.
(iv)     Tax so paid by Government of India or a State Government or an Indian enterprise will be exempted i.e., it will not be grossed up with the income of the foreign company.
Example.      A foreign company renders technical services to an Indian company and as per agreement, foreign company is to be paid a fees of ` 1,00,000. Tax of ` 30,000 on such fees is also paid by the Indian company. Tax paid by Indian company will be exempt and so it will not be grossed up with the income of the foreign company and such foreign company’s income will be only Rs. 1,00,000.
(6B) :
The tax liability of a non-resident (Not being a company) or a foreign company if paid by an Indian concern or Government of India or a State Government the same will be exempted and so will not be grossed up with the income of the foreign entity.
(6BB) :
Tax paid on income received by foreign government or a foreign enterprise on leasing aircraft.
In case any income is received by a foreign government or a foreign enterprise from an Indian company which is engaged in the operation of aircraft and such income is by way of consideration of acquiring an aircraft or an engine of aircraft (other than payment for providing spares or services in connection with the operation of leased aircraft) on lease under an agreement entered into after 31-3-1996 but before 1-4-2007 and approved by the Central Government in this behalf, and the tax on such income is payable by such Indian company under the terms of agreement, the tax so paid shall be fully exempted
.

This benefit shall be available only to that foreign enterprise which is non-resident.
(6C) :

Any income derived by a foreign company (so notified by Central govt.) by way of royalty or fees for technical services under an agreement for providing services in or outside India in projects connected with security of India shall be fully exempted.

10.  Perquisites and Allowances paid by Government to its Employees serving 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.

The following conditions have to be satisfied before such income is treated as deemed to accrue or arise in India:

  1. Income should be chargeable under the head 'Salaries';

  2. The payer should be Government of India;

  3. The recipient should be an Indian citizen — whether Resident or Non-Resident;

  4. The services should be rendered outside India.

While salary of Indian citizen in the above case shall be deemed to accrue or arise in India but all allowances or perquisites paid outside India by the Government to the above Indian citizens for their rendering services outside India are exempt under section 10(7).

11.  Employees of Foreign Countries working in India under Cooperative Technical Assistance Programme [Section 10(8)]

The persons who are working in India under co-operative technical assistance programmes in accordance with an agreement entered into by the Central Government and the Government of a foreign State, the following incomes of such individuals shall be exempt provided the terms of agreements provide for such exemption

  1. the remuneration received by him directly or indirectly from the Government of the foreign State for such duties rendered in India ; and
  2. any other income of such individual which accrues or arises outside India and is not deemed to accrue or arise in India, in respect of which individual is required to pay any income or social security tax to the Government of that foreign State.

12.     Income of a Consultant [Section 10(8A)]

Any remuneration or fee received by a consultant from an international organisation who derives its fund under technical assistance grant agreement between such organisation and the Foreign Government, and any other income accruing or arising to him outside India (which is not deemed to accrue or arise in India) and which is subject to income-tax or social security tax in foreign country, shall be fully exempted. The agreement of the service of consultant must be approved by the competent authority.
The consultant means :

  1. an individual who is (a) not a citizen of India; or (b) if citizen but is not ordinarily resident in India ; or
  2. any person who is non-resident ; and is rendering technical services in India in connection with any technical assistance programme or project.

Conditions laid down for Tax Exemption U/s 10(8A)

  1. The fees or remuneration is paid for technical services rendered in India under the technical assistance programme or project.

  2. The sum is paid directly or indirectly out of funds made available to international organization as per agreement between such organization & government of foreign state.

  3. The technical assistance provided is in accordance with such agreement.

  4. Any agreement for appointment of consultant shall have to be approved by the authorities prescribed.

  5. Any other income which accrues or arises outside India is subjected to any income or social security tax in other state.

13.     Income of Employees of Consultant [Section 10(8B)]

In case of an individual who is assigned duties in India under technical assistance programme—

  1. the remuneration received by him directly or indirectly from any consultant as referred u/s 10 (8A) above and
  2. any other income accruing or arising to him outside India (which is not deemed to accrue or arise in India) and which is subject to income-tax or social security tax in foreign country. shall be fully exempted provided
  3. such individual is not a citizen of India ; or
  4. if citizen but is not ordinarily resident and
  5. the contract of service is approved by the competent authority.

Conditions laid down for Tax Exemption U/s 10(8B)

  1. The individual should be an employee of consultant referred to in clause 8A above.

  2. His contract of service is approved by the prescribed authority.

  3. The remuneration is received in connection with technical assistance programme referred to in clause 8A.

  4. Any other income which accrues or arises outside India is subjected to any income or social security tax in other state.

    The prescribed authority for clauses 8A & 8B are :
    The Additional Secretary, Department of Economic Affairs in Ministry of Finance, Government of India, in concurrence with members CBDT

14.     Income of any member of the family of individuals working in India under co-operative technical assistance programmes [Section 10(9)]

As per section 10(9), the income of any member of the family of any such individual as is referred to in section 10(8)/(8A)/(8B) accompanying him to India, which accrues or arises outside India and is not deemed to accrue or arise in India, in respect of which such member is required to pay any income or social security tax to the Government of that foreign State or country of origin of such member, as the case may be, is exempt from tax.

15.     Gratuity [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:
(a)      the employee himself at the time of his retirement; or
(b)      the legal heir on the event of the death of the employee.
Gratuity received by an employee on his retirement is taxable under the head "Salary" whereas gratuity received by the legal heir of the deceased employee shall be taxable under the head "Income from other sources". 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).

A.       Death-cum-retirement gratuity received by Government servants [Section 10(10)(i)]
Section 10(10)(i) grants exemption to gratuity received by Government employee (i.e., Central Government or State Government or local authority).
B.       Gratuity Received by a Non-Government Employee covered by Payment of Gratuity Act, 1972 [Section 10(10)(ii)]
Minimum of the following 3 limits:
(1)      Actual gratuity received, or
(2)      15 days salary for every completed year, or part thereof exceeding six months 7 days salary for each season in case of employee in seasonal establishment; or
(3)    ₹. 10,00,000

Meaning of Salary:
(i)         Basic salary plus dearness allowance.
(ii)        Last drawn salary. Average salary for preceding 3 months in case of piece rates employees
(iii)       No. of days in a month to be taken as 26

C.       Any other Employee
Minimum of the following 3 limits:
(1)      Actual gratuity received
(2)      Half months average salary of each completed year of service.
(3)      ₹. 10,00,000

Meaning of Salary:
(i)         Basic Salary plus D.A. to the extent the terms of employment so provide Commission, if fixed percentage of turnover.
(ii)        Average salary of last 10 months preceding the month in which event occurs.
(iii)       Only completed year of service is to be taken
.

  1. Where an employee had received gratuity in any earlier year(s) and had claimed exemptions under section 10(10) in respect of the gratuity received earlier also, he will still be entitled to this exemption but the limit which at present is `10,00,000 shall be reduced by the amount of exemption(s) availed in the earlier year(s). There will be no change in the other two limits.
  2. The words "completed service" occurring in section 10(10) should be interpreted to mean an employee's total service under different employers including the employer other than the one from whose service he retired, for the purpose of calculation of period of years of his completed service, provided he was not paid gratuity by the former employer. CIT v P.M. Mehra (1993) 201 ITR 930 (Bom).
  3. Any gratuity paid to an employee, while he continues to remain in service with the same employer is taxable under the head "Salaries" because gratuity is exempt only on retirement or on his becoming incapacitated or on termination of his employment or death of the employee. In this case, however the assessee can claim relief under section 89.
  4. The CBDT vide its instruction in F. No. 194/0/73-IT, dated 19.6.1973 has clarified that the expression "termination of employment" would cover an employee who has resigned from the service.

16.     Commuted value of pension received [Section 10(I0A)]

Govt. employees, employees of local authorities and employees of statutory corporations

Any other employee

Fully Exempt

(a) If gratuity is not received Commuted value of half of pension which he is normally entitled to receive.

(b) If gratuity is also received Commuted value of 1/3rd of pension which he is normally entitled to receive.

Pension received by the employee is taxable under the head "Salaries". However, the family pension received by the legal heirs after the death of the employee is taxable in the hands of the legal heir under the head "Income from other sources" because in this case there is no relationship of employer and employee. Treatment of family pension is discussed in detail under the head 'Income from other sources'.

17.     Amount received as leave encashment on retirement [Section 10(10AA)]

Govt. employee i.e. Central and State Govt. employees

Any other employee

Fully Exempt

Minimum of the following four limits:

  1. Leave encashment actually received; or
  2. 10 months average salary; or
  3. Cash equivalent of un-availed leave calculated on the basis of maximum 30 days leave for every year of actual service rendered; or
  4. `.3,00,000

Meaning of salary :

  1. Basic salary plus D.A. to the extent the terms of employment so provide plus Commission, if fixed percentage of turnover.
  2. Average salary of last 10 months immediately proceeding the date of retirement.

 

18.     Retrenchment compensation paid to workmen [Section 10(10B)]

Any compensation received by a workman at the time of his retrenchment, under the Industrial Disputes Act, 1947 or under:

  1. any other Act or rules or any order or notification issued there under; or
  2. any standing order; or
  3. any award, contract of service or otherwise,

shall be exempt to the extent of minimum of the following limits:

  1. Actual amount received;
  2. 15 days' average pay for every completed year of service or part thereof in excess of 6 months;
  3. Amount specified by the Central Government, i.e. ₹. 5,00,000.

Compensation received in excess of the aforesaid limit is taxable and would, therefore, form part of Gross Salary. However, the assessee shall be eligible for relief under section 89 read with rule 21A.

  1. Where retirement compensation is received by a workman in accordance with any scheme which the Central Government having regard to the need for extending special protection to the workman in the undertaking to which such scheme applies, has approved in this behalf, the entire amount of compensation so received shall be exempt under section 10(10B).
  2. Where retrenchment compensation received by a workman exceeds the amount which qualifies for exemption under the new clause, he will be entitled to relief under section 89 read with rule 21A of the Income-tax Rules, in respect of such excess.

19.     Payment received under Bhopal Gas Leak Disaster (Processing of Claims) Act 1985 [Section 10 (10BB)]

Any amount received under the provision of such Act or any scheme framed there under shall be fully exempted but in case payment is received against a loss or damage, for which deduction has been claimed ealier, it shall be taxable.

19.   Compensation received in case of any disaster [Section 10(10BC) ]

Any amount received from the Central Government or State Government or a Local Authority by an individual or his legal heirs as compensation on account of any disaster is exempt from tax. However, no deduction is available in respect of the amount received or receivable to the extent such individual or his legal heirs has been allowed a deduction under the Act on account of loss or damage caused due to such disaster. Disaster here means any disaster due to any natural or man-made causes or by accident/negligence which results in substantial loss of human life or damage to property or environment and the magnitude of such disaster is beyond coping capacity of community of the affected area

20.     'Retirement Compensation' from a Public Sector Company or any other Company [Section 10 (10C)]

The compensation received or receivable by the employee of the following, on voluntary retirement, under the golden hand shake scheme, is exempt under section 10(10C):

  1. a public sector company; or
  2. any other company; or
  3. an authority established under a Central, State or Provincial Act; or
  4. a local authority; or
  5. a co-operative society; or
  6. a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956; or
  7. an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961; or
  8. such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf;
  9. State Government;
  10. Central Government;
  11. Institutions having importance throughout India or in any State or States as may be notified.

Exemption shall be available, subject to the following conditions:

  1. The compensation is received only at the time of voluntary retirement or termination of his services in accordance with any scheme or schemes of voluntary retirement or in the case of public sector company, a scheme of voluntary separation. Even if the compensation is received in instalments, the exemption shall be allowed.
  1. Further, the scheme of the said companies or authorities or societies or universities or the institutes referred to in clauses (vii) and (viii) above, as the case may be, governing the payment of such amount, are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be prescribed. In the case of public sector companies, if there is a scheme of voluntary separation, it shall also be according to the said prescribed guidelines.

Quantum of Exemption:

  1. The amount of exemption is the actual amount of compensation received
  2. or ₹. 5,00,000,

whichever is less.

  1. The exemption is available to an employee only once and if it has been availed for an assessment year it shall not be allowed to him for any other assessment year.
  1. The assessee shall not be eligible for relief under section 89 in case he has claimed exemption under section 10(10C). On the other hand, if he claims relief under section 89, he cannot claim exemption under section 10(10C).

21. Tax on Non-monetary Perquisites paid by Employer [Section 10(10CC)]

The income-tax actually paid by the employer himself on a non-monetary perquisite provided to the employee shall be exempt in the hands of the employee..

22.     Any sum received under a Life Insurance Policy [Section 10(10D)]

Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, is wholly exempt from tax. However, the following sum received are not exempt under this section:

  1. any sum received from a policy under section 80DD(3) or section 80DDA(3); or
  2. any sum received under a Keyman Insurance Policy; or
  3. any sum received, under an insurance policy issued on or after 1.4.2003 but on or before 31.3.2012 in respect of which the premium payable for any of the years during the terms of the policy exceeds 20% of the actual capital sum assured. However, such sum received on the death of a person shall be exempt; or
  4. any sum received under an insurance policy issued on or after 1.4.2012 in respect of which the premium payable for any of the years during the terms of the policy exceeds 10% of actual capital sum assumed; or
  5. any sum received under an insurance policy issued on or after 1.4.2013 for insurance on the life of any person, who is
  • a person with disability or a person with severe disability as referred to in section 80U; or
  • suffering from disease or ailment as specified in the rules made under section 80DDB in respect of which the premium payable for any of the years during the terms of policy exceeds 15% of the actual capital sum assumed.

Keyman insurance policy means a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person and includes such policy which has been assigned to a person, at any time during the term of the policy, with or without any consideration.

23.     Payment from Statutory Provident Fund [Section 10(11)]

Statutory Provident Fund

Employer’s Contribution

Employer’s contribution to such fund is not treated as income of the employee

Interest

Interest credited to such fund is exempt in the hands of the employee.

Amount received at the time of termination

Lump sum amount received from such fund, at the time of termination of service is exempt in the hands of employees.

24.     Payment from Recognised Provident Fund [Section 10(12)]

The accumulated balance due and becoming payable to an employee participating in a recognised provident fund, is exempt to the extent provided in rule 8 of part A of the Fourth Schedule.

Recognised Provident Fund

Employer’s Contribution

Employer’s contribution to such fund, up to 12% of salary is not treated as income of the employee (see Note 1).

Interest

Interest credited to such fund up to 9.5% per annum is exempt in the hands of the employee, interest in excess of 9.5% is charged to tax in the hands of the employee.

Amount received at the time of termination

If certain conditions are satisfied, then lump sum amount received from such fund, at the time of termination of service, is exempt in the hands of employees. (see Note 2)

 

Un-Recognised Provident Fund

Employer’s Contribution

Employer’s contribution to such fund is not treated as income of the employee.

Interest

Interest credited to such fund is exempt in the hands of the employees.

Amount received at the time of termination

(See note 3)

 

                                                           

Public  Provident Fund

Employer’s Contribution

Employers do not contribute to such fund

Interest

Interest credited to such fund is exempt.

Amount received at the time of termination

Lump sum amount received from such fund at the time of termination of service is exempt from tax

.

Notes:

1. Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.

2. Accumulated balance paid from a recognised provident fund will be exempt from tax in following cases:

 

(a)       If the employee has rendered a continuous service of 5 years or more. If the accumulated balance includes amount transferred from other recognised provident fund maintained by previous employer, then the period for which the employee rendered service to such previous employer shall also be included in computing the aforesaid period of 5 years.

 

(b)       If the service of employee is terminated before the period of 5 years, due to his ill health or discontinuation of business of the employer or other reason beyond his control.

 

(c)        If on retirement, the employee takes employment with any other employer and the balance due and payable to him is transferred to his individual account in any recognised fund maintained by such other employer, then the amount so transferred will not be charged to tax.

 

Except above situations, payment from a recognised provident fund will be charged to tax considering such fund as un-recognised from the beginning (See note 3 given below for tax treatment of un-recognised provident fund).

 

3.         Treatment of payment (at the time of termination) from un-recognised provident fund:

 

Payment on termination will include 4 things, viz., employee's contribution and interest thereto and employer’s contribution and interest thereto, the tax treatment of such payment is as follows:

 

       Employee's contribution is not chargeable to tax; interest on employee contribution is taxed under the head “Income from other sources”.

 

       Employer's contribution and interest thereon are taxed as salary income, however, an employee can claim relief under section 89 in respect of such payment.

 

25.     Payment from Superannuation Fund [Section 10(13)]

Like Provident Fund, Superannuation fund is also a scheme of retirement benefits for the employee. These are funds, usually established under trusts by an undertaking, for the purpose of providing annuities, etc., to the employees of the undertaking on their retirement at or after a specified age, or on their becoming incapacitated prior to such retirement, or for the widows, children or dependents of the employees in case of the any employee's earlier death. The trust invests the money contributed to the fund in the form and mode prescribed. Income earned on these investments shall be exempt, if any such fund is an Approved Superannuation Fund.

Tax treatment: The tax treatment as regards the contribution to and payment from the fund is as under:

Employee's contribution: Deduction is available under section 80C from gross total income.

Employer's contribution: Contribution by the employer to the approved superannuation fund is exempt upto ₹1,50,000 per year per employee. If the contribution exceeds ₹1,50,000 the balance shall be taxable in the hands of the employee.

Interest on accumulated balance: It is exempt from tax.

Payment from the fund: Any payment from an approved superannuation fund shall be exempt if it is made:

  1. on the death of a beneficiary; or
  2. to any employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement; or
  3. by way of refund of contributions on the death of a beneficiary; or
  4. by way of refund of contributions to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement, to the extent to which such payment does not exceed the contributions made prior to the commencement of this Act and any interest thereon; or
  5. by way of transfer to the account of the employee under a pension scheme referred to in section 80CCD and notified by the Central Government.

26.     House Rent Allowance-HRA [Section 10(13A) Read with Rule 2A]

Quantum of Exemption: Minimum of following Three limits:

 

Mumbai/Kolkata/Delhi/Chennai

Other Cities

(i)

Allowance actually received

Allowance actually received

(ii)

Rent paid in excess of 10% of Salary

Rent paid in excess of 10% of Salary

(iii)

50% of Salary

40% of Salary

The exemption in respect of HRA is based upon the following factors:

  1. Salary
  2. Place of residence
  3. Rent paid
  4. HRA received.

Since there is a possibility of change in any of the above factors during the previous year, exemption for HRA should not always be calculated on annual basis. As long as there is no change in any of the above factors it can be calculated together for that period. Whenever there is a change in any of the above factors, it should be separately calculated till the next change.

 

27.     Any Allowance given for meeting Business Expenditure [Section 10(14)]

As per section 10(14), read with rule 2BB following allowances granted to an employee are exempt from tax subject to certain limit:

 

Allowances

Exemption Limit

Children Education Allowance

Up to Rs. 100 per month per child up to a maximum of 2 children is exempt

Hostel Expenditure Allowance

Up to Rs. 300 per month per child up to a maximum of 2 children is exempt

Transport Allowance granted to an employee to meet expenditure on commuting between place of residence and place of duty

Up to Rs. 1,600 per month (Rs. 3,200 per month for blind and handicapped employees) is exempt

Allowance granted to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance

Amount of exemption shall be lower of following:

a)  70% of such allowance; or

b)  Rs. 10,000 per month

Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office

Exempt to the extent of expenditure incurred for official purposes

Travelling Allowance to meet the cost of travel on tour or on transfer

Exempt to the extent of expenditure incurred for official purposes

Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty

Exempt to the extent of expenditure incurred for official purposes

Helper/Assistant Allowance

Exempt to the extent of expenditure incurred for official purposes

Research Allowance granted for encouraging the academic research and other professional pursuits

Exempt to the extent of expenditure incurred for official purposes

Uniform Allowance

Exempt to the extent of expenditure incurred for official purposes

Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations)

Amount exempt from tax varies from Rs. 300 to Rs. 7,000 per month.

Border area, Remote Locality or Disturbed Area or Difficult Area Allowance (Subject to certain conditions and locations)

Amount exempt from tax varies from Rs. 200 to Rs. 1,300 per month.

Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa

Up to Rs. 200 per month

Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance(Subject to certain conditions and locations)

Up to Rs. 2,600 per month

Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance(Subject to certain conditions and locations)

Up to Rs. 1,000 per month

Counter Insurgency Allowance granted to members of Armed Forces operating in areas away from their permanent locations. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations)

Up to Rs. 3,900 per month

Underground Allowance to employees working in uncongenial, unnatural climate in underground mines

Up to Rs. 800 per month

High Altitude Allowance granted to armed forces operating in high altitude areas (Subject to certain conditions and locations)

a)  Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet)

b)  Up to Rs. 1,600 per month (for altitude above 15,000 feet)

Highly active field area allowance granted to members of armed forces (Subject to certain conditions and locations)

Up to Rs. 4,200 per month

Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations)

Up to Rs. 3,250 per month

28.     Interest Incomes [Section 10(15)]

Interest incomes which are exempt under section 10(15) could be explained with the help of the following table-

Section

Income

Exemption to

10(15)(i)

Interest, premium on redemption, or other payment on notified securities, bonds, certificates, and deposits, etc. (subject to notified conditions and limits)

All assesses

10(15)(iib)

Interest on notified Capital Investment Bonds notified prior to 1-6-2002

Individual/HUF

10(15)(iic)

Interest on notified Relief Bonds

Individual/HUF

10(15)(iid)

Interest on notified bonds (notified prior to 1-6-2002) purchased in foreign exchange (subject to certain conditions)

Individual - NRI/ nominee or survivor of NRI / individual to whom bonds have been gifted by NRI

10(15)(iii)

Interest on securities

Issue Department of Central Bank of Ceylon

10(15)(iiia)

Interest on deposits made with scheduled bank with approval of RBI

Bank incorporated

Abroad

10(15)(iiib)

Interest payable to Nordic Investment Bank

Nordic Investment Bank

10(15)(iiic)

10(15)(iiic) Interest payable to the European Investment Bank on loan granted by it in pursuance of framework agreement dated 25-11-1993 for financial corporation between Central Government and that bank

European Investment bank

10(15)(iv)(a)

Interest received from Government or from local authority on moneys lent to it before 1-6-2001 or debts owed by it before 1-6-2001, from sources outside India

All assessees who have lent money, etc., from sources outside India

10(15)(iv)(b)

Interest received from industrial undertaking in India on moneys lent to it under a loan agreement entered into before 1-6-2001

Approved foreign financial institution

10(15)(iv)(c)

Interest at approved rate received from Indian industrial undertaking on moneys lent or debt incurred before 1-6-2001 in a foreign country in respect of purchase outside India of raw materials, components or capital plant and machinery, subject to certain limits and conditions

All assessees who have lent such money, or in favour of whom such debt has been incurred

10(15)(iv)(d)

Interest received at approved rate from specified financial institutions in India on moneys lent from sources outside India before 1-6-2001

All assessees who have lent such moneys

10(15)(iv)(e)

Interest received at approved rate from other Indian financial institutions or banks on moneys lent for specified purposes from sources outside India before 1-6-2001 under approved loan agreement

All assessees who have lent such moneys

10(15)(iv)(f)

Interest received at approved rate from Indian industrial undertaking on moneys lent in foreign currency from sources outside India under loan agreement approved before 1-6-2001

All assessees who have lent such moneys

10(15)(iv)(fa)

Interest payable by scheduled bank, on deposits in foreign currency when acceptance of such deposits by bank is approved by RBI

Non-resident or individual/HUF who is not ordinarily resident in India

10(15)( iv)(g)

Interest received at approved rate, from Indian public companies eligible for deduction under section 36(1)(viii) and formed with main object of providing long-term housing finance, on moneys lent in foreign currency from sources outside India under loan agreement approved before 1-6-2003

All assessees who have lent such moneys

10(15)( iv)(h)

Interest received from any public sector company in respect of notified bonds or debentures and subject to certain conditions

All assesses

10(15)( iv)(i)

Interest received from Government on deposits in notified scheme out of moneys due on account of retirement

Individual –Employee of Central Government/ State Government/Public sector company

10(15)(v)

Interest on securities held in Reserve Bank’s SGL A/c No. SL/DH-048 and Deposits made after 31-3-1994 for benefit of victims of Bhopal Gas Leak Disaster held in such account with RBI or with notified public sector bank

Welfare Commissioner, Bhopal Gas Victims, Bhopal

10(15)(vi)

Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015

All assesses

10(15)(vii)

10(15)(vii) Interest on notified bonds issued by a local authority/State Pooled Finance Entity

All assesses

10(15)(viii)

Interest on deposit made on or after 1-4-2005 in an Offshore Banking Unit referred to in section 2(u) of the Special Economic Zones Act, 2005

Non-resident or person who is not ordinarily resident

 

29.     Scholarship [Section 10(16)]

The full amount of scholarship granted to meet the cost of education is exempted.

‘Cost of education’ includes not only the tuition fees but all other expenses which are incidental to acquiring education. Scholarship may have been given by Govt., University, Board, Trust, etc. The exemption is irrespective of actual expenditure incurred by the recipient to meet the cost of education.

30.     Allowance of M.P./M.L.A.Ior M.L.C. [Section 10(17)]

Following allowances are exempt from tax in the hands of a Member of Parliament and a Member of State Legislature—

•          Daily allowance received by a Member of Parliament or by a Member of State Legislature or by member of any committee thereof.

  • Any Constituency allowance received by a Member of State Legislature

31.     Awards Instituted by Government [Section 10(17A)]

Any payment received in pursuance of following (whether paid in cash or in kind) is exempt from tax:

  • Any award instituted in the public interest by the Central Government or State Government or by any other body approved by the Central Government in this behalf.
  • Any reward by the Central Government or any State Government for such purpose as may be approved by the Central Government in this behalf in the public interest.

32.     Pension received by certain winners of gallantry awards [Section 10(18)]

  1. Any amount received by an individual as pension shall be exempt if:
    >> such individual has been in the service of the Central or State Government, and
    >> he/she has been awarded ‘Param Vir Chakra’ or ‘Mahavir Chakra’ or ‘Vir Chakra’ or such other notified gallantry awards.
  2. Also, any amount received as family pension by any member of the family of an individual referred above shall be fully exempted.

33.     Family pension received by family members of armed forces including para military forces [Section 10(19)]

With effect from the 1st day of April, 2005 family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including paramilitary forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed shall be fully exempted

34.     Income of a local authority [Section 10(20)]

The following income of a local authority is exempt from tax:

  1. Income which is chargeable under the head “Income from house property”, “Capital gains” or“ Income from other sources” or
  2. Income from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or
  3. Income from business of supply of water or electricity within or outside its own jurisdictional area

35.     Income of Scientific Research Association [Section 10(21)]

Any income of a research association, approved under section 35(1)(ii)/(iii) is exempt from tax, if following conditions as specified in section 10(21) are satisfied:

  1. Income should be applied or accumulated wholly and exclusively for the objects for it established.
  2. Funds should not be invested or deposited for any period during the previous year otherwise than in any one or more of the forms/modes specified in section 11(5). However, this condition is not applicable in respect of the following:-
  • any assets held by the research association where such assets form part of the corpus of the fund of the association as on the 1st day of June, 1973;
  • Debentures of a company acquired by the research association before the 1st day of March, 1983;
  • any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause (i) by way of bonus shares allotted to the research association;
  • voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,

Note:
1. Exemption shall not be denied in relation to voluntary contribution [other than voluntary contribution in cash or voluntary contribution of the nature referred to in (i), (ii), (iii) or (iv) supra]subject to the condition that such voluntary contribution is not held by the research association otherwise than in any one or more of the forms or modes specified in subsection (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired.
2. Exemption is not available in relation to any income of the research association, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business

36.     Income of a News Agency [Section 10(22B)]

In case there is any income of a news agency set up solely in India for collection and distribution of news and which is so notified in this behalf shall be fully exempted provided such income or accumulated income is used solely for collection and distribution of news and not to be distributed in any manner amongst its members.

The approval given under this section shall be withdrawn if the news agency has not applied, accumulated or distributed its income in accordance with the prescribed conditions, the notification issued under this section shall be cancelled

37.     Income of some Professional Institutions [Section 10(23A)]

Any income (other than income from house property and income from rendering any specific service or income by way of interest or dividend on investment) of an professional institution/association is exempt from tax, if the following conditions are satisfied:

1)         Professional institution is established in India for the purpose of control, supervision, regulation or encouragement of the profession of law, medicine, accountancy, engineering or architecture or such other notified profession.

2)         The institution applies its income, or accumulates it for application, solely to the objects for which it is established.

3)         The institution is approved by the Central Government by general or special order.

38.     Exemption of Income Received by Regimental Fund [Section 23AA]

Any income received by any person on behalf of any Regimental Fund or Non Public Fund established by the armed forces of India for the welfare of the past and present members of such forces or their dependents shall be exempted from tax

39.     Income of a Fund set-up for the welfare of employees or their dependents [Section 10(23AAA)]

Any income of such fund which is approved by Conmiissioner of Income-tax shall be fully exempted provided its income is applied wholly and exclusively for the objects for which it is established.
The CBDT has notified following purposes for which the fund is expected to help its members or their dependents—

  1. Cash amount given to a member of the fund—
  2. on superannuation, or
  3. in the event of member’s own illness or illness of his/her spouse or dependent children; or
  4. to meet the cost of education of dependent children of members.
  5. Cash amount given to the dependents of members in the event of death of such a member

40.     Income of a pension fund set up by LIC or other insurer [Section 10(23AAB)]

Income of an institution constituted as a public charitable trust or society which is established for the development of khadi and village industries (not for profit purpose) is exempt from tax, if following conditions are satisfied:

  1. Income is attributable to the business of production, sale, or marketing, of khadi or products of village industries.
  2. Institution applies its income, or accumulates it for application, solely for the development of khadi or village industries or both
  3. Institution is approved by the Khadi and Village Industries Commission

41.     Income of State Level Khadi and Village Industries Board [Section 10(23BB)]

Any income from an authority (whether known as the Khadi and Village Industries Board, or by any other name) established in a State by or under a State or Provincial Act for the development of Khadi or Village Industries in the State, shall be exempted from tax

42.     Income of certain Authorities set up to manage Religious and Charitable Institutions [Section 10(23BBA)]

Any income of any body or authority established, or appointed by or under any Central, State or Provincial Act which provides administration of any of the following institutions

  1. Public, Religious or Charitable Trusts
  2. Endowments (including Maths, Gurudwaras, Temples, Wakfs etc.) ; or
  3. a society for religious or charitable purposes registered under Societies Act 1860, shall be exempted from tax.

43.     Income of European Economic Community [Section 10(23BBB)]

Any income of European Economic community derived in India by way of interest, dividend or capital gain from investments made out of its funds under such scheme as the Central Govt. may notify is fully exempted.

44.     Income of a SAARC Fund for regional projects [Section 10(23BBC)]

Any income of a fund set up as SAARC Fund for Regional Projects set up by Colombo Declaration issued on 21st. Dec. 1991 by Heads of State or Government of the Member Countries of South Asian Association for Regional Co-operation shall be fully exempted.

45.     Any income of Insurance Regulatory and Development Authority [Section 10(23BBE)]

Any income of Insurance Regulatory and Development Authority established under Insurance Regulatory and Development Authority Act 1999 shall be fully exempted

46.     Income of Prasar Bharti [Section 10(23BBH)] [Inserted by the Finance Act 2012, w.e.f. 2013-14]

Any income of the Prasar Bharti (Broadcasting Corporation of India) established under section 3(1) of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990, shall be exempt.

47.     Any income received by a person on behalf of following Funds [Section 10(23C)]

Any income received by any person on behalf of the Prime Minister’s National Relief Fund, the Prime Minister’s Fund (Promotion of Folk Art) or the Prime Minister’s Aid to Students Fund is exempt from tax under clause (i), (ii) and (iii) of section 10(23C) respectively.

  1. Any income received by any person on behalf of :

  2. the Prime Minister’s National Relief Fund ; or

  3. the Prime Minister’s Fund (Promotion of Folk Art) ; or

  4. the Prime Minister’s Aid to Student’s Fund ; or

  5. The National Foundation for Communal Harmony

  6. Any educational institution which is

  7. a non profit earning body and is wholly or substantially financed by the Government;

  8. a non profit earning body whose aggregate annual receipts do not exceed the prescribed limits (to be notified) ; or

  9. a non profit earning body other than those mentioned at (a) and (b) above but are approved by the prescribed authority.

  10. any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or reception and treatment of persons during convalescence or of persons requiring medical attention and existing solely for philanthropic purposes and which:

  11. is wholly or substantially financed by the Government ; or

  12. whose aggregate annual receipts do not exceed the prescribed limits (to be notified); or

  13. other than those mentioned a) and (b) above but is approved by the prescribed authority.

  14. any other fund established for charitable purposes which may be notified by Central Government ; or

  15. any trust or institution set up wholly for religious purposes or purpose which may be notified by the Central Government.

The above exemption shall not be available for the profits and gains of any business which is carried on, on behalf of or by any fund or institution referred in points (iv) and (v) above or to the profits or gains of any business undertaking held under trust for the purposes of any fund or institution referred in points (iv) and (v) above. This amendment has come into effect from assessment year 1984-85.
In case annual receipts of such an institution exceeds ` 1 crore in a previous year, it has to file an application upto 30th September in the succeeding financial year.
Under Section 10(23C) income of institutions specified above shall be exempt from income tax. In certain cases, approvals are required to be taken from prescribed authority in the prescribed manner to became eligible for claiming exemption.

48.     Income of Mutual Fund [Section 10(23D)]

Any income of following mutual funds (subject to provisions of sections 115R to 115T) is exempt from tax:

  • A mutual fund registered under the Securities and Exchange Board of India Act or regulation made thereunder.
  • A mutual fund set-up by a public sector bank, or a public financial institution or authorised by RBI (subject to conditions notified by the Central Government).

49.     Exemption of income of a securitisation trust [Section 10(23DA)j [w.e.f. A.Y. 2014-15]

Any income of a securitisation trust from the activity of securitisation shall be exempt.

50.     Income of Investor Protection Fund [Section 10(23EA)]

Any income by way of contributions received from recognised stock exchanges and the members thereof, of a notified Investor Protection Fund set up by recognised stock exchanges in India is exempt from tax.

Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a recognised stock exchange, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax

51.     Exemption of income of investor protection fund of depository [Section 10(23ED)] [w.e.f. A.Y. 2014-15]

Any income, by way of contributions received from a depository, of notified Investor Protection Fund set up by a depository in accordance with the regulations made under the SEBI Act and Depository Act is exempt from tax

Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with a depository, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall, accordingly, be chargeable to income-tax.

52.     Exemption for Certain Incomes of a Venture Capital Company or Venture Capital Fund from Certain Specified Business or    Industries [Section 10 (23FB)]

As per this amendment, the exemption will now be available only in respect of income of a Venture Capital Company or Venture Capital Fund from investment in a venture capital undertaking engaged in certain specified businesses or industries.

New definition of “Venture Capital Company”, “Venture Capital Fund” and “Venture Capital undertaking” [Explanation 1 of section 10 (23FB)] [w.e.f A.Y. 20 13-14]

  1. Meaning of Venture Capital Company. A company which has been registered before 21-5-2012 under the SEBI Regulations, 1996 (Venture Capital Fund Regulation) or which has been registered as venture capital fund being a sub category of category 1 Alternative Investment Fund under the SEBI Regulation 2012 (Alternative Investment Fund Regulations). The Company has to satisfy the conditions mentioned in clause (a).
  2. Meaning of Venture Capital fund. A trust which has been registered before 21-5-2012 under the Venture Capital Fund Regulations or which has been registered as venture capital fund being a sub-category of category 1 Alternative Investment Fund under the Alternative Investment Funds Regulations. The trust has to satisfy the conditions mentioned in clause (b).
  3. Meaning of venture Capital undertaking. As defined under the Venture Capital Fund Regulation or under the Alternative Investment Funds Regulation.

53.     Income of Registered Trade Unions [Section 10(24)]

The following incomes of registered trade unions are exempt from tax :

  1. Income from house property.
  2. Income from other sources.

The trade union must be a registered one and formed primarily for the purpose of regulating the relations between workmen and employer or between workmen and workmen. This benefit shall also be available to an association of registered trade unions.

54.     Income of Provident and Superannuation Funds [Section 10(25)]

  1. Interest on securities which are held by or are the property of any provident fund to which Provident Funds Act, 1925 applies and any capital gains of the fund arising from the sale, exchange or transfer of such securities.
  2. Any income received by the trustees on behalf of a recognised provident fund.
  3. Any income received by the trustees on behalf of an approved superannuation fund

55.     Income of Employee’s State Insurance Fund [Section 10 (25A)]

Income of such fund is fully exempted.

56.     Income of Schedule Tribe Members [Section 10(26) and 10(26A)]

Certain types of incomes of the members of Scheduled Tribes living in tribal areas are exempt from tax. The Scheduled Tribes to which this exemption applies are defined in Clause (25) of Article 366 of the Constitution, residing in any areas specified in Part A or Part B of the table appended to paragraph 20 of the Sixth Schedule of the Constitution or in the State of Arunachal Pradesh, Manipur, Tripura, Mizoram and Nagaland or in the Ladakh region of the State of Jammu & Kashmir.
The exempted incomes are incomes which accrue or arise to him :

  1. from any source in the area, State, or Union Territories aforesaid, or
  2. by way of dividend.

This means that if a member of a Schedule Tribe sets up a business at any place other than mentioned above, profit from such business will be taxable.

57.     Income of Sikkimese individual [Section 10(26AAN] (With retrospective effect from 1-4-1990)

The following incomes which accrues or arises to a Sikkimese individual shall be exempt from income tax—

  1. income from any source in the State of Sikkim; or
  2. income by way of dividend or interest on securities.

This exemption will not be available to a Sikkimese women who, on or after 1-4-2008 marries a non-Sikkimese individual.

58.     Regulating the marketing of agricultural produce [Section 10[26AAB]

Any income of an agricultural produce market committee or board constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce shall be exempted.

59.     Income of a corporation set-up for promoting the interests of Scheduled Castes, Scheduled Tribes or Backward Classes [Section 10(26B)]

Income of such corporation or body, institutions or associations which are wholly financed by govt. and which have been set-up to promote the interest of above mentioned communities shall be fully exempted.

60.     Income of a corporation set-up to protect the interests of Minorities [Section 10(26BB)]

Any income of a corporation established by the Central Government or State Government for promoting the interests of the members of such minority community as notified by the Central Government from time-to-time, is exempt from tax under Section-10(26BB).

61.     Any income of a corporation for ex-servicemen [Section 10(26BBB)]

From assessment year 2004-05, any income of a statutory corporation established by Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen (being citizen of India) is exempt from tax under section 10(26BBB).

“Ex-Serviceman” means a person who has served in any rank, whether as combatant or non-combatant, in the armed forces of the Union or armed forces of the Indian States before the commencement of the Constitution (but excluding the Assam Rifles, Defence Security Corps, General Reserve Engineering Force, Lok Sahayak Sena, Jammu and Kashmir Militia and Territorial Army) for a continuous period of not less than six months after attestation and has been released, otherwise than by way of dismissal or discharge on account of misconduct or inefficiency, and in the case of a deceased or incapacitated ex-serviceman includes his wife, children, father, mother, minor brother, widowed daughter and widowed sister, wholly dependant upon such ex-serviceman immediately before his death or incapacitation.

62.     Income of cooperative society looking after the interests of Scheduled Castes or Scheduled Tribes or Both [Section 10(27)]

Such income shall be fully exempted provided the membership of such society consists of only other cooperative societies formed for similar purposes and the finances of the society are provided by Government and such other societies.

63.     Any income accruing or arising to Commodity Boards etc. [Section 10(29A)]

Any income accruing to

  1. The Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942), in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later
  2. The Rubber Board constituted under sub-section (1) of section 4 of the Rubber Board Act, 1947 (24 of 1947), in any previous year relevant to any assessment yeai commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later
  3. The Tea Board established under section 4 of the Tea Act 1953 (29 of 1953), in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later
  4. The Tobacco Board constituted under the Tobacco Board Act, 1975 (4 of 1975), in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1975 or the previous year in which such Board was constituted, whichever is later
  5. The Marine Products Export Development Authority established under section 4 of the Marine Products Export Development Authority Act, 1972 (13 of 1972), in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1972 or the previous year in which such Authority was constituted, whichever is later
  6. The Agricultural and Processed Food Products Export Development Authority established under section 4 of the Agricultural and Processed Food Products Export Development Act, 1985 (2 of 1986), in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1985 or the previous year in which such Authority was constituted, whichever is later
  7. The Spices Board constituted under sub-section (1) of section 3 of the Spices Board Act, 1986 (10 of 986), in any previous year relevant to any assessment year commencing on or after the 1St day of April, 1986 or the previous year in which such Board was constituted, whichever is later.
  8. The Coir Board established under section 4 of the Coir Industry Act, 1953.

64.     Amount received as subsidy from or through the Tea Board [Section 10(30)]

In the case of a taxpayer, who carries on business of growing and manufacturing tea in India, the amount of any subsidy received from or through the Tea Board under the notified scheme for replantation or replacement of tea bushes or for rejuvenation or consolidation of the area used for cultivation of tea, is exempt from tax (for notified schemes see Notification No. S.O. 3616, dated September 27, 1976).

To claim exemption, a certificate from the Tea Board as to the amount of subsidy paid to the taxpayer during the year is to be obtained.

A similar exemption is available under section 10(31) in respect of subsidy received by an taxpayer engaged in the business of growing and manufacturing rubber, coffee, cardamom or such other commodities as the Central Government may by notification specify [Section 10(31)]

65.     Amount received as subsidy from or through the concerned Board [Section 10(31)]

Any amount received as subsidy from or through the concerned Board for replantation or replacement of Rubber, Coffee, cardamom plants or plants for growing of such other commodities or for any other scheme so notified shall be fully exempted.

66.     Income of Child Clubbed U/s 64 (IA) [Section 10(32)]

In case income of a minor child is clubbed with the income of his parent, the parent can claim exemption upto actual income of child clubbed or 1,500 whichever is less in respect of each minor child whose income is included.

67.     Income by way of dividend from Indian company [Section 10(34)]

Dividend received from a domestic company is exempt in the hands of the shareholders provided such dividend has already suffered Dividend Distribution Tax (DDT) under section 115-O

68.     Exemption of income to a shareholder on buyback of shares of unlisted company [Section 10 (34A) [w.e.f. A.Y. 2014-15]

Any income arising to an assessee being a shareholder, on account of buyback of shares, (not being listed on a recognised stock exchange) by the company as referred to in section 115QA shall be exempt.

69.     Exemption of income from Units [Section 10(35)]

Like in case of dividend, section 10(35) provides that any income received in respect of—

  1. units from the Administrator of the specified undertaking, or
  2. the specified company, or
  3. a Mutual Fund specified under clause (23D)

shall be Exempt.

70.     Exemption of income from Securitisation Trust [Section 10(35A)] [w.e.f A.Y. 2014-15]

Any income received by any person being an investor of the Securitisation Trust from such a trust, by way of distributed income referred to in section 115TA shall be exempt.

71.     Capital Gain on compulsory acquisition of urban Agricultural Land [Section 10(37)]

With a view to mitigate the hardship faced by the farmers whose agricultural land situated in specified urban limits has been compulsorily acquired, the Finance (No. 2) Act, 2004 has inserted a new clause (37) in section 10 so as to exempt the capital gains (whether short-term or long-term) arising to an individualor a Hindu undivided family from transfer of agricultural land by way of compulsory acquisition where the compensation or the enhanced compensation or consideration, as the case may be, is received on or after 1.4.2004. The exemption is available only when such land has been used for agricultural purposes during the preceding two years by such individual or a parent of his or by such Hindu undivided family.

Where the compulsory acquisition has taken place before 1.4.2004 but the compensation is received after 31.3.2004, it shall be exempt. But if part of the original compensation in the above case has already been received before 1.4.2004, then exemption shall not be available even though balance original compensation is received after 31.3.2004.
However, enhanced compensation received on or after 1.4.2004 against agricultural land compulsory acquired before 1.4.2004 shall be Exempt.

If such urban agricultural land is held as stock-in-trade, section 10(37) shall not be applicable as it is not a capital asset. Profit from the compulsory acquisition of such urban land shall be taxable under business head.

 

72.     Income from international Sporting event [Section 10(39)]

Any specified income (which is from such international event and which is notified by the Central Govt.) of specified persons from any international event held in India shall be fully exempted if

  1. such event is approved by the international body regulating the international sport relating to such event
  2. it has participation by more than two countries ; and
  3. is notified by the Central Govt. in this regard.

73.     Exemption of ‘specified income’ of certain bodies or authorities [Section 10(46)]

Any 'Specified Income' arising to a body or authority or Board or Trust or Commission (by whatever name called) which—

  1. has been established or constituted by or under a Central, State or Provincial Act, or constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public;
  2. is not engaged in any commercial activity; and
  3. is notified by the Central Government in the Official Gazette for the purposes of this clause. shall be exempt.

Any Specified Income arising to a body or authority or Board or Trust or Commission (by whatever name called) which—

(a) has been established or constituted by or under a Central, State or Provincial Act, or constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public;

(b) is not engaged in any commercial activity; and

(c) is notified by the Central Government in the Official Gazette for the purposes of this clause. shall be exempt.

 

74.     Exemption of Income of a foreign company from sale of Crude Oil in India [Section 10 (48)]

Any income of a foreign Co. received in India in Indian currency on account of sale of crude oil to any person in India shall be exempt if the following conditions are satisfied

  1. Such Income is in pursuant to an agreement or an arrangement entered into by the Central Govt. or approved by the Central Govt.;
  2. having regard to the national interest, the foreign company and the agreement or arrangement are notified by the Central Govt. in this behalf; and
  3. the foreign company is not engaged in any activity, other than reciept of such income, in India.
 
 
 
 
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