INCOME EXEMPT FROM TAX (NON TAXABLE INCOME)

Exempted income is that income on which income tax is not chargeable. Exempted
incomes are not even included in total income. As per the provision of Section 10 of
the Act, following income shall not be included in computing the total income of the
previous year of an assessee. However, in order toclaim exemption under this
section, assessee has to prove that an item of receipt falls within exepted category
discussed us 10 of the Act.
Exempted incomes can be classi!ed in the following categories
A. "or all assessee
#. "or employees
$. "or institutions
(A) Exemption for all Assessees:
1. Agricultural Income[Sec.10(1)] %t is totally exempt from tax if it comes
within the de!nition of &agricultural income' as given in Section ()1A*.
However it is to be aggregated in case of certain assesses for the purpose of
determining the rate of tax on non+agricultural income.
2. Sums received from H.U.F. [Sec.10(2)] Any sum received by an individual
as a member of a H," out of income of the family is exempt from tax
. S!are of income of a "artner from t!e #rm [Sec.10(2)]A partner of a
!rm will be exempt from tax on his share of income in the !rm as per the
pro!t sharing ratio mentioned in the partnership deed.
$. %a&ment under '!o"al as lea( )isaster Act 1*+,[Sec.10(10'')]
Such payments received by a person will be exempt from tax but any
payment in this connection for which deduction has already been allowed will
not be exempted
,. -om"ensation for disaster[Sec.10(10'-)] Any amount received or
receivable from the $entral -overnment or State -overnment or a local
authority by an individual or his legal heir by way of compensation on
account of any disaster shall eb exempted
.. /ife Insurance 0one&[Sec.10(10))]Any sum received under a life
insurance policy including bonus shall be exempt
1. Interest etc. of di2erent t&"es[Sec.10(1,)] .he full exemption from tax
is allowed interest as Sec.10)1/*
+. Educational Scholership[Sec.10(16)]
*. Allowances of M.Ps, M..As ! M.."s.[Sec.10(1#)]
10. Awards$ An% pa%&ent &ade whether in cash or in 'ind[Sec.10(1#A)]
11. Pension of (allantr% awardees li'e Para& )ir "ha'ra or Maha*ir
"ha'ra or )ir cha'ra
12. +a&il% pension of a &e&,er of ar&ed forces [Sec.10(1-)]
1. Annual *alue of one palace of .ulers of /ndian States[Sec.10(1-A)]
1$. /nco&e of Scheduled 0ri,es residin( in the states of Arunachal
Pradesh, Manipur, Mi1ora&, 2a(aland, 0ripura ! Si''i& or adda'h re(ion of
the State 3.!4 are full% e5e&pt[Sec.10(66)]
1,. $ertain income of Si00imese as per Sec.10)(1AAA*
1.. Any income of an agricultural mar0et committee or board
2Sec.10)(1AA#*3
11. Subsidy from .ea #oard2Sec.10)40*3
1+. Subsidy received by planters 2Sec.10)41*3
1*. %ncome of 5inor $hild up to 6s. 1/00+ each 2Sec.10)4(*3
20. %ncome from units of ,nitsScheme,1718 2Sec.10)44*3
21. 7i*idend fro& do&estic co&pan% [Sec.10(89)]
22. /nco&e fro& :nits [Sec.10(8;)]
2. /nco&e fro& E<uit% Shares held for a period of 16 &onths [Sec.10(86)]
2$. "apital =ains on transfer of A(ricultural land [Sec.10(8#)]
2,. on( 0er& "apital =ains on transfer of an e<uit% share or a unit
[Sec.10(8>)]
2.. /nco&e fro& international sportin( e*ents [Sec.10(8-)]
21. %ncome from subsidiary company 2Sec.10)80*3
2+. Speci!ed %ncome of a body or authority 2Sec.10)8(*3
2*. Any amount received by an individual as a loan in a transaction of
reverse mortgage 2Sec.10)84*3
)(7A* + Allowances or per9uisite paid to the $hairman :r 5ember of
,;S$2Sec.10)8/*3
0. %ncome from newly established industrial underta0ing in free trade
<one, etc. 2Sec.10A3
1. %ncome from newly established ,nits in Special Economic =ones
2Sec.10AA3
(B) Exemption for Emplo!ees:
1. Allowance or ;er9uisite outside %ndia 2Sec.10)>*3
(. ?eave .ravel $oncession to an Employee 2Sec.10)/*3
4. @eath cum retirement gratuity 2Sec.10)10*3
8. $ommutation of pension 2Sec.10)10A*3
/. ?eave Salary or Encashment of Earned ?eave 2Sec.10)10AA*3
1. $ompensation on retrenchment2Sec.10)10#*3
>. $ompensation on voluntary retirement 2Sec.10)10$*3
A. .ax paid by Employer on the Balue of ;er9uisite 2Sec.10)10$$*3
7. ;ayment from Statutory ;rovident "und 2Sec.10)11*3
10. ;ayment from 6ecogni<ed ;rovident "und 2Sec.10)1(*3
11. ;ayment from Approved Superannuation fund 2Sec.10)14*3
1(. House 6ent Allowance 2Sec.10)14A*3
14. Special Allowance for meeting certain expenditure 2Sec.10)18*3
(C) Exemption for Instit"tion
1. %ncome of a local authority[Sec.10(20)]
(. %ncome of 6esearch Association[Sec.10(21)]
4. %ncome of Cews Agency[Sec.10(22')]
8. %ncome of ;rofessional %nstitute [Sec.10(2A)]
/. %ncome of 6egimental "und or Con+public "und [Sec.10(2AA)]
1. %ncome of a "und for Delfare of Employee or their dependants
[Sec.10(2AAA)]
>. %ncome of ;ension "und Set up by ?%$ of %ndia or other insurer
[Sec.10(2AA')]
A. %ncome of Ehadi F Billage %ndustries [Sec.10(2')]
7. %ncome of Ehadi F Billage #oard [Sec.10(2'')]
10.%ncome of statutory authority for the administration of ;ublic 6eligious or
$haritable .rusts [Sec.10(2''A)]
11.%ncome of European Economic $ommunity [Sec.10(2''')]
1(.%ncome of SAA6$ "und [Sec.10(2''-)]
14.Any income of the %nsurance 6egulatory and @evelopment Authority
[Sec.10(2''3)]
18. Any %ncome of the $entral Electricity 6egulatory $ommission
[Sec.10(2''4)]
1/. %ncome of Speci!ed $haritable "unds [Sec.10(2-)]
11. %ncome of 5utual "unds [Sec.10(2))]
1>.%ncome of %nvestor ;rotection "und from recogni<ed stoc0 exchange
[Sec.10(23A)]
1A. %ncome of %nvestor ;rotection "und from commodity exchange
[Sec.10(23-)]
17. %ncome of Benture $apital "und or Benture $apital $ompany )w.e.f A.G.(001+
0(* [Sec.10(2F')]
(0. %ncome of 6egistered .rade ,nions[Sec.10(2$)]
(1. %ncome of ;rovident "und, etc.[Sec.10(2,)]
((.%ncome of EmployeeHs State %nsurance "und [Sec.10(2,A)]
(4. %ncome of a body for promoting interest of Scheduled $aste or Scheduled
.ribes[Sec.10(2.')]
(8. %ncome of $orporation set up for the bene!t of 5inority
$ommunity[Sec.10(2.'')]
(/.%ncome of $orporation established by $entral govt. :r State -ovt.
[Sec.10(2.''')]
(1.)(1* %ncome of $o+operative Society formed for ;romoting the %nterests of S$
or S. [Sec.10(21)]
(>.)(>* %ncome of #oards ).he $oIee #oard, .he 6ubber #oard, .he .ea #oard,
.he .obacco #oard, etc. [Sec.10(2*A)]
(A.)(A* %ncome of Cew ;ension System .rust [Sec.10($$)]
)(AA*+ %ncome of a body or authority or #oard or .rust or $ommission
[Sec.10($.)]
)(A#*+ %ncome of %nfrastructure @ebt "und [Sec.10($1)]
(7.In#omes of Politi#al Parties $%i#% are exempt (&e#tion '(A)
$ertain incomes of political parties are exempt provided following conditions
are ful!lledJ
;olitical parties must be registered us (7A of the 6epresentation of the
;eople Act, 17/1.
;olitical parties must 0eep and maintain boo0s of account which
enables the Assessing :Kcer to properly deduce its income.
.he account of ;olitical parties should be audited by a $hartered
Accountant.
.reasurer of such ;olitical party or any other person authori<ed by a
;olitical party in this behalf must submit a report us (7$)4* :" .HE
6epresentation of the ;eople Act, 17/1.
%f voluntary contribution exceeds 6s (0000+ , such ;olitical parties
must 0eep and maintains a record of such contribution.
After ful!llment of these conditions, following incomes of ;olitical parties shall be
exempt from taxationJ
%ncome which is chargeable under the head L%ncome from house propertyH,
L%ncome from capital gainsH or
L%ncome from other sourcesH and
income from voluntary contribution from any person.
()* In#omes of a Ele#toral Tr"st (&e#tion '(B)
$ertain incomes from voluntary contributions received by a electoral trust
shall be exempt from taxation provided some conditions are ful!lled including
its continuance of functions in accordance with the rules made in this regard
by the $entral -overnment.
Note: Ele#toral tr"st means a trust so approved by the #oard in accordance with
the scheme made in this regard by the $entral -overnment. (&e#tion +(++AAA))