Appuonline - Regulation

Pamphlet - Exempt Income

TAX EXEMPTIONS - Chapter III of the Income-tax Act, 1961

Chapter II of the Income-tax Act contains a number of provisions in sections 10 to 13A which exclude various kind of incomes from the purview of taxation.

Section 10 enumerates a number of incomes at one place, which are otherwise incomes, but which are not to be included in the income for the purpose of taxation under the Income-tax Act provides that the agricultural income will be considered for the purpose of determining the rate of tax levied on non-agricultural income.

Section 10A exempts the income of any newly established undertaking in a free trade zone.

Section 10B exempts the income of any newly established 100% export oriented undertaking. Section 11 exempts the income of any charitable or religious trust or institution. Section 12 deems voluntary contributions to a charitable or religious trust or institution as the income from property held under the trust and, thus, exempts the contributions received by any charitable or religious trust or institution.

Section 13A exempts the income of political parties. Incomes enumerated in section 10 can be classified under two broad heads, namely that :

Incomes which are not to be included in the income without any further consideration, and
Incomes which are not to be included in the income on satisfaction of some further condition or conditions.
1. The incomes enumerated below are exempt from tax
  1. .Agricultural income Section 10(1)
    (This incomes has to be considered for determining the rate of tax applicable to the other income)
  2. Any sum received by an individual as a member of a Hindu undivided family from income of the family or from the income of the impartible estate of the family. Section 10(2)
  3. Share of profit of a person from a firm, which is separately assessed and where he is a partner. (This clause was introduced by the Finance Act, 1992, w.e.f. 1.4.1993, consequent upon taxation of the income of a firm separately at a flat rate)Section 10(2A)
  4. Any receipts which are of casual and non-recurring nature, to the extent mentioned below :
    1. not exceeding rupees two thousand five hundred in respect of winning from races including horse races,
    2. rupees five thousand in any other case.Section 10(3)
  5. Any payment made under the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 or any scheme framed thereunder. Section 10(10BB)
  6. Any scholarship granted to meet the cost of education.Section 10(16)
  7. Any payment, whether in cash or kind, by way of any award instituted in public interest by the Central Government or any State Government or by any other body approved by the Central Government in this behalf. Section 10(17A)
  8. Annual value of one palace occupied by a former ruler. Section 10(19A)
  9. Income of a local authority under the heads “Ïncome from House Property”, “Capital Gains”, “Ïncome from other sources” or income from supply of commodity or service within its jurisdiction or income from supply of water or electricity in its jurisdiction or outside its jurisdiction.Section 10(20)
  10. Any income of an authority constituted under a law for satisfying the housing need or for planning, development or improvement of cities, towns or villages. Section 10(20A)
  11. Any income of an authority established in a state, whether kwon as Khadi and Village Industries Board or by any other name of the development of khadi and village industries in the state.Section 10(23BB)
  12. Any income by way of property income and income from other sources of a registered trade union or an association or registered trade unions. Section 10(24)
  13. Income in the form of interest on securities or the capital gains on transfer of the securities received by a person on behalf of a statutory provident fund or any income received on behalf of recognized provident fund, approved superannuation fund, approved gratuity fund etc. Section 10(25)
  14. Income of Employee’s State Insurance Fund.Section 10(25A)
  15. Any income of a corporation established by the Central Government or any State Government for promoting the interests of the members of a minority community. Section 10(26BB)
3. The incomes enumerated below are exempt from tax subject to fulfillment of certain conditions
  1. Any interest received by a non-resident from specified securities or bonds, and any income received as premium on redemption of such bonds.
  2. Any interest received by an individual on moneys standing to his credit in Non-resident (External) Account maintained by him with any bank in India in accordance with the Foreign Exchange Regulation Act.Section 10(4)(i)
  3. Any interest from notified Savings Certificates received by an Indian citizen or an individual of Indian origin, being a non-resident, provided that the certificates have been subscribed to in convertible foreign exchange remitted from outside India in accordance with the provisions of Foreign Exchange Regulation Act.Section 10(4B)
  4. The value of leave travel concession provided to an individual and his family by an employer or a former employer in connection with his proceeding on leave to any place in India, or for proceeding to any place in India on retirement or termination of his services. Section 10(5)
  5. Any tax paid by the employer of an individual, being a non-resident technician for a period of 48 months. Section 10(5B)
  6. Any passage moneys or the value of concessional passage received by a foreign national from his employer for himself, spouse and children from proceeding outside India on leave or retirement.Section 10(6)(i)
  7. Any remuneration received by a foreign diplomat or a member of his staff.Section 10(6)(ii)
  8. Remuneration received by a foreign citizen as an employee of a foreign enterprise if his stay in India does not exceed 90 days. Section 10(6)(vi)
  9. Any income by way of salary received by a non-resident foreign citizen as a member of ships’ crew provided his total stay in India in that previous year does not exceed 90 days. Section 10(6)(viii)
  10. .Any remuneration received by a foreign national as an employee of a foreign government deputized in India for training in a government establishment or concern or a public sector undertaking. Section 10(6)(xi)
  11. Any tax paid on behalf or a foreign company on income by way of Royalty or fees for technical services.Section 10(6A)
  12. . Any tax paid on behalf of a non-resident or a foreign company by the Government or India concern on income under an approved agreement Section 10(6B)
  13. Any tax payable on behalf of a foreign state or a foreign enterprise in respect of the dry lease of an aircraft under an approved agreement.Section10(6BB)
  14. Income arising to specified foreign companies from services provided in or outside India in respect of projects connected with the security of India Section 10(6C)
  15. Any allowance or perquisites granted by the Government of India to its employees rendering services outside India. Section 10(7)
  16. Any sum received by an individual, who is assigned duties in India, from a foreign government by way of remuneration in connection with an y sponsored co-operative technical assistance program with government of a foreign state and income of family members of such employee accruing or arising outside India. Section 10(8) and Section10(9)
  17. Any remuneration or fees, paid out of funds made available to an international organization, received by a non-resident/non-Indian citizen consultant or the remuneration paid by such a consultant to any individual. Section10(8A)
  18. Any remuneration received by a consultant referred to in clause (8A) in connection with a technical assistance programme or project in accordance with the agreement between the Central Government and an agency, or the remuneration paid by the consultant to any individual. Section10(8B)
  19. Any sum received as Death-cum-Retirement gratuity as prescribed. Section 10(10)
  20. Any payment in commutation of pension subject to the limits specified. Section 10(10A)
  21. Any payment as leave encashment in respect of earned leave paid to the retiring employees. Section 10(10AA)
  22. Any amount received as retrenchment compensation by a workman under the Industrial Disputes Act. Section 10(10B)
  23. Any amount by way of compensation received from a public sector company at the time of voluntary retirement, not exceeding rupees five lakhs. Section10(10C)
  24. Any sum received on life insurance policy, not being a Key man insurance policy, including any sum received as bonus. Section 10(10D)
  25. Any payment from provident fund. Section 10(11)
  26. Accumulated balance in a recognized provident fund. Section 10(12)
  27. Any payment from an approved superannuation fund. Section 10(13)
  28. House rent allowance subject to certain limits. Section 10(13A)
  29. Special allowance or benefit granted to an employee to meet expenses incurred wholly and exclusively in performance of the duty. Section 10(14)
  30. Any income received by a public financial institution as exchange rise premium in certain cases. Section 10(14A)
  31. Any interest from or premium received on redemption of certain exempted securities. Section 10(15)
  32. Any income by way of daily allowance or constituency allowance received as a Member of Parliament or State Legislature and any other allowance not exceeding Rs.600/- per month. Section 10(17)
  33. Any income of an approved scientific research association. Section 10(21)
  34. Any income of a notified news agency Section 10(22B)
  35. Any income of an approved sports association Section 10(23)
  36. Any income other than income from property or income received for rendering any specific service or income by way of interest or dividends of professional bodies approved by the Central Government.
  37. Any income received by an person on behalf of any Regimental Fund or non-public fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependents. Section 10(23AA)
  38. Any income of a fund established for welfare of employees. Section 10(23AAA)
  39. Any income of pension fund set up by LIC. Section 10(23AAB)
  40. Any income of a public charitable trust or a registered society, approved by Khadi and Village Industries Commission, existing solely for the development of Khadi or Village Industries.
  41. Any income of any body or authority established, constituted or appointed under any statue for the purpose of administration of public, religious or charitable trusts or endowments or societies for religious or charitable purpose. Section 10(23BBA)
  42. Any income of the European Economic Community derived in India by way of interest, dividends or capital gains from specified investments. Section 10(23BBB)
  43. Any income of SAARC Fund for Regional Projects, set up under the Colombo Declaration. Section 10(23BBC)
  44. Any income received by any person on behalf of specified national funds and approved public charitable trust or institution, and any income of a university or an educational institution financed mainly by the Government or a hospital mainly financed by the Government, and existing not for profit. Section 10(23C)
  45. Any income of a registered Mutual Fund or a fund set up by a public sector bank or a public financial institution. Section 10(23C)
  46. Any income of a notified Exchange Risk Administration Fund. Section 10(23E)
  47. Any income by way of dividends or long-term capital gains of a venture capital fund or a venture capital company from investment in a venture capital undertaking. Section 10(23F)
  48. any income by way of dividend, interest or long-term capital gains of an infrastructure fund or an infrastructure company from investment in shares or long-term finance of an infrastructure facility. Section 10(23G)
  49. Any income of a member of schedule tribe, residing in Nagaland, manipur, Tripura, Arunachal Prades, Mizoram and Ladakh from any source in those areas or income by way of dividends or interest on securities. Section 10(26)
  50. Any income of a statutory Central or State corporation or a body or an institution, financed by the government formed for promoting the interests of members of scheduled castes, scheduled tribes or other backward classes.
  51. Any income of co-operative society formed for promoting interest of members of scheduled castes or scheduled tribes. (Section 10(27)
  52. Any income of a marketing authority from letting of godowns or warehouses. Section 10(29)
  53. Income by ay of subsidy from Tea Board for replanting or replacement of tea bushes or for the purpose of rejuvenation or consolidation of areas used for cultivation of tea in India. Section 10(30)
  54. Income by way of subsidy received from the respective Board by the planters or rubber, coffee or cardamom. Section 10(31)
  55. Income of a minor child, whose income is includible under Section 64(1A) in the income of the parent, upto Rs.1,500/-. Section 10(32)
  56. Any income by way of dividends distributed by an Indian company.
    Section 10(33) Section 10A : Any income of a newly established industrial undertaking in a free
    trade zone.
    Section 10(A) Section 10B : Any income f a newly established hundred percent export oriented
    undertaking. Section 10(B)
    1. Any income derived from property held under a trust for charitable or religious purposes to the extent to which it is applied for such purposes in India. If such income is set apart or accumulated for such purposes, then if such income does not exceed 25% of the income from the property. Section 11(1)(a)
    2. Any income derived from property held under a trust in part for charitable or religious purposes to the extent to which it is applied for such purposes in India., If such income is set apart or accumulated for such purposes, then if such income does not exceed 25% of the income from the property. The exemption is available if the trust was created before 1.4.1952. Section 11(1)(b)
    3. Any income derived from property held under a trust for charitable purposes to the extent to which it is applied for such purposes outside India provided that it promotes international welfare in which India is interested. Section 11(1)(c)
    4. Voluntary contributions received by a trust or an institution towards its corpus. Section 11(1)(d)
    5. Voluntary contributions received by a trust created wholly for charitable or religious purposes will be deemed to be the income derived from property held for charitable or religious purposes. Thus, such contributions will be exempt as provided in Section11. Section 12
    6. Section 13A : Income of a political party under the head Íncome from House Property’or Íncome from other sources’or any income from voluntary contributions. Section 13A