Exempted Incomes (Tax-Free) [Section-10(23C) to Section 10(26BBB)]

1.     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.

2.     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).

3.     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.

4.     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

5.     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.

6.     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.

7.     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.

8.     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

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

Income of such fund is fully exempted.

10.     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.

11.     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.

12.     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.

13.     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.

14.     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).

15. Any income of a Corporation established 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.