Exempted Incomes (Tax-Free) [Section-10(15) to Section 10(23BBH)]

1. 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

2. 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.

3. 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

4. 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.

5. 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.

6. 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

7. 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

8. 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

9. 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

10. 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.

11. 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

12.     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

13.     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

14.     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

15.     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.

16.     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.

17.     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.

18     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

19.     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.