Exempted Income

3 Exempted Income
CHAPTER

ny income that an individual acquires or earns during the course of a financial year
ALthat is deemed to be non taxable is referred to as 'Exempt Income. Income that is
non-taxable is called as exempt income. Under Section 10, there are different sub-sec
tions that define what kind of income is exempt from tax.
1. Income those are totallyexempt from tax.
2. Income those are partially exempt from tax.
TOTALLY EXEMPTED INCOME (Section- 10)
These ape the income which are neither included in total income nor income tax is pay
ableøn them.
yAgricultural income -Sec. 10(1): Agriculture income in India is fully exempted from
Incorpe tax.
,2sum received from the Hindu Undivided Family: Sec.10 (2): Any sum received by a
member of HUF out of the income of the family or out of the income of the impartible estate
belongingto the family is fully exempted.
of profit or income of apartner in a firm Sec.10 (2A): Share of profit or
3,Share
income of apartner in a firm is not taxable in the hands of a partner because firm is liable
to pay tas on its own income.
on notified securites or bonds received by non-residents Sec 10 (4) ():
hterest
Nalerest on specified securities or bonds, including premium on redemption of such bonds
is exempted in the hands of a non-resident
5. Interest to Non-Resident on Non-Resident (External) Account [Section 10(4)ü0))
Interest on Non-Resident (External) Account in any bank in India to a person who is a
resident outside India as per as defined insec. 2(w) of the Foreign Exchange Management
Act, 1999 or is a person who has been permitted by the Reserve Bank of Indiato maintain
the aforesaid Account

6. Interest paid to a person of Indian Origin and who is Non-Resident [Section To*
B) Interest on notified savings certificates issued before 1-6-2002 by the Central Governr
55
Exempted Income
ment to a non-resident, being acitizen of India or a person of Indian origin.
non-resi.
T.Interest on Rupee Denominated Bond [Sec. 10(4C)1:Interest payable to a
if following conditions are
dent, not being a company,or to a foreign company, is exempt
satisfied:
business trust. (b) SUch interest is
(a) Interest is payable by any Indian company or
India by way of issue of
payable in respect of monies borrowed from a source outside
during 17-09-2018 and 31-03.
rupee denominated bond. (c) Such bond has been issued
2019

8. Leave Travel Concession or Assistance (LTC/LTA) to an Indian Citizen Employee

[Section 10(5)]: The employee is entitled to exemption under section 10(5) in respect of
the value of travelconcession or assistance received by or due to him from hiS employer or
former employer for himself and his family, in connection with his proceeding-on leave to
any place in India. or to any place in India after retirement from service or after the termi
nation of his service.

9. Remuneration to Person who is not a Citizen of India in certain cases: Sec.10

(6):
1. Remuneration received by foreign diplomats and nationals. 2. Salary to non residents
employed on a foreign ship 3. Remuneration to a foreign trainee
10. Tax paid by Government or Indian concern on Income of a
Sec 10 (6A) (6B), 6(BB) and (6C): It is also exempted as per the
Foreign Company
under the above sections. çonditions laid down
11. Income from service
provided to National Technical Research
[Sec. 10(6D)]: Any income arising to a Organisation
non-resident
royalty from, or fees for technical services or to a foreign company, by way of
Technical Research Organisation rendered in or outside India to, the
National
12. Perquisites and
side IndiaSec.10 (7):allowances paid by
Any allowance or government to its employees serving out
to a citizen of India for perquisite paid
rendering services outside India outside India by the Government
13.Income of
employees foreign countries working in India
technical assistance
of
14. Income of a
programme. Sec.10 (8): Fully exempted under cooperative )
Consultant
him out of the funds made to [Section 10(3A)]: Any remuneration or fees
an international
grant agreement organisation under a received by
between the agency and the technical assistance
15. Income of
Employees of Consultant
government of the foreian state
accrues or arises to him it [Section 10(8B)]:
outside India, and is deemed to Any other
respect of which such consultant is income which
of the country of his or its origin. required to any income or accrue
or arise in
social tax to the India, in
16. Income of family
members of an employee government
56 serving under the
cooperative
 Exempted Income

technical assistance programmes Sec.10 (9): Fully exempted if the conditions men
tion in the section is satisfied.
cum Gratuity Sec. 10(10): (Explained under the head salaries)
(17.,boath
18. Commuted value of pension Sec 10(10A): Explained under the head salaries)
19. Leave encashment on retirement Sec.10 (10AA): (Explained under the head sala
ries)
20. Retrenchment compensation received by Workmen Sec.10 (10B): (Explained
underthe head salaries)
21. Payment received under Bhopal gas Leak disaster Sec.10 (10 BB): Compensa
tion reeived byvictims of Bhopalgas leak disaster is fully exempted.
Compensation received incase of any disaster [Section 10(10BC)J: Any amount
feceived from the Central Government or State Government or a Local Authority byan
individual or his legal heirs as compensation on account of any disaster is exempt from
tax.
VRS Compensa
23. Payment under Voluntary Retirement Scheme [Sec 10 (10 C)]:
head salaries)
tion is not eligible forSection 89(1)relief. (Explained under the
[Section 10(10CC)J: The
24. Tax on Non-monetary Perquisites paid by Employer non-monetary perquisite provided
income-tax actually paid by the employer himself on a
of the employee.
to the employee shall be exempt in the hands
Policy (Section 10(1OD)]: Any sum
25. Any sum received under a Life Insurance
sum allocated by way of bonus on
received under a life insurance policy, including the following sum received are not ex
However, the
such policy, is wholly exempt from tax.
empt under this section:
insurance policy.
1. Sum received under a key men
under an insurance policy issued after 31-03-2003 in respect of
2. Any sum received years during the term of the policy
premium payable for any of the
which the received arter
20% of the actual capital sum insured, But if the sum is
exceeds
insured, it shall be exempt. Now. this limit is reduced to 10%% In
the death of the
issued on or after 1st April, 2012.
the case of an insurance policy personsuffering
01.04.2013 on the life of a section
3. An insurance policy issued on or after specified under
section 80 U or disease exxceeds15%ofthe
with disability specified under
anyyear
80DDB, in respect of which the premium payablefor section
actual capital sum assured. under
intherules made
4. Suffering from disease or ailment as specified (1):
Sec.10
80DDB,. providentfund
appliesor
from
public|
26. Payment from the statutory provident fund or 1925,
Funds At, exempt
Provident F
Any payment from a provident fund to which the Governmentt is
Central
any other notified provident fund set up bythe
Exempted Income payment
SCHEME (Sec.10(11A)]-Any Rules 2014from
SAMRIDDHI Account
. Payraent from SUKANYA e with the Sukanya Samriddhi accumulated
an acgóunt, opened in accordance 10(12)]: The bal-
Provident Fund [Sec. recognised
28/Paymentfrom Recognised
an employee participatingin a
is exemp
provident
ance duánd becoming payable to Schedule
A ofthe Fourth
fundo the extent provided in rule 8 of Part sun
National Pension System Trust Sec.10(12A): 60% of the
.Payment fromthe exempt
received onclosure or opting outof the scheme is
under the
by an assessee from hiS account
SO.Section 10(12B): Partial withdrawal
25% of the amount contributed by
pension scheme mentionedin section 80CCD - up to
him.
[Section 10(13)]: Like Provident
. Payment from approved Superannuation Fund benefits tor the employee.
rund, Superannuation fund is also ascheme of retirement
These are funds, usualy established under trusts by an undertaking, for the purpose of
providingannuities, etc.,to the emplovees of the undertaking on their retirement at or after
a specitied age, or on their becomina incapacitated prior to such retirement, or for the
widows, children or dependents of the emplovees in case of the any employee's earlier
death.
32. House rent allowance Sec 10 (13A): (Explained under the head salaries)
33. Allowance given for meeting Business Expenditure to employees Sec.10 (14):
Any special allowance or benefit but not aperquisite (Sec 17) is specially granted to
meet
certain expenditure incurred during employment. In this case actual expenditure
will beéxempted on the fulfilment of certain conditions mentioned in this incurred
section.
34/Anterest on securities Sec 10 (15): Interest on certain securities is fully
Éxplained in Income from other sources) exempted.
35. Scholarships Sect 10 (16):
Scholarship given to meet the cost of education is fully
exempted.
38. Alowances givern to MPs, MLAs, and MLCs. Sec.
10 (17):
1. Daily allowance received by them is
fully exempted.
2. Any constituency
allowances received by amember of any state
anyact or rules made by the state
legislature are fully exempted. legislature under
3. Any allowance received by MP is fully exempt.
37Awards Instituted by Government Sec.10(17 A):Any
orkind instituted in the public award or
by the central Govt or state reward given in cash
interest
is appreved by the central government is fully Govt or any b0dy which
exempted.
38/Pension received by certain winners
orved by any individualwho has been in of f gallantry awards(Sec.10 (18) : Pension
service central or state
been awarded "Param Vira Chakra"'or "Maha Vira
Chakra" or"Vira government and has
Chakra" or such other
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 Exempted Income

gallantryaward notified by the central government is fully exempted. Family pension re

ceiveby the member of that individual is also exempted.
39/ Family pension received by family members of armed forces including para
hilitary forces (S(19): -Family pension received by widow or children of the a member of
armed forces (includingparamilitary forces), where the death of such member is hap
pened nthe course of operational duties is fully exempt from tax.
40/Palace of Ex-ruler [Sec. 10(19A)J: The annual value in respect of any one palace,
which is in the occupation of an ex-ruler
41. Income of a local authority Sec 10 (20): It is fully exempted on the basis of the
conditions mention in this section.
42. Jncomeof Scientific research associations (Sec 10(21): It is exempton satisfac
tion of the conditions given in this section.
43. Income of news agency Sec 10 (22B): Income of a notified news agency set up in
India solely collection and distribution of news is fully exempted on the fulfilment of certain
conditions.

44. Income of professional institutes Sec 10(23A): Any income (other than income from
house property, income received for rendering any specific service, or income by way of
interest or dividend on investments) of a professional institute is exempted if it satisfies
certain conditions mentioned in this section.

45.Income of regimental fund or non-public fund Sec 10(23AA): It is fully exenptèd.

48. Incomeof fund for welfare of employees or their dependents: Sec 10(23AAA):
Mt is exempted on the basis of conditions mentioned in this section.
47. Income of pension fund set up by LIC of india or other insurer under a pension
scheme to which contribution is made by the individual for receivingpension from such
fund approved by IRDA is exempted. Sec 10 (23AAB)
48. Income from khadior village industries Board Sec 10(23B): It is exempted on
fulfilment of the conditions mentioned in this section.
49. Income of khadi or village boards for the development of khadi or village
ndustries in the state Sec 10(23BB): Fully exempted.
50. Income of statutory bodies for the administration of the public charitable trusts
Sec 10(23BBA):): It is exempted on fulfilment of the conditions mentioned in this section.
51. Income of European Economic Community Sec10 (23BBB): It is exempted on
fulfilment of the conditions mentioned inthis section.
52. Income of SAARC fund for regional projects Sec 10(23BBC): It is exempted on
fulfilment of the conditions mentioned in this section.

53. Income of the secretariat of Asian organisation of 'Supreme Audit Institutions

Sec 10 (23BBD): Exempted.

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