Chapter 7

Exempted Incomnes
(Sec. 10]

Introduction.
Income can be classified into Three categories as per provisions of this Act
These rategornes are
Income forming part of Total Income and subject to Tax: --These
incomes are treated under section 14 to 80 of the Act
Income forming part of Total Income but entitled to Rebate or Relief
These incomes are qiven under section 86
Income Exempted from Tax-These incomes do not form part of total
income either fully or partially.
Section 10 of Income Tax Act has given a long list of incomes which are
totally exempt from tax and so these incomes are not included in the gross total
income of the assessee In other words, such incomes are totally Tax Free.
While calculating Total Income in any previous year of any person, any
income coming under the following clauses shall be exempted.
(1) Section 10(1}-Agricultural Income--tully exempted
(2) Section 10(2)- Any sum received by an individual as a member of a
Hindu Undivided Family (HU), either out of income of the family or
out of income of estate Belornging to the family is exempt from tax
Such receipts are not chargeable to tax in the hands of an individual
member even if tax is not paid or payable by the family on its tota!
income. Not apply. It is only if the assessee has received the sum ir
question by virtue of his position as a member of the undivided family to
which he claims to belong. that the application of section 14 (1) of the
1922 Act lcorresponding to section 10(2) of the 1961 Act) is
attractedMaharaj Kumar of Vizanagaram, In re (1934] 2 ITR
186 (All ); Vijayananda Galapati, Maharaj Kumar of
Vizianagarram v CIT, 9ITC73 (All).
Amount must be received in position as as member of HUFHf
aperson who is a member of a HUF receives an allowance not because
he is such a member but wholly apart from the position, the exemption
does
(3) Section 10(2A-Share of Income from a Partnership Firm. CBDT vide
circular 8/2014 clarify that the Partner's share of profit in the
partnership firm shall be always exempt under section 10(2A)

(84)
 Exempted Inc omes 83

The clarification has beern issued to rernove the dout that under
no circurnstances share of profit be taxed n the hands of its partner
ouen thOugh the partnership firrn payíng no tax on its profit on accourt
of clairming deduction or exernption
(4) Section 10(4}-Interest received by a Non-Resident frorn prescribed
securities

(5) Section 104B, Interest received by a person who is resident out sde
India on arnount credted in the Non ResidenttExternal) Account
(6) Section 10(5} -Leave Travel Concession provided by an enployer to
his Indian Citizen ernployee
In the case of an individual, the value of any travel concession or assistance
received by, or due to, hirm.
(a) from his employer for hinself and his farnily. in connection with his
proceeding on leave to any place in India.
(b) from his employer or former employer for himself and his farniy. in
connection with his proceeding to any place in India after retirernent
from service or after the termination of his servce, subject to such
conditions as may be prescribed (including conditions as to rumber of
journeys and the amount which shall be exempt per head) having regard
to the travel concession or assistance granted to the employees of the
Central Government:
Provided that the amount exempt under this clause shall in no case exceed
the amount of expenses actually incurred for the purpose of such travel
Finance Act 2021 provided further for the assessment year beginning on the
1 day of April, 2021, the value in lieu of any travel concession or assistance
received by, or due to, such individual shall also be exenpt under this clause subject
to the fulfilment of such conditions (including the condition of incurring such
expenditure within such period as may be prescribed
Explanation.-For the purposes of this clause. "family", in relation to an
individual, means
(1) the spouse and children of the individual; and
(iü) the parents. brothers and sisters of the individual or any ot
them, wholly or mainly dependent on the individual:
Other provisions to be kept in mind in this regard are as follows:
Where journey is performed by air: Amount of exemption will be lower
of amount of economy class air fare of the National Carrier by the shortest route
or actual amount spent.
Where journey is performed by rail. Amount of exemption will be lower
of amount of air- conditioned first class rail fare by the shortest route or actual
amount spent. The same rule willapply where journey is perfomed by any other
mode and the place of origin of journey and destination are connected by rai.
Where the place of origin and destination are not connected by
rail and journey is performed by any mode of transport other than
86
Prinuples of Taxation

by air:
The exemption willbe as follows
(a) If recognised public transport exists: Exemption
will be lower of first
amount spent
class or deluxe class fare by the shortest route or actual
Exemption will be lower of
(b) If no recognised public transport exists: route
amount of air- conditioned first class rail fare by the shortest
(considering as if joumey is performed by rail) or actual amount spent.
block
Block: Exemption is available for 2 journeys in a block of 4 years. The
was of
applicable for current period is calendar year 2014-17. The previous block
calendar year 2010-2013
assistance
Carry over: If an emplovee has not availed of travel concession or
years, then
in respect of one or two permitted journeys in a particular block of 4
In this situation,
he is entitled to carny over one journey to the next block.
exemption will be available for 3 journeys in the next block. However, to avail of
the first calendar
this benetit, exemption in respect of journey should be utilised in
year of the next block. In other words, in case of carry over, exemption is available
in respect of 3journeys in a block. provided exemption in respect of at least 1
journey is claimed in the first year of the next block.
Exemption is in respect of actual expenditure on fare, hence, if no journey is
performed, then no exemption is available
(7) Section 10(6) in the case of an individual who is not a citizen of India,
(i) Remuneration of officials of Foreign embassies, High
Commissions. Legations, Commissions, Consultants or Trade
Representatives
As per section 1O(6)(11), in case of an individual who is not
a citizen of India, remuneration received by him as an official
(by whatever name called) of an embassy, high Commission,
legation, Commission, consulate or trade representative of a
foreign State, or member of the staff of any of that official is
exempt from tax, if corresponding Indian official in that foreign
country enjoys asimilar exemption.
(vi) Remuneration of Employees of certain Foreign Enterprises.
As per section 10(6\vi), the remuneration received by a
foreign national as an employee of a foreign enterprise for
services rendered by him during his stay in India is exempt from
tax, provided the following conditions are fulfilled- (a) the
foreign enterprise is not engaged in any trade or business in
India : (b) his stay in India does not exceed in the aggregate a
period of 90 days in such year ; and (c) such remuneration is
not liable to be deducted from the income of the employer.
(vii) Salaries to non-residents employed on a foreign ship.
As per section 10(6(vii), any salaries received by or due
to a non-resident foreign national for services rendered in
connection with his employment on a foreign ship where his
 Exempted Incomes
87

total stay in India does not exceed in the aggregate a period of

90 days in the year Is exempt from tax
(xi) Remuneration to certain trainee foreigners
As per section 10(6/xi), the
remuneration received by a
foreign trainee as an employee of foreign Governmernt during
his stay in India in Connection with his training in any
pstablishment or office of,or in any undertaking owned by.
the Government ; or
ii any company ownmed by the Central Government, or any
State Government
any company which is a subsidiary of a company referred
to in item (ii) or
any corporation established by or under a Central State
or Provincial Act : or
V any co-operative society wholly financed by the Central
Government. or any State Government
(8 Section 10(6AFroreign Companies receiving approved royalty or
Fees for Technical Services
Tax paid by Central Government, State Government or an Indian
concern on behali of a toreign company deriving income by way of
roualty or fees for techical servnces in pursuance of an agreement
made after March 31, 1976 but before June 1, 2002 will be exempt
from tax in the hands of such foreign company provided such
agreement is in acCordance with the industrial policy of the Indian
Government or it is approved by the Central Government
(9) Section 10(6B)-Income Tax paid by Government or companies on
behalí of certain non-residents
Tax paid by Central Government, State Government or an Indian
concern on behali of a toreign company or non resident in respect of
any income (not being salary, royalty or fees for technical services) will
be exempt from tax in the hands of such foreign
company or non
resident if such income is received in pursuance of an
agreement
entered into before June 1, 2002 by the Central Government with the
Governmnent of foreign State or international organisation or any
other related agreement approved by the Central Government
(10) Section 10(6BB}-Incone Tax paid by an Indian Company engaged in
the business of operation of aircraft on behalf of Government of foreign
State or a foreign enterprises
lax paid by an Indian company. engaged in the business of
operation of aircraft, on behalf of foreign Govermment or foreigrn
enterprise deriving income by way of lease of aircraft or aircraft engine
will be exempt from tax in the hands of such foreign Government or
toreign enterprise if such lease rental is received under an agreement
which is approved by Central Government and entered during the
88 Principles of Taxation

period between 31 3 1997 to 1-4 1999, or after 31-3-2007

(11) Secthon 10(6C)- Income of all notified foreign company
services within or outside India in providing
Section 10(6C) grants exemption trom tax in respect of income
arising to notified foreign company by way of royalty or fees for
technical services received in pursuance of an agreement entered into
with that Government for providing services in or outside India in
projects connected with security of India.
(11A) Section 10(6D0-Royalty/Fees received by non-resident from National
Technical Research Organisation
As per section 10(6D), income arising to non-resident by way of
royalty or fees for technical services from services rendered to National
Technical Research Organization (NTRO) will be exempt from tax in
India
(12) Section 10(7)--Foreign Allowance granted by the Government of India
to its employees posted abroad.
(13) Section 10(8) &(9-Employees of Foreign Countries working in India
under Cooperative Technical Assistance Programme
As per section 10(8). remuneration received directly or indirectly
by an individual, from the foreign Government in connection with a co
operative technical assistance programme and projects in accordance
with an agreement entered into by the Central Government and such
foreign Government., is exempt from tax. Further, exemption is
available in respect of any other income of such an individual which
accrues or arises outside India and is not deemed to accrue or arise in
India, provided such individual is required to pay income-tax/ social
security tax to the foreign Government.
(14) Section 10(8A),. (8B) & (9) Remuneration / Fees received by non
resident consultants and their foreign employees
Under section 10(8A). (a) remuneration or fees received by a
consultant" directly or indirectly out of the funds made available to an
international organisation, under a technical assistance agreement
between such organisation and the Government of a foreign State and
(b) anyother income which accrues or arises to him outside India and is
not deemed to accrue or arise in India, in respect of which such
consultant is required to pay income-tax/social security tax to the
foreign Government of the country of his origin, is exempt from tax
'Consultant means any individual who is either not a citizen of India, or
being a citizen of India, is not ordinarily resident in India or any other
person who is a non resident and is engaged by the international
organization for rendering technical services in India in accordance with
an agreerment entered into by the Central Government and the said
international organization and the agreement relating to engagement ol
consultantis approved by the prescribed authority. Section 10(8B)
grants similar exemption to the employee of the above discussed
 Exempted lncomes 89

consultant, if such employee is either not a citizen of India ot berg a

citizen of India, is not ordinarily resident in India and the contract of hs
service is approved by prescribed authority before the commercernert
of his service
Note: The provisions of sections 10(8A) and (8B) shail not be
b
anplicable with effect from Assessment Year 2023 24 (Amendrnent
the Finance Act, 2022]
famuly of
As per section 1O(9), the income of any mermnber of the
1018)/(8A)/18B
any such individual as is referred to in section
India ard s
accompanying him to India, which accrues or arises outside
respect of which such
not deemed to accrue or arise in India, in
security tax to the
member is required to pay any income or social
mernber
Government of that toreign State or country of ornig1n of such
exempt from tax
as the case may be, is
appibcable with
Note: The provisions of section 10(9) shall not be
(Amendment by the Finance
offect from Assessrnent Year 2023-24
Act, 2022]
Retirement Gratuty Gratutyis a
(15) Section 10(10)-Death cum time of cessation of
retirement benefit. It is generally payable at the
service Tax treatment of
emploument and on the basis of duration of
Gratuity is given below:
Status if employee Whether Gratuity is taxable
Government employee It is fully exempt from tax u/s 1010X)
Non-Government employee It is fully or partialy exempt trom tax
cOvered by the Payment of u/s10(10\i)
Gratuity Act, 1972.
Non-Government employee not It is fully or partially exempt irom tax
covered by the Pay1ment of Wsl0(10Xu)
Gratuity Act, 1972
Exempt up to least of the following
15 days' salary (7 days salary in the case
Seasonal
of employees of
establishment) based on salary last drawn
15 days
For other employees : for each year of service (e
salary X Length of service)
Rs. 20,00,000
Actual Gratuity received
received
(16) Section 10(10A)--Commuted value of Pension
if it is received from the
(1) The full amount is exempted corporation
Government, a Local Authority or a Statutory
limit if any payment in
(2) It does not exceed the following any scheme trom any
Commutation of person receives under
 90
Priniples of Taxation

other employer
in case where the enployee rocoves nny

(ii)
Commuled value of 1/3 rd of Pensill
in any olher case the Comnutod
itatuity ho
pension
(17) Section 10(10AA) Amount received as leave
retirement:
(1) Central & State Government Employee
eicashment
any
as leave salaryin respect of the earned lcave payrrient
time of his retirement shall be fully exempt his crodit at
the
(2) Other employees any payinent received as the
cash
of the leave salary t his credit at the tine
of
shall be exempt up to least of the following four equivalent
superannuation
(3) Actual anournt received. arnounts
(4) Amount calculated at average salary of 10 months
(5) Cash equivalent to Leave Salary due at the tine of
(6) Notified Limit Rs 3.00,000 retirement
(18) Section 10(10OB) Retrenchment
compensation
Compensation received by a workman
paid to worktrer:
at the time of
exempt from tax to the extent of the lower of the following
(1) Amount calculated in accordance with the
retrenchnent
is

25Fb) of the Industrial Dispute Act, 1947; or provisions of Ser

(2) Such amount as notified by the
Government (i e. Rs 5,00,000
(3) The amount received
Section 10(10B) v. 10(10C) In Hindustan Photo
Welfare Centre (CITU) v. Government of India Film Workers'
298249 Taxman 204 (Mad.), it was held that |20170 79 taxmunn corn
monetary benefit given to
employees of company for special protection of employees
Compensation qualitying parameters laid down under sectionwould be in nature of
10(10B) Thus sane
would be exempted from tax.
(19) Section 10(10C) Payment on
Voluntary
public sector company, any other company, Retirement of employees of
Authority or Co operative Society, specificAuthorities of Govt., LOcal
university, IIT, notified
institution of management.
Exemption up to Rs.
5,00,000 is available, if few conditions are satisfied
Onr of the conditions is the
amount payable on
voluntary separation of the employees should notaccount
exceed
of voluntary retirerment or
(a) the amount equivalent to three
nonths salary for each
completed year of service, or
(b) salary at the time of retirement
multiplied by the balance
months of service lett before the date of his retirement on
superanrnuation.
 Exempted Incomes 91

Section 10(10D}Any sum received under Life Insurance Policy.

(20) such policy.
including thesum allocated by way of Bonus on
provisions of section 10(10D)
The table given below highlights the
Exemption not available.
Any sum received under section
SODD3)
insurarnce policä. Exemption not available.
2Kevman nothing
other policy (sum received on Exemption available,
3 Any person) chargeable to tax.
the death of a
(not being the case
4 Any other policy on the death of a available, nothing is
when sum
received Exemption
chargeable to tax.
person)
betore April 1, 2003. Exemption available only when annual
41Policy issued premium payable is not more that 20%
issued on or after Aprill,
42 Policy 1, 2012. of sum assured.
2003 but before April Exemption available only when annual
2012-13.
43 Policyissued during premium payable is not more than
10%
April 1,
A4 Policy issued on or after of sum assured.
2013.
Exemption available only when annual
more that
premium payable is not
10%/15% of sumassured.
received from
Note: w.e.f. Assessment Year 2021-22, any sum
exemption if such
Unit Linked Insurance Plan (ULIP) is not entitled for premium
ULIP is issued on or after the 01-02-2021 and the amount of
term of such policy
payable for any of the previous year during the person for more
exceeds 2,50.000. Further, if premium is payable by a
exemption under
than one ULIP, isSued on or after 01-02- 2021, the
ULIPs, where the
Section 10(10D) shall be available in respect to those
2,50,000 in any of
aggregate amount of premium does not exceed Rs.
those policies.
the previous year during the term of any of
amount received from
(21)&(22) Section 10(11)/(12) Exemption in respect of
recognised provident
public provident fund/statutory provident fund/
fund/un recognised provident fund.
of different provident
The tax treatment of various items in case
funds is as follows:
Statutory Provident Fund Employer's
is
Employer 's contribution Employer's Contribution to such fund
not treated as income of the employee.
Interest Interest credited to such fund is exempt in
thehands of the employee. (see note 4]
Amount received at the Lump sum amount received from such
service
time of termination fund. at the time of termination of
employees.
is exempt in the hands of
92
Principles of Taxation

Recognised Provident Fund

Employer 's Contribution Employer's contribution to such fund, up
to 12% of salary is not
treated asincome
of theemployee (see Note 1).
Interest
Interest credited to such fund up to 9.5%
per annum is exempt in the hands of the
employee, interest in excess of 9 5% is
charged to tax in the hands of the
employee. (see note 4]
Amount received at the If certain conditions are
time of termination satisfied, then
lump sum amount received from such
fund, at the time of termination of
service, is exempt in the hands of
employees. (see Note 2)
Un-recognised Provident Fund
Employer 's Contribution Employer's contribution to such
fund is
not treated as income of the employee.
Interest Interest credited to such fund is
the hands of the exempt in
Amount received at the (See note 3) employees. note 4]
[see
time of termination
Public Provident Fund
Employer's Contribution Employers do not contribute to such
fund.
Interest
Interest credited to such fund is
Amount received at the Lump sum exempt.
time of termination fund at the
amount received from such
time of termination of service
is exempt trom tax.
Notes:
1
Salary for this purpose will
allowance, if the terms of serviceinclude
so
basic salary. dearness
based on fixed provide and commission
employee. percentage of turnover
achieved by the
Accumulated balance from a recognised
will be exempt from taxpaid
in following cases: provident fund
(a) If the
employee has rendered a continuous
years or more. f the service of 5
accuinulated
arnount transferred from other balance includes
recognised
maintained by previous employer, then theprovident fund
which the employee period fcr
rendered service to
employer shall also be included in such previous
computing the
 txempted In omes 9

aforesad penod of 5 years

before the period
i) lf the service of employee is terminated discontinuatior, of
of 5 years, due to his ill health or beyond his
business of the employer or other reason
control.
takes employment with
(c) lf on retirement, the employee and payable to
any other employer and the balance dueaccount in any
him is transferred to his individual employer, then
recoqnised fund maintained by such other to tax
charged
theanount so transferred will not be
trom a recognised provident
Except above situations, payment
considering such fund as un
fund will be charged to tax tax
recognised from the beginning (See note 3 given below for
provident fund).
treatment ofun-recognised
time of termination) from un
Treatment of payment (at the
3. recognised provident fund:
include 4 things, viz.
Payment on termination will
contribution and interest thereto and employer's
employee's
the tax treatment of such
contribution and interest thereto.
payment is as follows:
chargeable to tax; interest
Employee's contribution is not
taxed under the head "Income
on employee contribution is
from other sources'
thereon are taxed as
Employer's contribution and interest can claim relief
employee
salary income, however, an payment.
under section 89 in respect of such accrued
exemption shall be available for the interest income
No
4
the recognized and statutory
during the previous year in relates to the contribution made
provident fund to the extent it
2,50,000 in the previous year.
by the employees over Rs.contributing to the fund but there is
However, if an employee is employer, then the interest
nocontribution to such fund by the shall be taxable to the
year
income accrued during the previous
contribution made by the employee to
extent it relates to the
in a financial year.
that fund in excess of Rs. 5.00,000
approved superannuation fund
(23) Section 10(13)-Payment from an
made
beneficiary: or
(G) to the leqal heirs on the death of a
commutation of an annuity on
(1) to an employee in lieu of or in
age or on his becoming
his retirement at or after a specified
incapacitated prior to such retirement; or
death of a beneficiary:
(ii) by wayof refundof contributions on the
or
an employee on his leaving
(iv) byway of refund of contributions to
 Priniple of Taxalion

the service in connedion with which the tund is establishod

otherwise than byretirement at or atter aspetied oqe or on
his becoming incapacitated prior to such retirement, to the
extent t which yuch, payrnent does not exood the
contributios modepror to the cornmencenent of his Act and
any interest thereon.
V) by way of transfer to the accOunt of ernployee under a pension
scheme reffered in section 80CCD and notified by the Central
Government
Approved superannuation fund neans superannuation
tund which is approved by the Cormnissioner of Income tax
Tax treatrnent of such fund is as followS:
Fmployer's contribution is exernpt from tax, however
Iron assessInent year 2010 1l employer's Contribution in
excess of Rs. 1.50,000 per annurm is charged to tax as
perquisite Employee'scontribution qualifies for deduction
under section 80C and interest on accurnulated balance is
not liable to tax.
Payrnents rmade from the fund are exernpt frorn tax under
section 10(13) in following cases:
Payrment on death of beneficiary:; or
Payrnent to ernployee in lieu of, or in
comnutation of
annuity on his retirernent at or after the an
on his becorning specified age or
incapable prior to such retirernent; or
Payrnent by way of refund of
of a
beneficiary; or contributions on the death
Paynent to employee by way of
Contributions on leaving the refund of his
which the fund is service in
connection with
at or after established otherwise
specified age or orn than by retirement
incapacitated prior to such retirement; or his becoming
Payrnenta to employee by way of
under pension transter to hisaccount
(24) Section 10(13A) House Rent schene reterred to in section 80CCD
Allowance
(a) Persons living in Rented TloUse
Allowance ( HRA)
is exempt up to thereceved by
Any arnount of
the employee form hisHouse Rent
least of thefollowing ermplover
actual Rent paid over 10%limits
() excess of :
(1) an amount equal to of Salary
50% of
acconmodation is
situated in
places, namely, Bornbay.
Salaryof where
any one such
the
(ii)
40% of Calcutta,
Salary in other towns; or fol owing
Delhi, Chennai and
actual arnount of House
Rent
(b) Person living in their own houses Allowance received.
or not
paying any rent but
 fxempted Inc omes

oetting HRA Full RA receved s taxable NO exettileiti

under this provision
5Ston
10(14) Any allowance given for meeting Business
tpenditure any such special allowance or benefit. not being in the
to meet expenses wholly.
nature ot a perquisite. specitically grantedperformance
necessarnly and exclusively incurred in the of the duties of
expenses
an office or employment of profit, tothe extent to which such
are actually incurredfor that purpose:
premium on redemption or
D Section 10(15) Income by way of interest. certificates, savings
other payment on such securities, bonds. annuity
Government and
cetificates, other certificates issued by the Central
notification in the Official
deposits as the Central Government may. by
conditions and limits as
Gazette. specity in this behalt. subject to such
specified in the notification:
into agreement with consortium of
Donal interestWhere assessee entered
on said loan
obtain loan for its tyre cord plant and payment of interest
banksto later assessee decided to disinvest tyre
exenmpted under section 10(15(iv)c) but
was penal interest, in view of
division and assessee had to pay certain amount as
Cord imposed as part of conditions of original loan
fact that said penal interest was Ltd. v.
itsself. same was exempt under section 10)15(ivc)-CEAT
agreement Taxman
Board of Direct Taxes, 2016] 68 taxmann.com 114/240
Central
147 Delhi).
to meet the cost of education. In
(27) Section 10(16EScholarships granted necessary that scholarship should
order to avail the exemption it is not
term cost of education' takes
be financed by the Government. The
other incidental expenses
within its ambit not only tuition fee but all
incurred for acquiring education.
M.L.A. /or M.L.C-anyincome
(28) Section 10(17-Allowance of M.P. /
by way of
of Parliament (MP)
() daily allowance received by any Membership
Committee thereof;
or of any State Legislature or of any
person by reason of his
(ii) any allowance received by any of Parliament
membership of Parliament under the Members
(Constituency Allowance) Rules, 1986:
received by any person by reason
(ii) any constituency allowance Legislature under any act or
of his membership of any state
rules made by the state legislature any payment
Government:
(29) Section 10(17A)-Award instituted by
made, whether in cash or in kind,
() under anyaward instituted in
the public interest by the Central
or instituted by any
Government or any State Government Government in this
the Central
other body and approved by
behalf shall be fully exempted; or
Central Government or any
() any other reward given by the
 Piniples of Laxation

State Govemment for such purposes as may be approved bu

the Central Govermment in this behall in the public interost
shall also be tullyexempted :
(30) Section 10(18) Paunent 1eceived by the winners of Vir Chakra etc
any income byway of
Pension received by an individual who has been in the service
of the Central or State Government and has been awarded
"Paran Vir Chakra' or "Maha Vir Chakra" or"Vir Chakra" or
such other qallantry award as the Central Government may
approved;
(1) Section 10(19) Family Pension received by family members of Armed
rorce Family pension received by the widow or children or nominated
heirs, as the case may be, of amember of the armed torces (including
Dara military forces) of the Union. where the death of such member has
OCCured in the course of operational duties, in such circumstances and
subject to such conditions, as may be
(32) Section 10(20} Income of a local prescribed;The
authority:
incomes in the hands of a local authority following types of
are exempt trom tax
(1) Income from house property.
(2) "Capital gains" or
(3) "Income from other
sources" or from a trade or
business
carried on by it which accrues or arises from the
commodity or service supply of a
(33) Section
10(21)-Any income of an approved Scientific Research
(34)
Association:
Section 10(22B)-Income of News
agency set up in India solely for Agency:- any income of such news
the Central collection and distribution of news as
Government
specity in this behalf: may, by notification in the Official Gazette.
(35) Section
income of10(23A)-Income
an
of some
Professionalin Institutions: - anu
association or institution established
obiect the control, India havino as its
prolession of law. supervision, regulation or
or such other medicine,as theaccountancy, encouragement of the
behalf. from time to time, by Central engineeringmay architecture
profession or
(36) Section 10(23AA) Income ofnotification inGover thenment
Official Gazetspecity in this
Any income received by any institutions established b te
non public fund established byperson on behalf any
by armed
the armed forces.
wellare of the past and present
members offorces oí theregimUnientonal for
fun or
dependernts is exempt trom tax such forces or the
(37) Section their
10(23AAA)-Income
employees or their
of a
Fund set up for
dependents any inCome the
behalf of afund established,. for such purposesreceived by
as any welfare of
Board in the Offcial Gazette, tor the
welfare of may be personby on
employees edor the
notifi
their
 Exempted Incomes 97

mernbers
dependants and of which fund such employees are also
of a Pension Fund set up by LIC %r other
Section 100(23AB) Income IRsurance
(3S)
Insurer any income of a fund set up by the Life
day of Auqust, 1996 or
Corporation of India (LIC) on or after the lst
pension scherne.
any other insurance under a
purpose of
() to which contribution is made by any person for the
fund:
receiving pension from such
and
(i) which is approved by the Insurance Regulatory
Development Authority Act, 1999
Institutions established for development of
(39) Section 10(23B)- -Income of income of an institution constituted
Khadi and Village Industries :- any Registration
the Societies
ac a public charitable trust or registered under
corresponding to that Act in
Act 1860(21 of l860), or under any law
solely for the development of
force in any part ot India, and existing for the purposes of profit. to
Lkhadi or village industries or both, and not of production.
attributable to the business
the extent such income is
of village industries:
sale, or marketing, of khadi or products Industries
Section 10(23BB) -Income of State Level Kahdi Village Khadi and
(40) (whether known as the
Board : any income of an authority name) established in aState bu
Village Industries Board or by any other the development of Khadi or
Act for
or under aState or Provincial
State.
Village Industries in the manage
of certain Authorities set up to
(411 Section 10(23BBA)-IncomeInstitutions (incuding maths, temples,
Religjous and Charitable agiaries)
qurdwaras, wakts, churches, synagogues,
Insurance Regulatory and Development
(42) Section 10(23BBE-Income of Insurance regulatory and Development
Authority - any income of the Insurance Regulatory and
Authority established under of the
Development Authority Act, 1999)
10(23C-Any Income received by a person on behalf of
(43) Section received by any person on behalf
of-
following Funds:-- any income
Relief Fund; or the Prime
the Prime Minister's National Emergency Situations
Minister'sCitizen Assistance and Relief in
Fund (PM CARES FUND)or
(Promotion of Folk Art); or
(i) the Prime Minister's Fund
Students Fund; (or)
(lii) the Prime Minister's Aid to
Communal Harmony; or
(ia) the National Foundation for
educational institution which is wholly
(iiab) any university or other Government; or
orsubstantially financed by the substarntially
which is wholly or
(iac) any hospital or other institution
financed bythe Government; or
Income of any university or other educational institution
(uiad) and not for purposes ol
existing solely for educational purposes
section 10(23CXiiad)if the
protit would be exempt under
98 Principles of Taxation

aggregate annual receipts of such university or

institutiorn do not exceed Rs. 1 Core.
Wef Assesment Year 2022 23, the Finarnce
has increased the limit of aggregate annual receipts
educatlonal
crore to Rs. 5 crore.
(iv) anyother fund or institution established for charitablo
which may be notied by the Central Government i
Official Gazette
purpose,the
(44) Section 10(23D) Income of Mutual Fund: any income of
() a Mutual Fund registered under the Securities and
Board of lndia Act, 1992 or regulations made there
(ti) such other Mutual Fund set up by under:
a public sector bank or
Fxchange
public financial institution or authorised by the
of India and subject to such Reserve Boul
conditions as the Central
Government may, by notification in the Official Gazette.
in this behalf] speity
(45) Section 10(23EA)-
(46) Section 10(23EB) Income of investor protection fund.
of
Income Credit Guarantee Funds Trust for
Industries.
(47) Section
Small
contributions10(23EC)-Income of Investor
from commodity exchange Protection Fund by way of
and the members
(48) Section thereof.
10(23FA)-Income
Gain of venture Capital Fundby/ way of Dividend or Long Term
Capital
of undertaking.
(49) Section
10(24}-Income
chargeable under the heads Registered Trade Unions: any inCome
()
(1)
"Income from house property and
The Trade Union "Income from other sources" of
must be a
Unions Act, 1926 formed registered union within the
between workmen and primarily tor the purpose of meaning of the Trade
(50) Section employers between workmen andregulating the relations
or
10(25}-ncome
of
income received by a Provident and
person on behalf
Statutory Provident Fund,
workmen:
of Superannuation
Fund :- Any
Recognized approved approved Gratuity Fund,
(51) Section Provided Fund and Approved coal mines
incomes 10(26}-Income
proviFund.
dent funds,
of the
exempted from tax
of Schedule
members Schedule
of
of Tribe SuperlivingannuationCertain
Tribes Members :
from any source in the those incomes which in tribal type of
area
dividendaccrue arise toareashim: are
(52) Section by way of or
or
10(32)-Income
case income of a minor
of Child
child is clubbed under interest
on
the parent can claim
exemption clubbed with the securitieS
section 64(1A):
Rs.5,000 whichever is less in upto actual income of of his
respect each minor child income 1n
is included of
child clu parent,
bbed or
whose incorme
 Iempted Ine omes

l0(33) Inc ome from transter of capital assets of Un

(53) Section
1034) Income by way of dividend from Indian1 conpany
(4) Sethon
10(34A) Ixemption of inc ometo ashareholder on tnyia krf
55) Setion
shares of unl1sted company
mutual funds
Sotionl0(35) Income from units of UTl and other
10(35A) Income from securitisation tnust
(57) Setion Equity
LR Sotion 10(36) Long term capital gains on transfer of listed
Share
10(37) Capital Gain on compulsory acquisition of urban
(50) Section
Agricultural Land
Where land was cultivated through labourers Assessee could be
exemption made section 10(37) even if agricultural land was not
cultivated
allowed
assessee himself but through hired labourer or other farmily mermber CITv
bv Somabhai Patel, [2014) 47 taxmann com 406/225 Taxrnan 158
Jasubhai
Gui
10(38)-Long Term Capital Gain on transfer of shares and
(60) Section Trarnsaction Tax (STT).
securities covered under Security
international
K1 Section 10(39}-Specified income arising from any
sportingevent in India.
a subsidiary from its
62 Section 10(40)-Certain grants etc. received by generation or
Indian holding company engaged in the business of
transmission or distribution of power.
of asset of an undertaking
(63) Section 10(41Hncome from transfer transmission or distribution of
engaged in the business ot generation,
power
certain bodies or authorities set up
(64) Section 10(42)-Specified income of
by two Countries.
transaction of Reverse Mortgage
(65) Section 10(43}-Income received in a
person on behalf of New
(66) Section 10(44)Income received by any
Pension System Trust.
perquisite to chairman or a
(67) Section 10(45) Specified allowance or member of UPSC.
retired Chairman or other mnember or retired
not engaged in
(68) Section 1046)Specified income' of notified entities
certain commercial activity.
'Infrastructure debt fund' and
(69) Section 10(47)-Income of notified such
on interest received by non residents from
concessional tax rate
fund
sale of Crude Oil
(70) Section 10(48) Income of a foreign company from
in India
(7)) Section 10(48A) -Income of Foreign company from storage and sale ot
crude oil stored as part of strategic reserves
Holdings Company
(72) Section 1049) Income of National Financial India (SUUTI) was
Limited The Specified Undertaking of Unit Trust of
100
Principles of laxation

Created vde the Unit Tnst of India (ranster of Undertaking a.

Repeal) Act, 2002 as the successor of Unit Tnust of India,
Irom lncome tax was available to SUUTI in respect of its income up to
3103 2014
Lxemptio
(73) Secton 10 (50) Any arising from any specitied service provided
income
on or after the date on which the provisions of Chapter VIll of
the
Ihance Act, 2016 comes into force and chargeable to equalization len
umder that Chapter
Exemption under Special Provisions-Sections 10A/10AA/1OB/10BA.
(A) Section 10A Special provision in respect of newly established
undertakings in free trade zone, etc. Deduction under section 10A is not available
Irom the assessment vear 2008-09.
(B) Section 10AA-
Special Economic Zones. Special provisions in respect of newly established Units in
Assessee's who are eliaible for exemption-Exemption is available to
all categories
of assessee's who
being a unit engaged derived any profits or gains from an undertaking
in the export of articles or things or providing any service
Such asseSsee should be an entrepreneur
referred to in Section 2j) of the Special
Economic Aone Act, 2005 ie. a person who has fbeen granted a letter
approval by the Department Commissioner under section 15(9).
of
The benetit in respect of newly
Available to all Assessees established Industrial Undertaking in SEZ is
on Export of Certain Articles or things or software.
Subject to the following Conditions:
() Begin its
07. production, etc. on or after 01-04-2005 relevant to AY 2006
(i) Should not be
formed by spliting up or
existence reconstruction of unit already in
(ii) Should not be
used. In certainfomed by transferring machinery or plant
machinery is allowed conditions as specified in the Act secondpreviously
hand
(iv) Report in Form
No.56F.
export tor the first
Tax
5 years holiday.-100% of the profits from the
from the
years and for further 5
Years 50% beginningto and 50% for next 5
Fconomic Zone Reinvestment subject creation of "Special
Allowance Reserve Account" and
fulfillment of conditions relating thereto
faling the
deemed incomewhich
wrongly utilised Reserve would be
of the Act and the Rules. as per theunutilized or
(vi) The computation of profits is as per
the provisions
" Export Turnover following formula:
. Profit irom the business of the
" Total Turnover of Undertaking.
undertaking X
(vi) Loss referred to in sub section (1) of
sub section (3) of Section 74,, in so far Sectioasn
72 or sub
such loss section (1) or
relates to the
 Iempted Ine omes 101

siness of the undertakirnq heing the Unit hall he allrsorl t

LAITied fonward oY et off
dedxtion shall be allowed under Section 80 or Sor tior ROtA
Sti) 80lo Section 80 IA or Secton 80IBin relation to the
profits and gains of the undertaking
No loss reterred to in sub section (1) of Section 72 or sub section (1) or
h setion (3) ot Section 74, in so far as such loss rolatos to the
isiDess of the undertaking. shall be carried foward or set off wtero
ech loss relates to any of the relevant assessrnent years [ending helore
the ist day of April. 2006)
In conputing the depreciation allowance under Section 32, the written
dun value of any asset used for the purposes of the business of the
ndertaking shall be computed as if the assessee had clairmed and beeri
actually allowed the deductiorn in respect of depreciation for each of the
relevant assessment year
The Market value of goods to be transferred to be as per market rate on
.he date of transter and as per arms length price as per the provisions
80-IA.
of sub section (8)and sub-section (10) of Section
The profits and gains derived from on site development of cornputer
software (including services for development of software) outside India
shall be deemed to be the profits and gains derived from the export of
computer software outside India.
the Act the Deduction is
i) Subiect to some conditions mentioned in Section 10A
available only for unexpired period if claim made under
demerger-The benefit under
(N) Provisions relating to amalgamation oramalgamating or the dermerged
ths section is not available to the amalgamation or the
company for the previous year in which the amalgarmated or the
demerger takes place: and it is available to the the the amalgamating
to
resulting company as it would have been available demerger had not
amalgamation or
or the demerged company if the
taken place.

Definitions
consideration in respect of export by the
(a) "export turnover' means the
or services received in, or brought
undertaking. being the Unit of articles or things freight, telecommunication charges
include
nto, india by the assessee but does not articles or things outside India or
attributable to the delivery of the
Ot insurance
exchange in rendering of services (ncludng
Openses. ii any. incurred in foreiqn
Computer software) outside India:
export in relation to the Special Economic Zones means taking
(b)
provid1ng services out of India from a Special Economic Zote b,lal.d
goods or otherwise,
Sea. air or by any other mode whether physical or
Assessing Officer should look into the following important
The
factual areas:
 Principles of Taxation
102

newly established units in SEZS and

This is applicable to production must
bequn nnanufacture or or articles in A. Y
200607 onwardshave
Ihe unit must not be tormed by splitting or re construction
ol an
alreadvexisting business and old machineries must not be used
The assessee must file auat report along with the Income tax return
The assessee must not be claiming deduction under Sections 80HH
SOHHA, S01, SOIA, 801Bwith respect to the same
The assessee must be allowed, even if not claimed,
undertaking,
Section 32. depreciation under
vi) The sale proceeds of the goods must b on
understated. market value and not
vii) l the unit/undertaking has already claimed benefit under Section 10A,
then under this section benefit is available only for unexpired period.
wii) The benetit is available for 6 vear
onwards only on creation of SEZ re
investment reserve account.
IX) I1 the amount credited to the
reserve account is not
expiry oft the specified period or utilized for some utilized betore the
will be treated as other purpose, then it
x)
deemed income.
The export turnover does not
charges or insurance attributable include freight, telecommunication
to the goods outside
expenses incurred in foreign exchange in rendering of India or any
India. services outside
xiv) The deduction is not
available on other income like interest etc.
(C) Section 10B.Special provisions in
hundred percent export-oriented respect of newly
established
* Deduction undertakings.
under section 10A is not
2012-13 available from the assessmnent year
(D) Section 10B.-Special provisions in respect of profit from export of
artistic hand-made wooden articles.
*
Deduction under section 10A is not
2010-11. available from the assessment year
$$$$*$$*