SALARY

 WHAT IS “SALARY”

Salary is the remuneration received by or accruing to an individual, periodically, for service rendered as a result of an express or implied contract. The actual receipt of salary in the previous year is not material as far as its taxability is concerned. The existence of employer-employee relationship is the sine-qua-non for taxing a particular receipt under the head “salaries.” For instance, the salary received by a partner from his partnership firm carrying on a business is not chargeable as “Salaries” but as “Profits & Gains from Business or Profession”. Similarly, salary received by a person as MP or MLA is taxable as “ Income from other sources”, but if a person received salary as Minister of State/ Central Government, the same shall be charged to tax under the head “Salaries”. Pension received by an assessee from his former employer is taxable as “Salaries” whereas pension received on his death by members of his family (Family Pension) is taxed as “Income from other sources”.

WHAT DOES “SALARY” INCLUDE

Section 17(1) of the Income tax Act gives an inclusive and not exhaustive definition of “Salaries” including therein (i) Wages (ii) Annuity or pension (iii) Gratuity (iv) Fees, Commission, perquisites or profits in lieu of salary (v) Advance of Salary (vi) Amount transferred from unrecognized provident fund to recognized provident fund (vii) Contribution of employer to a Recognised Provident Fund in excess of the prescribed limit (viii) Leave Encashment (ix) Compensation as a result of variation in Service contract etc. (x) Contribution made by the Central.

FEATURES/ CHARACTERISTICS OF SALARY UNDER INCOME TAX ACT 1961

For any payment to be made taxable under the head ‘Salaries’ it must fulfill the following characteristics. In case any receipt is not covered under any of these features it will not come under this head. 1. Relationship of Employer and Employee For a payment to fall under the head ‘Salaries’ the relationship of employer and emplqyee must exist between payee and the receiver of the salary. The employer may be a Government,\. a Local authority, a company or any other public body or an Association or H.U.F. or even an individual. Every kind of payment to every kind of servant, public or private, however high or low placed he may be, is covered under the provisions of this Act. Even the remuneration payable to an employee of a foreign Govt. falls within this section. Even servant is an employee, but an agent may or may not be employee. A detailing agent of a selling concern is its employee whereas the person holding an agency to sell the goods of such a concern will not be employee. The relationship of master and servant is the only test to establish the relationship of employer and employee. A director of a company, though holding an office, is not an. employee unless it is so provided in the independent contract, or the Articles of Association of the company provide for such a relationship. 2. Salary from more than one Employer Any amount of salary received or due from one or more than one employer/source shall be taxable under this head. Such situation may arise when an employee is working with two employers simultaneously or has worked with one employer and later on serves with another employer after leaving service with, first employer, salary from both the employers shall be taxable under this head. 3. Salary from Present, Past or Prospective Employer Salary received or due from present, past or future employer is also taxable under this head. 4. Tax Free Salary Sometimes, the employer allows an employee to draw tax-free salary, e.g., the employer pays full salary to the employee and also pays tax on this directly to the department. The employee’s assessment is to be made not on the amount of salary he is drawing but on gross amount i.e., salary drawn plus the tax paid by the employer. 5. Salary Received as Member of Parliament Salary received by a member of Parliament is not taxable under the head ‘Salaries’. It is taxable as income from other sources’. Any allowance received by them is fully exempted from tax. 6. Receipts from Persons other than Employer Perquisites or benefits or any other remuneration received from persons other than the employer, would be taxable not under the head ‘Salaries’ but under the head ‘income from other sources’ even if they accrue to the employee by reason of his employment or while he was discharging his normal duties, e.g., amount received by a professor of a college for acting as an examiner in a university. For example, Dr. Dhir is an employee of a leading physician of Delhi. In one case, the patient’s life was saved because of the hard work and intelligence of Dr. Dhir. The patient, therefore, gives 5,000 to Dr. Dhir in appreciation of his services. The amount in this case is not chargeable as ‘salary’ but constitutes income from other sources. 7. Place of Accrual of Salary Income Salary accrues at that place where the services are rendered. If the services are rendered in India, the salary accrues in India and if the services are rendered outside India, the salary accrues outside India. Thus, if a person employed in India goes on leave to England and gets his leave salary there, the salary is said to accrue in India and not in England, because it is paid for services rendered in India. Pension paid in a foreign country for services rendered in India, will be Indian income, as it is paid for the services rendered in India although in the past. On the other hand, if any person is employed in India and transferred to its branch in England, the salary received by him in England is not Indian income, but it is income arising in England as the service is rendered in England. Followings are the two exceptions to this rule A pension payable outside India to a person who has gone to foreign country for permanent settlement is not deemed to arise in India, if pension is payable to a person appointed by the Secretary of State or to a person who was appointed before 15th August 1947, as a judge of the Federal Court or of a High Court and who continued to serve on or after the commencement of the Constitution as a judge in India. This is a special concession granted to certain officials of Government, who were employees before independence but continued to serve after this. The Govt. of India employs Indian citizens for services to be rendered in foreign countries and salary paid outside India is deemed to accrue or arise in India. This provision helps in taxing the salaries received by Government servants posted abroad. But under Section 10(7) the allowances and perquisites paid or allowed by the Government outside India are to be excluded from total income. 8. Deductions made by the Employer If, an employer makes certain deductions out of the salary payable to an employee, amount so deducted is deemed to be received by the employee and the amount so deducted is also taken as application of income by the employee. Some important types of deductions made by the employer are as follows : 1. Deductions made to recover the loan advanced by the employer. 2. Employee’s contribution towards the provident fund, income-tax and profession tax. 3. Deduction made to pay the premium on life insurance policy of the employee. 4. Any other deduction for which the employee has authorised the employer. In case an employee receives his salary after certain deductions made by employer on account of profession tax, contribution to provident fund, tax deducted at source, the ‘salary’ will not be the net amount received, rather it will be the gross salary due to the employee.  9. Salary or Pension received by UNO Employees It is fully exempted as per circular No. 293 Dt. 10-2-81. 10. Salary received by a teacher/ researcher from a SAARC member State Exempted upto 2 years. 11. Salary as Partner Any salary, commission or remuneration received by a working partner from a firm assessed as firm shall not be taxable under the head ‘Salaries’. It is taxable under the head Profits & Gains. 12. Payments received by Legal Heirs of a Deceased Employee Any ex-gratia payment or compensation given to widow or legal heirs of an employee who dies during service is not taxable as salary income but family pension received is taxable under ‘other sources’. 13. Payment made after Cessation of Employment Payment made by an employer to his employee after the cessation of his employment is also taxable under the head ‘Salaries’. It is taxable under this head because it represents remuneration for services rendered in the past. 14. Voluntary foregoing : Application of Salary Voluntary foregoing of salary by an employee is simply an application of income by him and, therefore, any voluntary foregoing of salary is taxable when it is due, whether paid or not (Section 15). The salary which is voluntarily foregone must be actually due in the name of the employee. Voluntary foregoing is different from voluntary surrender of salaries which is exempted from tax. 15. Previous year for Salaries The previous year for the income under the head ‘Salaries’ shall always be financial year of the Government of India (i.e., April to March). 16. Taxability of salary on due or receipt, whichever is earlier basis U/s 15(a) salary is taxable on due basis whether received or not. Salary becomes due after doing work and in India it is due on monthly basis. Every employee gets salary on completion of a month. As per our financial system the year starts on 1St April and ends on 31st March. As such first salary for the month of April becomes due on 1st day of next month. But in some cases salary becomes due on the last day of the month and salary for the month of April shall be due on 30th April. This results into following two situations : If salary is due on 1 st. day of the month, during the financial year 2013-14 first salary shall be due on 1st April 2013 and it shall be for the month of March 2013 and last salary shall be due on 1st March 2014 for the month of February 2014. If salary is due on the last day of the month, during the financial year 2013-14 first salary shall be due on 30th April 2013 and it shall be for the month of April 2013 and last salary shall be due on 31st March 2014 for the month of March 2014. 17. Salary Grade / Pay Scale In some organisations like Government offices, Banks, Post Offices, Railways, Universities, Colleges etc. salary to employees is paid as per pay scales or salary grades. The pay sc,les fixes the starting salary of an employee and also the annual increment in future years of employment. The annual increment is granted to employee after completion of one full year of service e.g. if an employee joins his service/job on 1st September 2010, he will be granted 1st annual increment w.e.f. 1st September 2011. Example of Grade/Pay Scale 8,000-300-11,000 12,000-500-20,000 The amount mentioned in between two big amounts is known as annual increment i.e. the salary of employee will increase by this amount on the completion of every 12 month of his job. Example. Mr. A joined his job on 1st September 2009 in the grade of 12,000-500-20,000. Find out his salary for the previous year 2013-14. 18. Advance salary received In case an assessee receives some salary in advance in a previous year which was actually not due in that year, it shall be taxable in the year of receipt. In case, any loan or advance is taken it is not treated as advance salary. 19. Arrears of salary received Any amount of salary received from present or past employer during relevant previous year and which relates to some earlier previous years, is treated as arrears of salary. It is taxable in the year in which received and not the year to which it belongs. [C.I.T. v. Gajapathy Naidu (1964) 58 I.T.R., 114 (S.C.)]. In case assessee has to pay tax at a rate higher than that at which he would have paid, had these arrears been received in the year to which they belong, assessee can apply to Income-tax Officer for relief u/s 89(1) (Refer to Chapter 2 of part III of this book). 20. Salary in Lieu of notice To terminate the services of an employee it is essential to serve a notice as per service agreement. In case it is desired to relieve the employee immediately, he is given salary in lieu of such notice period. Such amount is fully taxable under the head ‘salaries’ on receipt basis.

Exempted incomes

 The Income Tax Act, 1961 specifies that every individual who earns an income in India should pay income tax on such income earned. That is why the income that you generate in a financial year from all possible sources is taxed at specified tax rates. Though the income earned is taxable, the Act also allows for different types of exemptions which help you in lowering your taxable income. These exemptions allow specific incomes to be tax-free in nature. As such, the exempted income is not added to your gross total income which reduces your tax liability.

There are different types of income tax exemptions which you can claim. Section 10 of the Income Tax Act allows a list of exemptions which are available to tax-payers, both salaried as well as non-salaried individuals. You can claim an exemption under Section 10 for different types of incomes that you earn in a financial year. Section 10 contains various subsections which allow exemptions on different types of incomes. These exemptions can be claimed by the following types of assessees- 

• Individuals, salaried as well as non-salaried 
• Hindu Undivided Families (HUFs)
• Trusts
• Associations
• Body of Persons
• Companies
• Foreign Companies, etc.

Thus, different subsections of Section 10 allow different types of exemptions for different types of assessees. So, let’s understand the list of various exemptions under Section 10 of the Income Tax Act, 1961 – 

1. Exemption under Section 10 (1) on agricultural income

   If you earn any type of agricultural income in a financial year, such an income would be exempted from tax. Agricultural income, as defined under Section 2 (1A) of the Income Tax Act, 1961, would include the following types of incomes –

   • Rent or revenue earned from a land located in India which is used for agricultural purposes
   • Income earned from an agricultural land located in India by doing agricultural activities. These agricultural activities also include processing of the agricultural produce to make it fit for sale in the market
   • Income earned from a farmhouse provided specific conditions are fulfilled
   • Moreover, income earned from saplings or seedlings which are grown in a nursery would also be considered as an agricultural income
2. Exemption under Section 10 (2) on income received by a coparcener from the HUF

   If you are a coparcener in a Hindu Undivided Family (HUF), share of income received from family income or income received from an impartial family estate would be exempted from tax. For instance, in a financial year, you earn INR 50,000 as salary from your HUF. Moreover, the HUF earned an income of INR 60,000 out of which you received INR 20,000 as your share. In this case, your salary income would be liable to tax but the share of profit which you received from the HUF, i.e. INR 20,000 would be exempted from tax.

3. Exemption under Section 10 (2A) on profit received by a partner from a firm

   If you are a partner in a partnership firm or in an LLP (Limited Liability Partnership), the share of profit which you receive from the firm or LLP would be exempted from tax. This exemption would be allowed only on the share of profit received. Any other amount received by way of remuneration or interest on capital would not be exempted.

4. Exemption under Section 10 (4) on interest received by a non-resident

   Section 10 (4) is further divided into two sub-sections. The first one is Section 10 (4) (i) wherein interest received by a non-resident individual on specific securities or bonds and the premium earned on redemption on such bonds are allowed as an exemption. The second one is Section 10 (4) (ii) wherein interest earned by a non-resident on the Non-Resident External Account (NRE Account) is allowed as an exemption. The NRE account can be maintained with any bank as per the Foreign Exchange Management Act, 1999 (FEMA). The exemption under Section 10 (4) (ii) would be available to an individual who is a resident outside India as mentioned in Section 2, clause ‘w’ of the FEMA or is an individual who is allowed by the RBI to maintain an NRE Account.

5. Exemption under Section 10 (4B) on interest paid on notified savings certificates

   If an individual is an Indian citizen or a PIO (Person of Indian Origin) and he/she is a non-resident, interest income earned from saving certificates which are issued by the Central Government would be completely exempted from tax. The saving certificates should be notified in the Official Gazette of the Central Government and the individual should have invested in such certificates in foreign currency or foreign exchange as specified in the Foreign Exchange Act, 1973, FEMA or any other Act passed by the Government. However, if the securities are issued on or after 1st June 2002, the exemption would not be allowed and the interest income would be fully taxable.

6. Exemption under Section 10 (5) on Leave Travel Allowance /Concession paid to an employee

   A salaried employee can claim an exemption for the Leave Travel Allowance (LTA) or Leave Travel Concession (LTC) paid by the employer. There are various rules for claiming LTC exemption which includes the following –

   • The actual cost of travel would be allowed as an exemption subject to the maximum allowance paid by the employer. Let’s understand with an example. Mr Verma, an employee, receives LTA of INR 50,000 from his employer. He goes on a trip with his wife and two kids and the total cost of travel tickets comes to INR 40,000. In this case, the LTA exemption would be allowed for INR 40,000 which is the actual cost of the journey. However, if the travel tickets amounted to INR 60,000, the exemption would have been available only for INR 50,000 which is the maximum LTA paid by the employer. The remaining INR 10,000 would be taxed in the hands of the employee
   • The exemption can be claimed either when the employee takes a leave from work and travels or if the employee has retired or left the job before travelling
   • The travel should be taken within India
   • The travel cost of the family members can also be claimed as an exemption. Family members include spouse, children, parents and siblings. In the case of children, the exemption is allowed for up to 2 children born on or after 1st October 1998. For children born earlier, however, there is no maximum limit.
   • Costs incurred on sightseeing, food, etc. would not be allowed as an exemption under LTA
   • If the journey is done by air, the maximum exemption would be the economy class return airfare for the shortest route taken from the place of origin to the place of destination
   • If the journey is done by any other mode (except by air) when there is train connectivity, the maximum exemption would be limited to the return fare of first-class AC train ticket for the shortest possible route 
   • If the destination is not connected by train, the exemption limit would be limited to the return fare of first-class AC train ticket for the shortest possible route assuming that the journey is done by train
   • The exemption can be taken for a maximum of two journeys undertaken in a block of 4 years. The block of 4 years has been listed by the Government and it follows the calendar, i.e., the year starts from January and ends in December. The current block is from January 2018 to December 2021
   • If two LTA exemptions are not claimed in a block of four years, the unclaimed LTA can be carried forward to the next block. However, in that case, the carried forward LTA should be claimed within the first year of the next block. For example, for the block of 2018-2021, if the employee claims only one LTA, the remaining LTA can be carried forward to the 2022-2025 block. However, the carried forward exemption should be claimed between 1st January 2022 and 31st December 2022
7. Exemption under Section 10 (6)

   Section 10 (6) allows exemptions on different types of incomes which are listed below –

   • Section 10(6)(ii) – remuneration received by ambassadors and officials of the Embassy, High Commission or Legation, consular officer, trade commissioner or other official representative and members of staff of these officials would be exempted from tax. This exemption would be allowed if the individuals are not Indian citizens and if they serve on behalf of a foreign country in India. Moreover, the individual should not have any other source of income in India and the country which the individual represents should also allow similar tax exemptions to Indian Government officials located therein.
   • Section 10(6)(vi) – incomeearned byan employee of a foreign company who is sent to India for rendering services would be allowed as an exemption. However, to claim the exemption, the foreign company should not have any type of business in India, the employee’s stay in India should not be for more than 90 days in the previous year and the remuneration paid should not be deducted from the income of the company which is chargeable under the Income Tax Act, 1961.
   • Section 10(6)(viii) – salary income earned by an individual who is a non –resident when employed on a foreign ship would be exempted from tax. However, for claiming the exemption, the individual should not have stayed in India for more than 90 days in the previous year.
   • Section 10(6)(xi) – if an individual who is not an Indian citizen receives a remuneration when training in India in a Government-owned institution, a Central and/or State Government-owned company, a subsidiary of a Central and/or State Government-owned company or a society registered under the Societies Registration Act, 186Q that is financed by the Central or State Government, the remuneration received would be tax-exempt.
   • Section 10(6A) – if a foreign company provides technical services to the State or Central Government or to an Indian company and receives an income in the form of royalty or fees for the services provided, the tax might be paid by the Government of the company which availed the foreign company’s services. This tax payment would be exempted from tax provided that the foreign company provided the service as per an agreement made before 1st June 2002, the agreement is approved by the Government and the agreement complies with the Industrial Policy of the Government. 
   • Section 10(6B) – If an Indian company or the Government seeks services of a non-resident individual or a foreign company and pays tax on behalf of them, the tax paid would be allowed as an exemption. It would not be included in the income earned by the non-resident individual or the foreign company.
   • Section 10(6BB) – if a foreign company or Government receives income from an Indian company which is engaged in aircraft operations and the income is the consideration paid for buying the aircraft or its engine on lease and the Indian company pays taxes on such income, the tax paid would be exempted from tax. This would be allowed if the foreign company has entered into an agreement with the Indian company on or after 31st March 1996 but before 1st April 2007 and the agreement has been approved by the Central Government of India.
   • Section 10(6C) – if a foreign company, notified by the Government in the Official Gazette, receives an income in the form of royalty or fees for technical services provided in or outside India for projects related to the security of India, the income received would be tax-exempt.
   • Section 10(6D) – income which is paid to a non-resident individual who is not a company or a foreign company in the form of royalty or fees for services provided to the National Technical Research Organisation whether in or outside India would be exempted from tax.
8. Exemption under Section 10 (7) on perquisites and allowances paid by the Government to its employees outside India 

   If an Indian citizen is working outside India for the Government, any perquisite or allowance paid by the Government to such employee would be exempted from tax. The salary of the employee would be deemed to accrue in India on which the employee would be taxed. However, the perquisites and allowances paid to the employee would not be taxed. To claim exemption, the income should be charged under the head ‘Salary Income’ and it should be paid by the Government to an Indian citizen (whether resident or non-resident) for the services rendered outside India.

9. Exemption under Section 10 (8) on income paid to employees of foreign countries working in India 

   If a foreign citizen is working in India under the scheme of co-operative technical assistance programmes and there is an agreement between the Government of India and the Government of the foreign State, the income earned by the individual would be exempted from tax. The income should be paid by the Government of the foreign State and the individual should not have any income arising in India.

   • Section 10 (8A) – If an individual who is a non-resident, not an Indian citizen or a citizen but not ordinarily resident in India is a consultant from an international organization, any fee or remuneration earned by him would be exempted from tax under Section 10 (8A). To claim exemption, the organization for which the consultant works should derive its fund from a technical assistance grant which is given by the foreign Government under an agreement. The technical assistance provided by the consultant should be as per the agreement. The appointment of the consultant should also be approved by specified authorities. Moreover, if the individual has any income arising outside India, he should be liable to pay tax to the foreign Government on such income. 
   • Section 10 (8B) – If the consultant mentioned under Section 10 (8A) employs and pays an individual any remuneration for services rendered in India under the technical assistance program, such remuneration would be tax-exempt under Section 10 (8B). The individual should not be an Indian citizen or if he is an Indian citizen he should not be ordinarily resident in India. Any other income of the individual outside India would also be exempted if it is subject to tax in a foreign country. Moreover, the individual’s service contract should be approved by a specified authority to claim exemption.
10. Exemption under Section 10 (9) on the income of family members of individuals working in India under the co-operative technical assistance programs

    If the family member of the individual referred under Sections 10 (8), (8A) and (8B) comes to India with the individual and earns an income outside India, such income would not be taxed in India. The income would be deemed to accrue outside India for which the family member of the individual would have to pay an income or a social security tax to the Government of the country where the income originated.

11. Exemption under Section 10 (10) on gratuity income received by an employee

    If an employee has completed five years of service with an employer, the employer pays a gratuity to the employee on retirement or on the death of the employee. Gratuity is paid as an acknowledgement of the past service rendered by the employee. If gratuity is paid on the retirement of the employee, the amount of gratuity is recorded under ‘Income from salary’. However, gratuity paid to the legal heir on the death of the employee would be recorded under the head ‘Income from other sources’ in the tax return of the legal heir. Section 10 (10) exempts the gratuity received by the employee up to specified limits. These limits are as follows –

    • Section 10(10)(i) – any gratuity paid to a Government employee on death or retirement would be tax-exempt under this Section.
    • Section 10(10)(ii) – if gratuity is paid to a non-Government employee by an organisation covered under the Payment of Gratuity Act, 1972, a specific portion of the gratuity would be exempted from tax under this Section. The exempted amount of gratuity would be the lowest of the following –
    • Amount of gratuity received
    • 15 days’ average salary of the last three months for each completed year of service. If in a year the employee has worked for more than 6 months, it would be considered to be one full year of service. In the case of seasonal establishments, however, 7 days’ salary is considered for calculation of exemption limit. Salary would include basic salary and dearness allowance. The formula to calculate the amount would be (15 or 7 * last monthly salary * years of service) divided by 26
    • INR 20 lakhs

    If, however, gratuity is paid to any other employee, i.e. non-Government employee of an organisation not covered under the Payment of Gratuity Act, 1972, the exempted amount would be the lowest of the following –

    • Amount of gratuity received
    • Half months’ average salary for each year of service. Average salary would mean the average salary of the last 10 months and it would include basic salary, dearness allowance and commission on sales. Moreover, service rendered for a fraction of the year would not be taken into consideration. The formula here becomes (15 * last monthly salary * years of service) divided by 30
    • INR 20 lakhs

    If gratuity is paid on death, termination of service or disablement of the employee, the afore-mentioned exemption is allowed. However, if the employee avails gratuity while being in service with the same employer, the gratuity received would be taxed under the head ‘Income from Salary’. If the employee has availed gratuity earlier and had claimed an exemption under the Section, he would be eligible for a further exemption if gratuity is received again. In that case, however, the limit of INR 20 lakhs would be reduced by the exemption already claimed by the employee.

12. Exemption under Section 10 (10A) on commuted pension

    If an employee has a pension fund to his name, a part of the fund can be commuted. Commutation of pension means withdrawing a part of the fund in a lump sum. The remaining fund is, then, used to pay pensions. This commutation of pension is allowed as a tax-exempt income. The exemption is allowed on the commuted part of the pension and the limit of exemption is as follows –

    • If the employee is an employee of the Government, statutory corporations or local authorities, the exemption is allowed on the total commuted value of pension
    • If the employee is a non-Government employee and he has not received gratuity, half of the pension corpus can be commuted tax-free
    • If the employee is a non-Government employee and has received gratuity, 1/3rd part of the corpus can be commuted and the commuted pension would be exempted from tax
    • For other individuals, i.e. those who are not salaried, tax exemption is allowed on commutation of pension received from a fund as specified under Clause 23AAB. The tax-exempt commutation would be limited to 1/3rd of the total corpus.
13. Exemption under Section 10 (10AA) on leave encashment received on retirement

    If an employee retires from service and receives leave encashment, the amount received would be exempted from tax. The limit of exemption would be as follows –

    • If the employee is a Government employee the full amount of leave encashment received would be tax-free
    • If the employee is a non-Government employee, the exemption limit would be lower of the following –
    • Amount of leave encashment received
    • The average salary of the last ten months preceding the retirement date. The salary would include basic salary, dearness allowance and commission expressed as a percentage of sales.
    • Cash value of leave which the employee did not avail. This would be calculated assuming a leave of 30 days for each year of service 
    • INR 3 lakhs
14. Exemption under Section 10 (10B) on retrenchment compensation paid to workmen

    If a workman is terminated from employment, which is called retrenched, the employer pays compensation to the worker at that time. This is called retrenchment compensation and this compensation is payable under the provisions of the Industrial Disputes Act, 1947, any other rules of Act issued by the Government, any standing order or through an award, service contract or otherwise. The compensation received by the workman would be exempted up to a specified limit which is considered to be the lowest of the following –

    • Amount of retrenchment compensation received
    • 15 days’ average salary for each completed year of service. If the workman has worked for more than 6 months in a year, that year would also be considered to be a complete year
    • INR 5 lakhs

    If the workman receives an amount higher than the maximum exemption limit, the excess amount received would be subject to tax under the head ‘Income from Salaries’. However, the workman can avail tax relief under Section 89 of the Income Tax Act, 1961 read with Rule 21A. Moreover, if the workman receives retrenchment compensation under any scheme introduced by the Central Government for the welfare of the workman, the entire amount of compensation received would be exempted from tax. There would be no exemption limit on such compensation.

15. Exemption under Section 10 (10BB) on compensation received for Bhopal Gas Tragedy

    Any compensation paid to an individual under the Bhopal Gas Leak Disaster (Processing of Claims) Act 1985 would be considered to be a tax-exempt income. However, if the compensation is paid against any loss or any damage for which the individual has already claimed a deduction, the compensation received would be taxable.

16. Exemption under Section 10 (10BC) on compensation received for any disaster

    If an individual or his legal heirs receive compensation from the Government or local authority for a disaster, such compensation would be exempted from tax. However, if the individual or his legal heirs suffered a loss due to the disaster and they have claimed a deduction in the Income Tax Act, 1961 for such losses, the compensation received would be taxable. The term ‘disaster’ would include both man-made causes and natural disasters which cause considerable loss of life and/or damage to property or the environment. Moreover, the extent of disaster should be beyond the coping capacity of the community of individuals in the affected areas.

17. Exemption under Section 10 (10C) on compensation received at the time of voluntary retirement 

    If an employee voluntarily retires from employment, compensation is paid to him on such voluntary retirement would be exempted from tax. The exemption would be allowed to the employees of the following types of organisations –

    • Public sector company
    • Any other non-public sector company
    • The authority which has been established under the Provincial, State or Central Act
    • Local authority
    • Co-operative society
    • University which has been established under the Provincial, State or Central Act including an institution which has been declared a University under the provisions of Section 3 of the University Grants Commission Act, 1956
    • Indian Institute of Technology (IIT) which falls under the meaning of Section 3 Clause (g) of the Institutes of Technology Act, 1961
    • Management institutes which have been specified by the Central Government by notification in the Official Gazette
    • State or Central Government 
    • Institutions which have importance either throughout India or in one or more States of India 

    To claim an exemption on voluntary retirement compensation, the following conditions would have to be fulfilled –

    • The compensation should be received only when the employee voluntarily retires from the company or when his services are terminated by the company under any scheme of voluntary retirement. In the case of public sector companies, the compensation should be paid under the scheme of voluntary separation. The compensation can be paid in a lump sum or in instalments and exemption would be allowed under both the cases.
    • The voluntary retirement scheme of the above-mentioned organisations which governs the payment of the compensation should be framed in accordance with the prescribed guidelines of Rule 2BA of the Income Tax Rules, 1962
    • The exemption for voluntary retirement compensation can be availed by the employee for one assessment year only. If availed, the exemption would not be allowed for any other assessment year
    • If the employee has claimed tax relief under Section 89 of the Income Tax Act, 1961 for the voluntary retirement compensation received, the exemption under Section 10 (10C) would not be allowed. Similarly, if the employee has claimed an exemption under this Section on the compensation received, he/she would not be able to claim relief for such compensation under Section 89.

    The amount of exemption allowed under the Section is INR 5 lakhs or the actual compensation received by the employee, whichever is less.

18. Exemption under Section 10 (10CC) on non-monetary perquisites paid by the employer

    Perquisites are additional benefits and facilities which the employer provides to its employees. Perquisites can be monetary or non-monetary in nature. If the employer provides non-monetary perquisites to the employees and pays tax on such perquisites on behalf of the employees, the tax paid by the employer would be allowed as an exemption in the hands of the employees.

19. Exemption under Section 10 (10D) on benefits received from life insurance policies

    If an individual receives any amount from a life insurance policy, including any bonus earned on the policy, the amount received would be fully exempted from tax without any maximum limit. However, to claim exemption, the following conditions should be fulfilled –

    • If the policy was issued on or before 31st March 2003, any amount of money received from the policy would be exempted from tax
    • If the policy is issued on or after 1st April 2003 but before 31st March 2012, the premium should not be more than 20% of the sum assured of the policy. If the premium is more than 20% of the sum assured, the exemption would not be available and the policy benefit would be taxable in the hands of the policyholder. For example, if the premium is INR 20,000 and the sum assured is INR 2 lakhs, the benefit received would be completely exempted from tax. However, if the premium is INR 50,000 and the sum assured is INR 2 lakhs, the benefit received from the policy would be taxable.
    • If the policy is issued on or after 1st April 2012, the premium should not be more than 10% of the sum assured of the policy. If the premium is more than 10% of the sum assured, the exemption would not be available and the policy benefit would be taxable in the hands of the policyholder. So, if the premium of the policy is INR 15,000 and the sum assured is INR 2 lakhs, the benefit would be exempted from tax. If, however, the premium is INR 25,000, the benefit would be taxable.
    • If the policy is bought on or after 1st April 2013 for an individual who suffers from any disease specified under Section 80 DDB of the Income Tax Act, 1961 or from a disability as specified under Section 80U of the Act, the premium should not be more than 15% of the sum assured of the policy. If the premium is more than 15% of the sum assured, the exemption would not be available and the policy benefit would be taxable in the hands of the policyholder.

    However, if the life insurance policy pays a death benefit, the above-mentioned conditions would not apply. The death benefit would be fully exempted from tax in the hands of the nominee whatever is the amount. Moreover, the exemption would not be allowed on policy benefits received under a Keyman insurance plan, under Section 80 DD (3) or under Section 80DDA (3) of the Income Tax Act, 1961.

20. Exemption under Section 10 (11) on payment from Statutory Provident Fund

    The exemption is allowed on payment made to an employee from a Statutory Provident Fund set up under the provisions of the Provident Funds Act, 1925 or from any other Provident Fund established by the Central Government through a notification in the Official Gazette. The employer’s contribution to such fund is not treated as an income for the employee and is, therefore, not taxable in the employee’s hands. Moreover, interest earned and lump sum amount received at the time of termination of services are also completely exempted from tax for the employees.

21. Exemption under Section 10 (11A) on payment from Sukanya Samriddhi Yojana

    If an individual opens a Sukanya Samriddhi Account in accordance with the Sukanya Samriddhi Account Rules, 2014 which have been created under the Government Savings Bank Act, 1873, payments from the account would be exempted from tax. This payment includes the interest earned, partial withdrawals from the account as well as the lump sum benefit received on termination or maturity of the account.

22. Exemption under Section 10 (12) on payment received from a Recognized Provident Fund

    If an employee participates in a Recognised Provident Fund, the accumulated amount in the fund which is payable to the employee would be allowed as an exemption. The exemption would be allowed up to a specified extent which is mentioned in Rule 8 of Part A of the Fourth Schedule. The exemption limits are as follows –

    • In case of a Recognised Provident Fund, employer’s contribution of up to 12% of the employee’s salary would not be taxed in the hands of the employee. Interest earned on the fund, up to 9.5% would be exempted from tax. If a higher rate of interest is earned, the excess interest would be taxed in the hands of the employee. At the time of service termination, the lump sum amount received would be exempted from tax if the employee has completed at least 5 years of service before termination. However, if the employee’s service is terminated before 5 years due to his ill health, if the employer shuts down business or for any other reason beyond the control of the employee, the exemption would be allowed. Moreover, if the employee takes up another employment after retirement and transfers the balance of the fund to another employer, the balance transferred would be exempted from tax.
    • In case of a Public Provident Fund, interest earned and lump sum amount received from the fund on termination of service would be exempted from tax.
    • In case of an unrecognised Provident Fund, the employer’s contribution would not be taxed in the hands of the employee. Interest earned on the fund would be exempted from tax. However, on termination of the fund, the amount contributed by the employee would be exempted from tax but the interest earned on such amount would be taxable in the hands of the employee under the head ‘Income from Other Sources’. The employer’s contribution and interest thereon would be taxed in the hands of the employee under the head ‘Income from Salary’. However, employees can claim tax relief under Section 89 of the Income Tax Act on such income.
23. Exemption under Section 10 (12A) on the amount received from NPS

    If an individual invests in a National Pension System Trust or any other pension scheme as mentioned under Section 80CCD and then closes the scheme, the money received from the scheme would be exempted from tax. The exemption would be allowed for up to 40% of the money received. However, from 1st April 2020, the limit has been increased to 60%.

24. Exemption under Section 10 (12B) on partial withdrawals from NPS

    If an individual invests in the National Pension System (NPS) and makes a partial withdrawal from the scheme, the money withdrawn would be exempted from tax. The exemption would be available for up to 25% of the balance withdrawn from the NPS account. Moreover, the withdrawal should be done as per the terms specified by the Pension Fund Regulatory and Development Authority Act, 2013 and any other regulation made in the Act.

25. Exemption under Section 10 (13) on payment from an approved superannuation fund

    A superannuation fund is like a pension fund which is created to provide retirement benefits to its employees. The fund is created under a trust to pay annuities to employees of the organisation on their retirement, incapacitation to work or on premature death. In case of premature death of the employee, annuities are paid to the widow, children or other dependents of the employee. The fund collects contributions from the employer and employee and invests the contributions in prescribed avenues. Income earned from the investments is exempted from tax provided that the fund is an approved superannuation fund. The employee’s contribution to the fund is allowed as a deduction under Section 80C of the Income Tax Act, 1961 up to INR 1.5 lakhs. Employer’s contribution of up to INR 1.5 lakhs per year per employee is exempted from tax. Any excess contribution, however, would be taxed in the hands of the employee. If any payment is received by the employee or his family from the approved superannuation fund, such payment would be exempted from tax provided any of the following conditions are fulfilled –

    • The beneficiary dies
    • The employee commutes his annuity on retirement or at a specified age or when the employee becomes incapacitated before retirement
    • The contributions are refunded on the death of the beneficiary
    • The contributions are refunded to the employee when he/she leaves the employment for which the superannuation fund was created for any other reason except retirement or incapacitation. The exemption would be allowed up to the extent that the payment from the fund does not exceed the contribution made to the fund before the start of the Act and interest earned thereon
    • The money is transferred to a pension account of the employee of a pension scheme which is mentioned in Section 80CCD and is notified by the Government
26. Exemption under Section 10 (13A) on House Rent Allowance 

    House Rent Allowance (HRA) is a salary component of almost all salaried employees provided by the employer to meet the rent of accommodation of the employee. This HRA received from the employer is exempted from tax in the hands of the employee up to a certain extent. The limit of exemption allowed is the lowest of the following –

    • 50% of the salary if the house is in a metro city like Kolkata, Mumbai, Delhi and Chennai else 40% of the salary
    • HRA received by the employee from the employer
    • Rent paid in excess of 10% of the salary of the employee

    For computation, the salary would include the basic pay, dearness allowance and commission if it is expressed as a fixed percentage of the turnover. Moreover, to claim the exemption, the employee should not own a residential house in his name and should live in a rented house.

27. Exemption under Section 10 (14) on specified benefits and allowances paid to an employee

    If an employee receives specified allowances and benefits from his employer for performing his employment-related duties, such allowances and benefits would be exempted from tax. The list of allowances and benefits which are exempted under this Section and their corresponding limits are mentioned below –

    • Children Education Allowance – up to INR 100/child/month for a maximum of two children
    • Hostel Expenditure Allowance – up to INR 300/child/month for a maximum of two children 
    • Transport allowance paid to blind or handicapped employees for their commute from residence to office and back – INR 3200/month/employee
    • Allowance paid to employees in the transport business for personal expenses incurred when running transport from one place to another if a daily allowance is not already being paid to such employees – INR 10,000 or 70% of the allowance received, whichever is lower
    • Conveyance allowance paid to employees for expenses incurred on the conveyance for performing employment-related duties – up to the actual cost of conveyance incurred by the employee for official purposes
    •  Travelling allowance paid to employees to cover the cost of travelling incurred on business tours or transfer of the employee – up to the actual cost of travel incurred for business purposes
    • Daily allowance paid to employees to meet the expenses incurred by the employee when he/she is absent from the normal place of duty – up to the actual expenses incurred for official purposes
    • Helper or Assistant Allowance – up to the actual amount incurred for official purposes
    • Research allowance to promote research of academic nature and any other professional pursuits – up to the actual costs incurred on the research for official purposes
    • Uniform allowance – up to the cost incurred on buying the uniform for official purposes
    • Special compensatory allowance for hilly areas subject to specified terms and conditions – INR 300 to INR 7000 per month depending on different factors
    • Border Area, Difficult Area, Remote Locality or Disturbed area allowance subject to specified terms and conditions – INR 200 to INR 1300 per month depending on different factors
    • Tribal Area Allowance paid for Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, Bihar, West Bengal, Orissa, Assam and Tripura – up to INR 200/month
    • Compensatory Field Area Allowance subject to specified terms and locations – up to INR 2600/month. If this allowance is claimed by the employee, the Border Area Allowance would not be exempted if paid to the employee.
    • Compensatory Modified Area Allowance subject to specified terms and locations – up to INR 1000/month. If this allowance is claimed by the employee, the Border Area Allowance would not be exempted if paid to the employee
    • Counter Insurgency Allowance paid to members of the Armed Forces subject to specified terms and locations who are operating in areas which are away from their permanent location – up to INR 3900/month. If this allowance is claimed by the employee, the Border Area Allowance would not be exempted if paid to the individual
    • Underground Allowance paid to employees who work in an unnatural and uncongenial climate in underground mines – up to INR 800/month
    • High Altitude Allowance paid to members of the Armed Forces subject to specified terms and locations who are operating in areas of high altitude – if the altitude is 9000 to 15,000 feet, the exemption allowed is up to INR 1060/month. If the altitude is more than 15,000 feet, the exemption allowed is up to INR 1600/month
    • Highly Active Field Area Allowance paid to members of the Armed Forces subject to specified terms and locations – up to INR 4200/month
    • Island Duty Allowance paid to members of Armed Forces subject to specified terms and locations who are working in Andaman and Nicobar Islands and in Lakshadweep Group of Islands – up to INR 3250/month
28. Exemption under Section 10 (15) on interest income

    There are different types of interest incomes on which exemption can be claimed under Section 10 (15). Each income is specified under sub-sections of Section 10 (15) along with the type of taxpayer who can claim the exemption. The different sub-sections of Section 10(15) and their respective exemptions are mentioned below –

    • Section 10(15)(i) – income earned from interest, the premium on redemption or any other type of payment received from bonds, notified securities, deposits and certificates can be claimed as an exemption. This exemption is allowed to all types of taxpayers
    • Section 10(15)(iib) – interest earned from notified Capital Investment Bonds which have been notified on or before 1st June 2002 is exempted for all individual taxpayers as well as Hindu Undivided Families (HUFs)
    • Section 10(15)(iic) – interest earned from notified Relief Bonds is exempt for all individuals taxpayers and HUFs
    • Section 10(15)(iid) – interest earned from notified bonds on or before 1st June 2002 which were purchased using a foreign exchange is exempted from tax. This exemption is allowed subject to specified terms and conditions. The exemption can be claimed by an NRI individual, nominee or survivor of the NRI individual or by the individual to whom the bonds were gifted by an NRI
    • Section 10(15)(iii) – interest earned from securities is allowed as an exemption. This exemption is allowed only to Issue Department of Central Bank of Ceylon
    • Section 10(15)(iiia) – interest earned from deposits made with a scheduled bank after availing approval from the RBI would be exempted from tax. This exemption is allowed to a bank which has been incorporated abroad.
    • Section 10(15)(iiib) – interest income paid to Nordic Investment Bank would be exempted in the hands of the Nordic Investment Bank
    • Section 10(15)(iiic) – exemption is allowed to interest paid to the European Investment Bank on the loan that it has issued pursuant to the framework agreement done on 25th November 1993 for financial corporation between the bank and Central Government. The interest income would not be taxed in the hands of the European Investment Bank.
    • Section 10(15)(iv)(a) – interest received from the Government or from any local authority to whom money has been lent using sources outside India before 1st June 2001 would be exempted from tax. This exemption would be allowed to all types of taxpayers who lend money to the Government from sources outside India.
    • Section 10(15)(iv)(b) – interest received by an approved foreign financial institution on a loan lent by it to an industrial undertaking in India under an agreement entered before 1st June 2001 would be exempted in the hands of the foreign financial institution.
    • Section 10(15)(iv)(c ) – interest received from an industrial undertaking in India at an approved rate on a loan lent to the undertaking before 1st June 2001 would be exempted from tax. The loan should be given for purchasing of raw materials, components or plant and machinery by the undertaking subject to certain terms and conditions. The exemption would be allowed to all assessees who have lent the loan to the undertaking and receive interest on the loan.
    • Section 10(15)(iv)(d) – interest received by sources outside India who have lent money to specified financial institutions in India would be exempted in the hands of such sources who have lent money. The interest on the loan should be at an approved rate and the loan should have been issued before 1st June 2001.
    • Section 10(15)(iv)(e ) – interest received by sources outside India who have lent money to other financial institutions or banks in India would be exempted in the hands of such sources who have lent money. The interest on the loan should be at an approved rate and the loan should have been issued for specified purposes before 1st June 2001 under an approved loan agreement
    • Section 10(15)(iv)(f) – interest received by sources outside India who have lent money in foreign currency to industrial undertakings in India would be exempted in the hands of such sources who have lent money. The interest on the loan should be at an approved rate and the loan should have been issued before 1st June 2001 under an approved loan agreement
    • Section 10(15)(iv)(fa) – interest paid by a scheduled bank on deposits which are made in foreign currency would be exempted in the hands of non-resident or resident but not ordinarily resident individual or HUF. The exemption would be allowed only when the acceptance of the deposit by the scheduled bank was done with RBI approval.
    • Section 10(15)(iv)(g) – interest received by sources outside India who have lent money in foreign currency to Indian public companies would be exempted in the hands of such sources who have lent money. The interest on the loan should be at an approved rate, the Indian company should be eligible for availing a deduction under Section 36(1)(viii), the company should be formed for providing housing finance and the loan should have been issued before 1st June 2003 under an approved loan agreement to claim the exemption.
    • Section 10(15)(iv)(h) – interest paid by public sector companies on debentures or notified bonds issued by it would be exempted in the hands of all types of taxpayers who have invested in such securities. The exemption would be allowed subject to specific terms and conditions.
    • Section 10(15)(iv)(i) – interest received from the Government on deposits made in notified schemes from the money due on retirement would be exempted from tax. This exemption would be allowed to employees of the Central Government, State Government or public sector companies.
    • Section 10(15)(v) – interest received on securities which are held in RBI’s SGL Account Number SL/DH- 048 and on deposits which have been made after 31st March 1994 for the benefit of the victims of the Bhopal Gas Tragedy would be exempted. The deposit account should be held with the RBI or with any other notified public sector bank for getting the exemption. This exemption is allowed to Welfare Commissioner, Bhopal Gas Victims, Bhopal
    • Section 10(15)(vi) – interest earned on Gold Deposit Bonds which were issued under the Gold Deposit Scheme, 1999 and the interest earned on deposit certificates which were issued under the Gold Monetisation Scheme, 2015 would be exempted from tax. This exemption would be allowed to all taxpayers who have invested in the specified schemes.
    • Section 10(15)(vii) – interest earned on the investment done in notified bonds which have been issued by a local authority or by State Pooled Finance Entity would be exempted from tax. This exemption would be allowed to all assessees.
    • Section 10(15)(viii) – interest earned on a deposit made on or after 1st April 2005 in an Offshore Banking Unit which is referred in Section 2(u) of the Special Economic Zones Act, 2005 would be exempted from tax. The exemption would be allowed to non-residents and resident but not ordinarily resident individuals.
    • Section 10(15)(ix) – interest paid by a unit which is located in an International Financial Services Centre on loans borrowed by the unit on or after 1st September 2019 would be exempted from tax. This exemption would be allowed to non-residents who lent money to the unit.
29. Exemption under Section 10 (15A) on lease rent paid for an aircraft

    If an Indian company, engaged in the business of operating an aircraft, pays a lease rent for the aircraft or for an engine of the aircraft, to a foreign Government or enterprise, the rent received by the foreign Government or enterprise would be exempted from tax in its hand. However, the payment of rent should be approved by the Central Government and pursuant to an agreement made before 1st April 1997 or after 31st March 1999 but before 1st April 2007. If the agreement was made between the period of 1st April 1997 and 31st March 1999 or after 31st March 2007, exemption on the rent would not be available to the foreign Government or enterprise. However, if the Indian company pays a tax on the payment of rent, then the tax paid by the Indian company would be exempted in the hands of the foreign Government or enterprise under Section 10(6BB). However, for this exemption too, the agreement between the Indian company and the foreign Government or enterprise should be approved by the Central Government.

30. Exemption under Section 10 (16) on scholarship received for education

    Any scholarship is given by the Government, university, educational board, education trust, etc. for education costs would be exempted in the hands of the student. The exemption would be allowed for the full amount of scholarship received irrespective of the actual cost of education. Moreover, the cost of education would not only cover the tuition fee, but it would also cover incidental expenses which are incurred in availing education.

31. Exemption under Section 10 (17) on allowances paid to MP, MLA or MLC

    Any amount paid for specified allowances to Members of Parliament (MPs), Members of Legislative Assembly (MLAs) or Members of Legislative Committee (MLCs) would be exempted in the hands of such members. The allowances which are allowed to be exempted include the following –

    • Daily allowance received by the MP, MLA or MLC
    • Any other allowance received by the MP under the provisions of the Members of Parliament (Constituency Allowance) Rules, 1986
    • Any type of constituency allowance received by Member of State Legislatures 
32. Exemption under Section 10 (17A) on awards instituted by the Government of India

    Any payment made, either in cash or in-kind, for the following would be exempted from tax in the hands of the awardee –

    • An award instituted in the interest of the public by the Central Government, State Government or any other body which has been approved by the Central Government in this regard
    • A reward paid by the Central Government or State Government in the interest of the public for a purpose which has been approved by the Central Government in this regard
33. Exemption under Section 10 (18) on pension paid to gallantry award winners

    If an individual was an employee of the Central or State Government and has received a gallantry award like the Vir Chakra, Mahavir Chakra or the Param Vir Chakra, any pension paid to such individual would be exempted from tax. Moreover, if a family pension is paid to the family members of such individual, such pension would also be exempted from tax.

34. Exemption under Section 10 (19) on family pension received by the family of individuals in the armed forces

    If an individual was a member of the armed forces, including paramilitary forces, of India and he/she died in the course of operational duty in specified circumstances and subject to specific conditions, the family pension paid to the individual’s family members would be exempted from tax. This exemption came into effect from the financial year 2005-06. Family members include widow, children or nominated heirs of the individual.

35. Exemption under Section 10 (19A) on the annual value of a palace

    The annual value of one palace occupied by a former ruler would be allowed as an exemption from tax under this Section.

36. Exemption under Section 10 (20) on the income of the local authority 

If a local authority earns the following types of incomes, such incomes would be exempted from tax – 

• Income which would be subjected to tax under the heads ‘Income from Capital Gains’, ‘Income from house property’ or ‘Income from other sources’
• Income earned by the local authority from a trade or business engaged in the supply of a commodity or a service (except water or electric supply) within its jurisdictional area
• Income earned by the local authority from the business of supplying water or electricity either within its jurisdictional area or outside

The local authority for this Section would include a Panchayat, Municipality, Municipal Committee and District Board or a Cantonment Board.

37. Exemption under Section 10 (21) on income earned by a scientific research association

    Income earned by a scientific research association which has been approved under Section 35 (1)(ii) or (iii) of the Income Tax Act, 1961 would be exempted from tax. However, to claim the exemption, the following conditions should be fulfilled –

    • The income earned is used or accumulated wholly for the purpose for which the association was established
    • The funds earned should not be deposited for any period of time during the previous year other than in forms or modes mentioned under Section 11(5). However, this condition would not apply in the following instances – 
    • Assets held by the association wherein the assets form a part of the association’s fund’s corpus as on 1st June 1973
    • Debentures of a company which the association acquired before 1st March 1983
    • Accretion of the shares which form a part of the association’s fund’s corpus specified in sub-clause (i) which has been earned through bonus shares allotted to the association
    • Voluntary contribution received and maintained by the association in the form of furniture, jewellery or any other article as specified by the Board in the Official Gazette

    Moreover, the exemption should be allowed to the association with respect to a voluntary contribution (except the contribution made in cash or kind specified under the above-mentioned clauses). However, to claim this exemption, the association should not hold the contribution in any other form or mode except the ones mentioned under Section 11(5) after the completion of one year from the end of the previous year in which the asset was acquired. Furthermore, the exemption would not be allowed to the research association for any income which is profits and gains of business. However, if the business is incidental for the association to fulfil its objectives and separate books of accounts are maintained by the association in respect of such business, the profits and gains from such business would be allowed as an exemption.

38. Exemption under Section 10 (22B) on income earned by a news agency

    Any income which is earned by a news agency which has been set up in India for the purpose of collection and distribution of news would be exempted from tax. To claim exemption, however, the income of the agency should be used only for the collection and distribution of news and should not be distributed among the members of the agency in any form. If the agency does not apply, distribute or accumulate its income as per the prescribed conditions, the allowed exemption would be cancelled.

39. Exemption under Section 10 (23A) on income earned by a professional association or institution

    Any income earned by a professional institution or a professional association would be exempted from tax. The exemption, however, is not allowed on income from house property, dividends or interest earned from investments or income earned by providing some specific service. Moreover, to claim the exemption, the following conditions would have to be fulfilled –

    • The institution or association should be established in India for controlling, supervising, regulating or encouraging the professions of law, accountancy, medicine, engineering, architecture or any other notified profession.
    • The institution or association uses or accumulates its income only for the objective for which it has been established
    • The institution or association has been approved by the Central Government by a special or a general order
40. Exemption under Section 10 (23AA) on income received by a regimental fund

    If a Regimental Fund or a Non-Public Fund has been established by the members of the armed forces for providing welfare to the existing and previous members of the armed forces or their dependents, income earned by any person on behalf of such established fund would be exempted from tax.

41. Exemption under Section 10 (23AAA) on income earned on a fund for employee welfare

    If a fund is established for the welfare of employees and their dependents and the employees are the members of such fund, income earned by the fund would be exempted from tax. To claim exemption, the fund should be approved by the Commissioner of Income Tax and it should be used only for the purpose for which it was established. The purpose for which the fund can be used to pay any member include the following –

    • On superannuation
    • If the member or his/her spouse or dependent children are ill
    • For meeting the cost of education for the member’s dependent children
    • Payment to the family members on the death of the member
42. Exemption under Section 10 (23AAB) on income earned on a pension fund established by an insurance company 

    If a fund is set up by LIC or any other insurance company under a pension scheme, income earned by such fund would be exempted from tax. To claim exemption, however, the following conditions should be fulfilled –

    • The fund should have been created on or after 1st August 1996
    • Contribution to the fund should be made by a policyholder for the purpose of receiving pension
    • The fund should be approved by the Controller of Insurance or by the Insurance Regulatory and Development Authority of India (IRDAI) which has been set up under Section 3(1) of the Insurance Regulatory and Development Authority Act, 1999.
43. Exemption under Section 10 (23B) on income earned by an institution established for the development of khadi and village industries

    If an institution has been established as a public charitable trust or it has been registered under the Societies Registration Act, 1860 or any other Act and its objective is the development of khadi and village industries, the income earned by the institution would be exempted from tax. The following conditions would have to be fulfilled to claim an exemption on income –

    • The institution should not have been established for earning profits
    • The income should arise from the business of production, sale or marketing of khadi products or other products of village industries
    • The income earned is used by the institution only for the development of khadi and/or village industries
    • The institution has been approved by the Khadi and Village Industries Commission
44. Exemption under Section 10 (23BB) on income earned by Khadi and Village Industries Board at the State level

    Income earned by an authority which has been established in a State through or under a State or Provincial Act solely for the development of village and khadi industries would be exempted from tax. The authority can be called Khadi and Village Industries Board or any other name.

45. Exemption under Section 10 (23BBA) on income earned by authorities established for administering charitable trusts

    The exemption is allowed on income earned by a body or an authority which has been established or appointed by the Provincial, State or Central Act provided the authority is engaged in the administration of the following types of institutions –

    • Public trusts, charitable trusts or religious trusts
    • Endowments like Maths, Temples, Gurudwaras, Wakfs, etc.
    • A society for charitable and religious purposes which has been registered under the Societies Act, 1860

    However, income earned by a trust, society or an endowment would not be exempted from tax.

46. Exemption under Section 10 (23BBB) on income earned by the EEC

    Income earned by the European Economic Community (EEC) in India through capital gains, dividends or interest on the investments made in India using its funds would be exempted from tax. However, the income should be earned from a scheme notified by the Central Government.

47. Exemption under Section 10 (23BBC) on income earned by a SAARC Fund

    The exemption is granted on any type of income earned by the SAARC Fund for Regional Projects established under the Colombo Declaration on 21st December 1991 by the Heads of State or Government of the Member Countries of the South Asian Association for Regional Cooperation (SAARC). SAARC was established on 8th December 1985 by the Charter of South Asian Association for Regional Cooperation.

48. Exemption under Section 10 (23BBD) on income earned by the ASOSAI – SECRETARIAT 

    The exemption is allowed on the income earned by the Secretariat of the Asian Organisation of the Supreme Audit Institutions which has been registered as the ASOSAI-SECRETARIAT under the Societies Registration Act, 1860. This exemption would be allowed for ten previous years corresponding to the assessment years beginning from 1st April 2001 and ending on 31st March 2011.

49. Exemption under Section 10 (23BBE) on income earned by the IRDA

    Income earned by the Insurance Regulatory and Development Authority (IRDA) would be exempted from tax.

50. Exemption under Section 10 (23BBG) on income earned by CERC

    The exemption is allowed on the income earned by the Central Electricity Regulatory Commission (CERC) which has been established under Section 76 (1) of the Electricity Act, 2003.

51. Exemption under Section 10 (23BBH) on income earned by Prasar Bharati

    Tax exemption is granted on the income earned by Prasar Bharati (Broadcasting Corporation of India) which has been constituted under Section 3 (1) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990.

52. Exemption under Section 10 (23C) on income earned from specified funds

    The exemption is allowed under this Section for income earned from different types of funds. Each type of income is segregated into sub-sections. These sub-sections and their exemptions are as follows –

    • Section 10(23C)(i) – income earned on behalf of the Prime Minister’s National Relief Fund
    • Section 10(23C)(ii) – income earned on behalf of the Prime Minister’s Fund (Promotion of Folk Art)
    • Section 10(23C)(iii) – income earned on behalf of Prime Minister’s Aid to Students Fund
    • Section 10(23C)(iiia) – income earned on behalf of National Foundation for Communal Harmony
    • Section 10(23C)(iiiaa) – income earned on behalf of the Swachh Bharat Kosh which has been established by the Central Government
    • Section 10(23C)(iiiaaa) – income earned on behalf of the Clean Ganga Fund which has been established by the Central Government
    • Section 10(23C)(iiiaaa) – income earned on behalf of the Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund set up for a State or Union Territory
    • Section 10(23C)(iiiab) – income earned by a non-profit university or educational institute which has been established only for the purpose of imparting education and which has been wholly or majorly financed by the Government
    • Section 10(23C)(iiiac) – income earned by a hospital or any other institution which has been established for treating individuals who are ill, treating individuals who have a mental illness, receiving and treating individuals during convalescence or for providing medical assistance and rehabilitation. The hospital or institution should be established only for charitable purposes and not for profit and it should be wholly or majorly financed by the Government.
    • Section 10(23C)(iiiad) – income earned by a non-profit university or educational institute which has been established only for the purpose of imparting education and whose annual receipts do not exceed a specified amount
    • Section 10(23C)(iiiae) – income earned by a hospital or any other institution which has been established for treating individuals who are ill, treating individuals who have a mental illness, receiving and treating individuals during convalescence or for providing medical assistance and rehabilitation. This income would be exempted if the annual receipts of the hospital or institution do not exceed a specified limit
    • Section 10(23C)(iv) – income earned by a charitable fund or institution which has been approved by a specified authority would be exempted from tax. The fund should be established for charitable purposes and its importance should be throughout a State, multiple States or the whole country.
    • Section 10(23C)(v) – income earned by a trust or institution which has been established solely for religious and charitable purposes would be exempted from tax. The trust or the institution should be approved by a specified authority in the context of how the affairs of the trust or institution would be managed and supervised so that the income earned should be used solely for the purpose for which the trust or institution was established.
    • Section 10(23C)(vi) – income earned by a non-profit university or educational institute which has been established only for the purpose of imparting education and approved by a specified authority would be exempted from tax. However, under this section, universities and educational institutions mentioned under sub-clauses (iiiab) and (iiiad) would be excluded.
    • Section 10(23C)(via) – income earned by a hospital or any other institution which has been established for treating individuals who are ill, treating individuals who have a mental illness, receiving and treating individuals during convalescence or for providing medical assistance and rehabilitation would be exempted from tax if they have been approved by a specified authority. However, under this section, hospitals and other institutions mentioned under sub-clauses (iiiac) and (iiiae) would be excluded

    To claim exemption from tax under Sections 10 (23C)(iv),(v), (vi) and (via), the following conditions would have to be fulfilled –

    • For claiming exemption under Sections 10 (23C)(iv) and (v) an application should be made in Form 56. For claiming exemption under Sections 10 (23C)(vi) and (via), an application under Form 56D would have to be filed with the Commissioners of Income Tax (Exemptions)
    • The documents or information required by the Commissioners of Income Tax (Exemptions) should be provided by the hospital or educational institution. These documents are needed to ensure the authenticity of the activities done by the specified institutions and also to ensure that the institutions followed all the requirements of the law for achieving their objective.
    • The income should be used or accumulated by the specified institutions solely for the purpose for which they were established. If more than 15% of the income is accumulated on or after 1st April 2002, the accumulation should not exceed five years
    • The fund of the specified institutions should not be invested in any other form or mode except the ones specified under Section 11(5). However, this rule has the following exceptions –
    • Assets which form a part of the corpus of the fund of the specified institution as on 1st June 1973
    • Equity shares held by the specified institutions when such shares form a part of the corpus of the fund as on 1st June 1998
    • Debentures of a company bought by the specified institutions before 1st March 1983
    • Any accretion of shares earned through bonus shares and if such shares form part of the corpus of the fund of the specified institutions
    • Any voluntary contribution received and maintained in the form of furniture, jewellery or any other item which is specified by the Board by notification in the Official Gazette

    Moreover, the exemption should be allowed to the specified institutions with respect to a voluntary contribution (except the contribution made in cash or kind specified under the above-mentioned clauses). However, to claim this exemption, the association should not hold the contribution in any other form or mode except the ones mentioned under Section 11(5) after the completion of one year from the end of the previous year in which the asset was acquired. Furthermore, the exemption would not be allowed to the specified institutions for any income which is profits and gains of business. However, if the business is incidental for the association to fulfil its objectives and separate books of accounts are maintained by the institutions in respect of such business, the profits and gains from such business would be allowed as an exemption. To claim an exemption under Sections 10(23C)(iv) and (v), the specified institutions should disinvest the investments made before 1st April 1989 by 30th March 1993. This disinvestment should be made in any form except those mentioned under Section 11(5). If the taxable income of the specified institutions, before availing exemptions, exceeds the limit of exemption, the books of accounts should be audited in Form 10BB and the audit report should be submitted along with the return of income. If the specified institutions are eligible to claim deductions under any sub-sections of Section 10 (23C), they would not be allowed to claim an exemption under any other provisions of Section 10.

    For claiming exemption under Section 10 (23C), the income of the specified institutions would be considered without allowing any deduction or allowance for depreciation or any other expense on an asset whose acquisition has been claimed as an income application under this clause either in the same financial year or in any other financial years. Donations were given by the specified institutions mentioned under Sections 10 (23C)(iv),(v), (vi) and (via) to another specific institution mentioned under Sections 10 (23C)(iv),(v), (vi) and (via) would not be treated as income application if the donation has been given with specific instructions that it would form a part of the corpus of the fund of the specific institution.

53. Exemption under Section 10 (23D) on income earned from a mutual fund

    Income earned by a mutual fund would be exempted from tax provided that the provisions specified under Sections 115R to 115T are fulfilled and the mutual fund fulfils the following conditions –

    • It is registered under the Securities and Exchange Board of India Act, 1992 or any other regulation made under the Act
    • It is established by a public financial institution, public sector bank or authorized by the RBI and fulfils the conditions specified by the Central Government through a notification in the Official Gazette.
54. Exemption under Section 10 (23DA) on income earned from securitisation by a securitisation trust

    Income earned by a securitisation trust from the activity of securitisation would be exempted from tax.

55. Exemption under Section 10 (23EA) on income earned by Investor Protection Fund

    Income earned by a notified Investor Protection Fund which has been established by recognized stock exchanges of India would be exempted from tax provided the income is earned through contributions received from recognized stock exchanges and their members. However, if any amount which is to be credited to the investor protection fund and which is not taxed in any previous year is shared partially or completely with any stock exchange, the shared amount would be considered to be a taxable income of the fund in the year in which the amount is shared.

56. Exemption under Section 10 (23EB) on income earned by Credit Guarantee Fund Trust for Small Industries

    Income earned by the Credit Guarantee Fund Trust for Small Industries or five previous years corresponding to assessment years between 1st April 2002 and 31st March 2007 would be exempted from tax. The Credit Guarantee Fund Trust for Small Industries should be created by the Government and the Small Industries Development Bank of India under the provisions of Section 3(1) of the Small Industries Development Bank of India Act, 1989.

57. Exemption under Section 10 (23EC) on the income of investor protection fund created by commodity exchanges

    The exemption is allowed on income earned by a notified Investor Protection Fund which has been established by recognized commodity exchanges of India jointly or independently as notified by the Central Government in the Official Gazette. The income would be exempted from tax provided the income is earned through contributions received from recognized commodity exchanges and their members. However, if any amount which is to be credited to the investor protection fund and which is not taxed in any previous year is shared partially or completely with any commodity exchange, the shared amount would be considered to be a taxable income of the fund in the year in which the amount is shared.

58. Exemption under Section 10 (23ED) on the income of investor protection fund created by depositories

    The exemption is allowed on income earned by a notified Investor Protection Fund which has been established by a depository through the regulations notified by the Central Government in the Official Gazette. The income would be exempted from tax provided the income is earned through contributions received from the depository. However, if any amount which is to be credited to the investor protection fund and which is not taxed in any previous year is shared partially or completely with the depository, the shared amount would be considered to be a taxable income of the fund in the year in which the amount is shared.

59. Exemption under Section 10 (23EE) on income earned by Core Settlement Guarantee Fund

    The exemption is allowed on specified income earned by a Core Settlement Guarantee Fund which has been established by a recognized clearing corporation in compliance with the regulations notified by the Central Government in the Official Gazette. However, if any amount which is to be credited to the Core Settlement Guarantee Fund and which is not taxed in any previous year is shared partially or completely with the specified person, the shared amount would be considered to be a taxable income of the fund in the year in which the amount is shared. For claiming exemption, ‘specified income’ would include the following –

    • Income received from specified persons
    • Income through penalties imposed by the recognized clearing corporation and credited to the Core Settlement Guarantee Fund
    • Income earned from investments made by the fund

    Similarly, for the purpose of the exemption, ‘specified person’ would include the following –

    • A recognized clearing corporation which has established the Fund and maintains it
    • A recognized stock exchange which is a shareholder of the recognized clearing corporation or which contributes to the Fund
    • Any clearing member who contributes to the Fund
60. Exemption under Section 10 (23F) on income earned by venture capital fund

    If a venture capital fund or a venture capital company invests in equity shares of a venture capital undertaking, the dividend income or long term capital gains earned by such venture capital fund or company would be exempted from tax. To claim exemption, the venture capital fund or company should be approved by prescribed authorities according to the rules specified and it should also fulfil the specified conditions. The exemption would, however, not be available for investments made by the fund or company after 31st March 1999.

61. Exemption under Section 10 (23FA) ) on income earned by venture capital fund

    If a venture capital fund or a venture capital company invests in equity shares of a venture capital undertaking, the dividend income (except dividend income under Section 115O) or long term capital gains earned by such venture capital fund or company would be exempted from tax. To claim exemption, the venture capital fund or company should make an application to the Central Government as per the rules specified and get approval on the same. It should also fulfil the specified conditions. The approval from the Central Government would be applicable for up to three assessment years at one time. The exemption would, however, not be available for investments made by the fund or company after 31st March 2000.

62. Exemption under Section 10 (23FB) on income earned by venture capital fund

    Income earned by a venture capital fund or a venture capital company from investments in a venture capital undertaking would be exempted from tax. However, if the income of the venture capital fund or company is an investment fund as mentioned in Explanation 1 to Section 115UB (a) for the assessment year on or after 1st April 2016, the exemption would not be allowed.

63. Exemption under Section 10 (23FBA) on income earned by an investment fund

    Income earned by an investment fund, except those charged under the head ‘Income from business or profession’, would be exempted from tax.

64. Exemption under Section 10 (23FBB) on income earned by a unitholder of an investment fund

    As per Section 115UB, income earned by a unitholder of an investment fund would be exempted from tax provided that the income is that portion of the income which is chargeable to tax under the head ‘Income from business or profession’

65. Exemption under Section 10 (23FC) on income earned by a business trust

    The following types of incomes earned by a business trust would be exempted from tax –

    • Interest received or receivable from a special purpose vehicle
    • Dividend specified under Section 115O (7)

    A ‘special purpose vehicle’ means an Indian company wherein the business trust holds controlling interests in the company as well as a specific portion of shareholding or interest as specified in the regulations under which the business trust has been registered.

66. Exemption under Section 10 (23FCA) on the income of a real estate investment trust

    A business trust which is a real estate investment trust can earn an exemption on the income earned by it through renting, letting out or leasing real estate property which the business trust owns. 

67. Exemption under Section 10 (23FD) on income received by the unitholder of a business trust

    Distributed income, as per Section 115UA, which is earned by a unitholder from the business trust, is exempted from tax. However, the income should not be the portion of income which is referred in sub-clause (a) of clause 23FC or 23FCA

68. Exemption under Section 10 (24) on income earned by trade unions

    The exemption is allowed for a trade union, under the meaning of Trade Unions Act, 1926 which has been formed mainly for regulating the relationship between employers and workers or between workmen, or an association of unions referred under sub-clause (a). The exemption is allowed on income earned under the head of ‘Income from house property’ and ‘Income from other sources’.

69. Exemption under Section 10 (25) on income earned by Provident Fund

    The exemption is allowed on the income earned in the following cases –

    • Interest income on securities held or owned by a provident fund or under the Provident Funds Act, 1925. Capital gains earned on transfer of such securities would also be allowed as an exemption
    • Income received by trustees on behalf of a recognized pension fund, superannuation fund or gratuity fund
    • Income received by the Board of Trustees on Deposit-linked Insurance Fund established under Section 3G of the Coal Mines Provident Funds and Miscellaneous Provisions Act, 1948
    • Income received by the Board of Trustees on Deposit-linked Insurance Fund established under Section 6C of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
70. Exemption under Section 10 (25A) on income earned by ESIF

    Income earned by the Employees’ State Insurance Fund (ESIF) constituted under the provisions of the Employees’ State Insurance Act, 1948 would be exempted from tax.

71. Exemption under Section 10 (26) on income earned by a member of the Scheduled Tribe 

    The exemption is allowed on the income earned by a member of the Scheduled Tribe, as specified under Clause (25) of Article 366 of the Constitution if any of the following conditions are fulfilled –

    • The member lives in an area which is specified in Part I and II of the Table which is appended to para 20 of the Sixth Schedule to the Constitution 
    • The member lives in Arunachal Pradesh, Mizoram, Nagaland, Manipur or Tripura
    • The member lives in an area covered under notification numbered TAD/R/35/50/109 issued on 23rd February 1951 by the Governor of Assam under the proviso to sub-para (3) of paragraph 20 as appearing immediately before the commencement of North-Eastern Areas (Reorganisation) Act, 1971
    • The member lives in Ladakh 

    The exempted income would include income earned from any source in any of the aforementioned areas as well as dividend or interest earned on securities.

72. Exemption under Section 10 (26A) on income earned from Ladakh

    Income earned by a person from any source in Ladakh or from outside India in any assessment year before 1st April 1989 would be exempted from tax if the person is the resident of the district from where the income has been earned.

73. Exemption under Section 10 (26AAA) on income earned by a Sikkimese

    Sikkimese individuals can claim an exemption on income earned from any source in Sikkim as well as on income earned through dividends or interest on securities held by them. However, if a Sikkimese woman marries a non-Sikkimese man on or after 1st April 2008, the exemption would not be allowed.

74. Exemption under Section 10 (26AAB) on income earned by an agricultural produce market committee

    An agricultural produce marketing committee or a board constituted for regulating the agricultural produce market would be allowed on their income.

75. Exemption under Section 10 (26B) on income earned by an organisation promoting SC/ST

    The exemption would be allowed on income earned by a corporation set up by the Provincial, State or Central Act or by a body, association or institution financed by the Government provided that such organisation has been established for promoting the interest of the members of Scheduled Castes, Scheduled Tribe or backward classes. 

76. Exemption under Section 10 (26BB) on income earned by an organisation promoting minority communities

    A corporation which has been established by the Central or State Government for promoting the interests of minority communities would be allowed exemption on its income.

77. Exemption under Section 10 (26BBB) on income earned by a corporation engaged in uplifting ex-servicemen

    A corporation which has been established by the Central or State Government for welfare and economic uplifting of ex-servicemen would be allowed exemption on its income.

78. Exemption under Section 10 (27) on the income of a co-operative society for SC/ST or both

    A co-operative society which is established for promoting the interests of members of Scheduled Castes, Scheduled Tribes or both can enjoy exemption on its income.

79. Exemption under Section 10 (29) on income earned by specified Boards

    Income earned by the following Boards would be allowed as an exemption –

    • The Coffee Board which has been established under section 4 of the Coffee Act, 1942 in any assessment year beginning on or after the 1st April 1962 or in the previous year in which the Board was established, whichever is later
    • The Rubber Board which has been established under Section 4(1) of the Rubber Board Act, 1947 in any assessment year beginning on or after the 1st April 1962 or in the previous year in which the Board was established, whichever is later
    • The Tea Board which has been established under Section 4 of the Tea Act, 1953 in any assessment year beginning on or after the 1st April 1962 or in the previous year in which the Board was established, whichever is later
    • The Tobacco Board which has been established under the Tobacco Board Act, 1975 in any assessment year beginning on or after the 1st April 1975 or in the previous year in which the Board was established, whichever is later
    • The Marine Products Export Development Authority which has been established under Section 4 of the Marine Products Export Development Authority Act, 1972 in any assessment year beginning on or after the 1st April 1972 or in the previous year in which the Board was established, whichever is later
    • The Agricultural and Processed Food Products Export Development Authority which has been established under Section 4 of the Agricultural and Processed Food Products Export Development Act, 1985 in any assessment year beginning on or after the 1st April 1985 or in the previous year in which the Board was established, whichever is later
    • The Spices Board which has been established under Section 3(1) of the Spices Board Act, 1986 in any assessment year beginning on or after the 1st April 1986 or in the previous year in which the Board was established, whichever is later
    • The Coir Board which has been established under Section 4 of the Coir Industries Act, 1953
80. Exemption under Section 10 (30) on income earned by an assessee engaged in the tea business

    If an assessee who grows or manufactures tea in India, receives a subsidy from or through the Tea Board, such subsidy would be exempted from tax provided it is allowed under any of the following schemes –

    • Scheme of replantation or replacement of tea bushes
    • Scheme of rejuvenation or consolidation of areas under tea production

    This subsidy should be notified by the Central Government in the Official Gazette for claiming exemption. Moreover, the assessee would have to provide the Assessing Officer with his income tax return and a certificate from the Tea Board certifying the amount of subsidy received during the previous year. The certificate should be submitted either with the income tax return or within the time allowed by the Assessing Officer for submission of the certificate.

81. Exemption under Section 10 (31) on income earned by an assessee engaged in rubber, coffee, cardamom or another commodity 

    If an assessee who grows or manufactures rubber, cardamom, coffee or any other commodity as notified by the Central Government through a notification in the Official Gazette, receives a subsidy from or through the concerned board, such subsidy would be exempted from tax provided it is allowed under any of the following schemes –

    • Scheme of replantation or replacement of plants
    • Scheme of rejuvenation or consolidation of areas under production

    This subsidy should be notified by the Central Government in the Official Gazette for claiming exemption. Moreover, the assessee would have to provide the Assessing Officer with his income tax return and a certificate from the concerned Board certifying the amount of subsidy received during the previous year. The certificate should be submitted either with the income tax return or within the time allowed by the Assessing Officer for submission of the certificate

82. Exemption under Section 10 (32) on the income of a minor clubbed with the income of an assessee

    Section 64 (1A) of the Income Tax Act, 1961 states the provisions for clubbing of income of a minor child with the income of the taxpaying parent. If, therefore, a taxpaying parent has clubbed the income of his/her minor child with his/her income, the parent can claim exemption on the income that has been clubbed. The exemption is allowed on the actual income clubbed per child or INR 1500/child, whichever is lower.

83. Exemption under Section 10 (33) on income earned on transfer of an asset of Unit Scheme

    If an income is earned when a capital asset, which is a unit of the Unit Scheme, 1964 as specified in Schedule I to the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002, the income would be exempted provided that the income is earned on or after 1st April 2002.

84. Exemption under Section 10 (34) on income from dividends 

    Income earned through dividends as specified under Section 115O would be exempted from tax. However, the exemption would not be allowed on is the dividend income is taxable under the provisions of Section 115BBDA.

85. Exemption under Section 10 (34A) on income earned from the share buyback

    If an assessee who is a shareholder earns an income when there is a buyback of shares which are not listed on any recognized stock exchange, the income earned would be exempted from tax. The company doing the buyback should be specified under Section 115QA of the Income Tax Act, 1961.

86. Exemption under Section 10 (35) on specified incomes

    The following incomes would be exempted from tax – 

    • Income earned on units of a mutual fund specified under Clause 23D
    • Income earned on units from the Administrator of specified undertakings
    • Income earned on units from a specified company

    However, the exemption would not be allowed on the transfer of a unit of the Administrator of the undertaking, company or mutual fund. Moreover, ‘Administrator’ would mean the Administrator as referred under Section 2(a) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002. ‘Specified company’ would refer to a company specified under Section 2(h) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002.

87. Exemption under Section 10 (35A) on distributed income from the securitisation trust

    Distributed income, as specified under Section 115TA, received from securitisation trust by an individual who is an investor in the sad trust would be exempted from tax. However, distributed income received on or after 1st June 2016, would not be allowed as an exemption.

88. Exemption under Section 10 (36) on capital gain earned from the transfer of equity shares

    Income, when an equity share of a company is transferred after being held for 12 months or more, would be exempted from tax. The share should be purchased on or after 1st March 2003 and before 31st March 2004 to be eligible for exemption.

89. Exemption under Section 10 (37) on income from transfer of agricultural land

    If an individual or a Hindu Undivided Family (HUF) earns a capital gain from the transfer of agricultural land, such gain would be exempted from tax. However, the following conditions would have to be fulfilled for claiming the exemption –

    • The land should be situated in an area which is referred to in items (a) or (b) of Section 2(14)(iii)
    • The land was being used for agricultural purposes for two years immediately before the transfer
    • The transfer is either due to compulsory acquisition under law or a transfer whose consideration is determined by the Central Government or the RBI
    •  The income has arisen due to compensation or consideration received on transfer of land on or after 1st April 2004
90. Exemption under Section 10 (37A) on income from transfer of specified capital asset

    Any capital gain earned by an individual or a Hindu Undivided Family (HUF) on the transfer of a specified capital asset owned by the individual or the HUF on 2nd June 2014 would be exempted from tax. The exemption would be allowed if the transfer is done under the Land Pooling Scheme specified under the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 2015 which have been established under the provisions of the Andhra Pradesh Capital Region Development Authority Act, 2014 (Andhra Pradesh Act 11 of 2014) as well as the rules, regulations and Schemes made under such Act.

91. Exemption under Section 10 (38) on capital gains from the transfer of equity

    The exemption is allowed on any income which is earned from the transfer of an equity share in a company, unit of an equity mutual fund or unit of a business trust provided the following conditions are satisfied –

    • The sale of the equity share or unit of a mutual fund is done on or after the date when Chapter VII of the Finance (No. 2) Act, 2004 came into force
    • The sale would be subject to securities transaction tax under Chapter VII

    The income earned by a company on long term capital gain should be considered when calculating the book profit of the company and tax payable under Section 115JB. Moreover, the exemption would not be allowed if the sale transaction is done on a recognized stock exchange which is located in an International Financial Services Centre and the consideration for which is paid or payable in a foreign currency. The exemption is also disallowed on long term capital gain earned from the transfer of an equity share in a company, unit of an equity mutual fund or unit of a business trust if the transaction is done on or after 1st April 2018.

92. Exemption under Section 10 (39) on income earned from an international sporting event in India

    Specified income earned by person or persons notified by the Government of India in the Official Gazette would be exempted from tax if the income is earned from an international sporting event which was hosted in India. The following conditions would have to be fulfilled for claiming the exemption –

    • The international sporting event is approved by the international body which regulates the international sport related to the event
    • More than two countries are participating in the event
    • The event is notified by the Central Government through a notification in the Official Gazette
93. Exemption under Section 10 (40) on income received by a subsidiary company engaged in power distribution

    If a subsidiary company receives an income through a grant or any other way from an Indian company which is its holding company and the holding company is in the business of power distribution, generation or transmission, such income is exempted from tax. The exemption is available if the income is received against the settlement of dues for reconnecting or reviving an existing business of power generation. Moreover, the exemption is available if reconstruction or revival of the power generation business is through the transfer of the business to the Indian company which has been notified under Section 80-IA (4)(v)(a).

94. Exemption under Section 10 (41) on income from transfer of a capital asset of a business in the power generation business

    If a company which is in the business of power distribution, generation or transmission, earns an income from the transfer of its capital asset to an Indian company which has been notified under Section 80-IA (4)(v)(a) and the transfer is done before 31st March 2006, the income would be exempted from tax.

95. Exemption under Section 10 (42) on income earned by specified non-profit bodies

    The exemption would be allowed to a body or authority on its income if the body or authority fulfils the below-mentioned conditions –

    • It has been established, appointed or constituted under an agreement or a treaty between the Central Government and two or more countries or through a convention which has been signed by the Central Government
    • It has been established, appointed or constituted not for making a profit
    • A notification has been made by the Central Government in the Official Gazette
96. Exemption under Section 10 (43) on income under the reverse mortgage scheme

    If an individual receives a loan, in a lump sum or in instalments, in a transaction of a reverse mortgage as mentioned in Section 47(xvi), the loan would be considered as an exempted income.

97. Exemption under Section 10 (44) on income received under the New Pension System Trust

    If an individual earns an income for or on behalf of the New Pension System Trust which has been established on 27th February 2008 under the provisions of the Indian Trusts Act, 1882, such an income would be exempted from tax.

98. Exemption under Section 10 (45) on allowance or perquisite paid to specified members of the UPSC

    Allowance or perquisite paid to the following members of the Union Public Service Commission would be exempted from tax–

    • Chairman 
    • Retired chairman
    • Existing members
    • Retired members 

    The allowance or prerequisite should be notified in the Official Gazette by the Central Government for becoming eligible for exemption under this Section.

99. Exemption under Section 10 (46) on income earned by specified bodies

    Under this Section, the exemption is allowed on the income earned by a Board, authority, body, Trust or Commission if such bodies fulfil the following conditions –

    • They have been set up under a Provincial, State or Central Act or have been established by the Central or State Government to regulate or administer any activity which is for the benefit of the public
    • They are not engaged in any type of commercial activity
    • The Central Government has made a notification in the Official Gazette for the exemption under this clause
100. Exemption under Section 10 (47) on the income of an infrastructure debt fund

     Any type of income earned by an infrastructure debt fund would be exempted from tax if the fund is established as per the prescribed guidelines and the Central Government has notified the income in the Official Gazette.

101. Exemption under Section 10 (48) on income received by a foreign company in India

     If a foreign company receives any income in India in Indian currency on the sale of crude oil or for any other goods or services rendered by the foreign company to any person in India, as notified by the Central Government, such income would be exempted from tax. However, to claim the exemption, the following conditions would have to be fulfilled –

     • The income received by the foreign company in India is pursuant to an agreement or arrangement entered into by the company with the Central Government or it has been approved by the Central Government
     • The agreement or arrangement with the foreign company is notified by the Central Government in the national interests
     • The foreign company has no other activity in India apart from receiving the income
102. Exemption under Section 10 (48A) on income earned by a foreign company on storing crude oil

     If a foreign company earns an income in India in Indian currency and such income arises due to stocking of crude oil in an Indian facility and subsequent sale of the crude oil to any Indian resident, the income earned would be exempted from tax. The exemption is allowed if the following conditions are satisfied – 

     • The storage and sale of crude oil by the foreign company in India is pursuant to an agreement or arrangement entered into by the company with the Central Government or it has been approved by the Central Government
     • The agreement or arrangement with the foreign company is notified by the Central Government in the national interests
103. Exemption under Section 10 (48A) on income earned by a foreign company on the sale of leftover crude oil

     Income earned by a foreign company in India would be exempted from tax if such income is earned by selling the leftover stock of crude oil from an Indian facility. Such sale should either be after the expiry of the agreement or arrangement that the foreign company had as per clause 48A or on termination of such agreement or arrangement. The exemption would be allowed subject to the conditions notified by the Central Government.

104. Exemption under Section 10 (49) on the income of NFHCL

     Income earned by the National Financial Holdings Company Limited would be exempted from tax provided that the company has been established by the Central Government in any assessment year starting from 1st April 2014.

105. Exemption under Section 10 (50) on income earned from specified services

     The exemption is allowed on any income which is earned from any specified service rendered on or after the date on which the provisions of Chapter VIII of the Finance Act, 2016 came into force. Moreover, the income should be chargeable to equalisation levy under the said Chapter.

     This is the complete list of exemptions which are available under Section 10. Use the relevant exemptions to calculate your net taxable income and reduce your tax liability.

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