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Income that is exempt from Tax

Rupal Rautdesai

Introduction
Sections 10, 10A, 10AA, 10B, 10BA, 11, 12, 13 and 13A deals with income which does not form part of an assessees total income. Section 10 appends a list of income absolutely exempt from tax. Sections 10A, 10AA, 10B, 10BA, 11, 12, 13 and 13A deal with specific exemptions available to newly established industrial undertakings in free trade zones, charitable trust and political parties.

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Burden of Proof
The burden of proving that a particular item of income falls within section 10 is on the assessee.

Section 10
S. 10 (1) Agricultural income S.10 (2) Payments received from family income by a member of a HUF (as such income is chargeable to tax in the hands of HUF, and double taxation is to be avoided) Example X, has personal income of Rs.7,00,000 for the P.Y. 2011-12. He is also a member of HUF which has income of Rs.4,00,000, out of which he receives Rs.2,00,000 as his share. Rs.2,00,000 will be exempt in hands of X by virtue of Section 10(2). X shall pay tax only on his income of Rs.7,00,000

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S. 10(2A) Share of profit from a firm is exempt in the hand of partner (as the profit is taxable in the hands of firm) S. 10(4) Interest received by a non-resident from prescribed securities S.10(5) Leave travel concession provided by an employer to his Indian citizen employee

S. 10(6) - Remuneration received by foreign diplomats of all categories S.10 (6) (vi) - Salary received by a foreign citizen as an employee of a foreign enterprise provided his stay in India does not exceed 90 days S.10 (6) (viii) - Salary received by a non resident foreign citizen as a member of ships crew provided his stay in India does not exceed 90 days

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S.10 (6) (ix) - Remuneration received by an employee, being a foreign national, of a foreign government deputed in India for training in a Govt. establishment or public sector undertaking

S. 10(6A) Tax paid on behalf of foreign companies

Conditions:
1 2 3 The tax payer is a foreign company It has income by way of royalty or fees for technical service Such royalty is received from Central or State Govt. or Indian concern under an agreement made after March 31, 1976 but before June 1, 2002 Agreement is in accordance with industrial policy of the Indian Govt. or it is accepted by Central Govt. The payer of income pays tax liability of the foreign co. in respect of the above income

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Example X Ltd., a foreign company, provides technical services to B Ltd., an Indian Co. in accordance with an approved agreement. As per agreement X Ltd. annually gets Rs.80,000. Tax on Rs.80,000 (i.e. Rs.16000) is borne by B Ltd.

S.10(c) Income arising to notified foreign companies from services provided in or outside India in project connected with the security of India S.10(7) Foreign allowance granted by the Govt. of India to its employees posted abroad S.10(8) & (9) Remuneration received from a foreign Govt. by an individual who is in India in connection with any sponsored co-operative technical assistance programme with a foreign Govt. and the income of the family member of such employee

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S. 10(10) - Death cum Retirement gratuity S. 10(10A) Commuted value of Pension and any payment received by way of commutation of pension by an individual out of annuity plan of LIC or any other insurer from a fund set up by that corporation or insurer S.10(10AA) Leave Salary

S.10(10B) Retrenchment Compensation S.10(10BB) Compensation received by victims of Bhopal gas leak disaster S. 10(10BC) Compensation from Central or State Govt. or a local authority received by an individual or his legal heir on account of any disaster S. 10(10C) Compensation received from a public sector company at the time of voluntary retirement or separation

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S.10(10CC) - Tax on perquisite paid by employer S.10 (10D) Any sum (including bonus) on life insurance policy (not being a keyman insurance policy) S.10(11) - Any amount from Provident fund paid to retiring employee S.10(13A) - House Rent allowance subject to certain limits

S. 10 (14) - Special allowance granted to an employee (e.g. Travel/Transfer allowance, Conveyance Allowance, Dearness Allowance) S.10(16) Scholarship granted to meet the cost of education (not necessary that scholarship should be financed by Govt.) S. 10(17) - Daily allowances of MP or MLA (entire amount is exempt), and any other allowance subject to certain conditions

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S.10(17A) Rewards given by Central/State Govt. for literary, Scientific or artisitc work or attainment or for service for alleviating the distress of the poor, the weak and ailing, or for proficiency in sports and games or gallantry awards approved by Govt. S.10(18) Pension and family pension of gallantry award winners S.10(19) Family pension received by members of armed forces family

S.10(20) Income of local authorities S.10(20A) Any income of housing boards constituted in India for planning, development or improvement of cities, towns or villages S.10(21) Any income of an approved research association S.10 (22B) - Income of specified non-agencies (e.g. PTI for the A.Y. 1994-95 to 2011-12)

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S. 10(23A) - Any income (other than interest on securities, income from house property, income received for rendering any specific services and income by way of interest or dividends) of approved professional bodies. (e.g. professional institutions established in India for control, supervision, regulation or encouragement of profession of law, medicine, accountancy, engineering, architecture etc) S. 10(23AAA) - Income of fund established for welfare of employees (the purposes are notified by the Board, and the fund must be approved by Commissioner

S. 10(23AAB) Any Income of the pension fund set up by LIC or any other insurer approved by the Controller of Insurance or Insurance Regulatory and Development Authority S. 10 (23BBA) Income arising to any body or authority established, constituted or appointed under any enactment for the administration of public, religious or charitable trusts or endowments or societies for religious or charitable purposes

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S.10(23C) Income received by any person on behalf of specified national funds, approved public charitable institutions, educational institute and hospital (e.g. of National fund Prime Ministers National Relief Fund) S.10(23D) - Income of a Mutual fund set up by a public sector bank or public financial institution

S.10(24) Income by way of interest on securities, property income and income from other sources of a registered trade union or an association of registered trade unions S.10(25) Any income received by a person on behalf of statutory provident fund, recognized provident fund, approved superannuation fund, approved gratuity fund and approved coal-mines provident fund

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S.10(25A) Income of Employees State Insurance Fund S.10(26) Income of a member of Scheduled Tribe, residing in Nagaland, Manipur, Tripura, Arunachal Pradesh, Mizoram and Ladakh from any source arising by reason of his employment therein and income by way of dividend and interest on securities S.10(31) Subsidy received by planters

Special provisions in respect of newly established undertakings in free trade zone [S. 10A and 10AA] Undertaking must begin manufacture or production in free trade zone or electronic technology park or software technology park or SEZ within specified time limit Other conditions If the conditions are satisfied, the assessee can claim deduction from his total income for a period of 10 consecutive A.Y.

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S.10B Special provisions in respect of newly established 100% export-oriented undertakings S.10BA Special provisions in respect of profit from export of artistic hand-made wooden articles Section 11 How to claim exemption in respect of income from property held for charity

Section 13A Exemptions to political party Section 13B Exemption to electoral trust

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