Exemp ted Incomes

~. I. Onsif1nt1on of Incomes
4.~ E"empt~d Incomes u/~ lO
·• ~ sJ'f'Cial Prov Is Ians In respei.·t of Newly Established Units in Sped~ Economic Zones
-1 • ..1.

(Sechon IOAA)

~ CLASSIFICATION OF INCOMES
lnc.: omes can be clussificd into three cu1egories as per provisions of [Link] Act. The,e categone~ arc·
I. Incomes forming part of total income and subject to tax
-These incomes ure trcutcd u/':l J4 to MO of the Acl ant.I hn\'C been explained in detail m Pan II
o l 1hu; boo~

ll. Incomes forming part of total income but entitled to rebate or relief
- ·n,c~e incomi.:s urc givl!n u/':l 86 UJ1d haw hcen [Link] m Part Ill o( thu, book.
m. Incomes exempted from tax
-These 111come..s cfo nol Jorm [Link] oJ total income ciU1cr fully or [Link]

{!;2:j EXEMPTED INCOMES U/S 10

[Link] IO ol lncomc-1ux At.:1 h.i!I g1ve11 u long list ol rncomcs which ure toutll) exempt from ta~
omJ so rhc_se llllt1ml!:; me 1101 111ch1<.ll-d III the grwrn tutul income of the ,ts,[Link]. [n other word, \U1.:h
,m.:nmcs ore 101olly tux-lrcc
In compu1ing rhe 101nl mcoml of any prcv1oun ycai ol uny person, 11ny income falling within ,rn>
ol Ihe fotlow111r. clnuscs t;hulJ lw exempted
1. Agriculture Income (Section 10(1)1
/ AgncuHurol income fwm Jnn<.J [Link] III [Link] Is hilly exempled.
 I.J 11 '-' • - &I i , jj \)ff I]

3. Share of Income from the Firm [Section 10(2A)l

,/" In case of a person being a partner of a finn, which is ~cp.11 ,11cly O!>SC ~cJ
total income of the finn shall be fulJy exempted.
The share of partner in the total income of the firm shall he i11 same pmportum
partnership deed .
. Rocidont fS.o c t1an_ 1.0/A\fil
 Inc om e Tax Law and Practice
( 171 J
of par ent s or an
1h,s pur pos e, 11 per son sha ll he cJcc,m:cJ to he of lncJiun origin if he or eith er
l·or
,1 or ,n und1v1cJccJ India.
of hJ;; smm Jpa rcn ts, was horn in lnd1 Indian Co mp an y or Bu sin ess Tru
st
den t by an
~n te re st pa yab le to a no n-r esi
(Section 10(4C)J -,ource out.5ide India by
wn Comr,uny or bus ,ncs s trui;t has bor row ed money from a
In cas e an lnu
n borrowed between 17- 9-2 018 to 31-
way ot w;uc ol rupee dcn om,narccJ hondr. and such money hac; bee ed from
uhle u nnn-rc,icJcn1 shall be exempted Money should not hav e been borrow
l-20 19 interc~, pay 10

a compnny or foreign [Link]. ital ass et referred t o in

a spe cif ied fund as a result of
nsfer of cap
tra
)!a Inc om e of
sec tio n 47(viiab) [Section 10(4D)J t (referred to in clause viiab or sec tion 47) on
a
fun d tran,fer:-. a c;ap,tal asse
In cns c u spe cifi ed ration
exc han ge and loca ted in ,my Interna tion al Financial Services Centre and conside
~cognisccJ "loc k rec eiv ed in respect
ablc in cov crti bJc fotc ign exc han ge, any income acc rue d or aisen is
,s p:u~ or pny
JI be cxcmpl
o/ unrts held by J non-rc,Jdcnl ~ha cts o
,:aJo r:ward__c on tra
 2J,- Gratuity [Section 10(10)]
/ ( i) Dealh-cum-retirement gratuitv-any such amount received by the employees working on Civil
or Defence !)erv1ces of Govt of India. or on any part of State Government or Local authority
covered under Revised Pens10n Rules of the Central Government shall be full:> exempted
(ii) Gralllil)' received under Poymem of Grat11ir1 Act-shnll be exempted upto an amount as
caJcuJated in accordance with the prov1siom, of such Act.
 .. ,... I fd
er cmp/mu,-ExemplrJ uplO lens1 ol the lnllow tng
p) ~,atutOl} [Link].11 t :?0.00,000
1.13

(II) 1/2 month''i uvcrnge suJury ror C\Cf'} one complcleJ year of service
,,,,) Ac1ual 1;mtu1I) rccc1vcd
\ "•rage S1lDr). Th~ D1rcc1 Tax Laws (Amendment) Act 1987 has rev1scu the defimuon ol
1£t' sa)llf) In futul'C' ;l\ernge salnry i~ to be calculated on the ba,1s or average of salary recct\'e<l
g\l'1P IO month:-. prccedmg [Link] month m which death or reltremcnt occur~

durt~t.111Jtory Limit. The prc,ent ceiling or ~ 20,00,000 is upphcable for whole ,erv1cc life of an
10,re \\'1th effect from a.s,C\sment year 1989-90 lhe monetary ceiling wiJI be 1,uch limjt as the
~!~ ao,emrnent ma) b) nouficntton m the Official Gazette specify in this behalf keeping in view
tht' lJmll applicable to Central Government employee~
Salary. The ,,ord '::,alary' here has the -.ame meaning a.~ assigned to it for provident fund purposes .
._,.. the Ba~ic Pay plm, <leames::, pay plus any ~oruon of D.A which enter!! into pay for service benefits.
[For deuuh. please ~ee the Chapter on 1Salants']

22. commuted value of pension received [Section l0(l0A)]

r" (,) The full amount or commuted value of pem,1on received 1s exempted if II is received from [Link]
(}o\'emment, a local aulhonty or a statutory corporation.
(ii) An) payment in commuwuon of pension received under any scheme from any [Link] employer
to the e,.tent ll doe::, not exceed
(a) in a case "here the employee receives any gratuity. the commuted value of 1/Jrd of pension
which be 1s nonnally entitled to receive . and
(b) in any other case [Link] commuted value or 1/2 of such pension.
23. Amount received as leave encashment on retirement [Section l0(l0AA)]
;---(a) Central & State Govt. Employees-any payment received as the cash equivalent of the leave
~:tlary m respect of the earned leave at his credit at the time of his retirement shall be fully exempt.
(b) Other Employees-any payment received as the cash equivalent of the leave salary at his credit
at the ume of superannuation shall be exempt upto least of the following four amounts :
(a) Achlal amount received .
(b) Amount calculated at average salary of IO months (average salary means average of salary
drawn by employee dunng IO months immediately preceding the month of his retirement) :
(r) Cash equivalent of leave salary due at the time of retirement.
(d) ~otified Lurut-t 3,00,000.
E,,.ces::, of amount received over the least of the above shall be taxable.
24. Retrenchment compensation paid to workmen [Section 10(10B)]
The Finance Act, 1975 has inserted a new clause IOB in secuon IO of Income-tax Act ,._ hich
pro\ ides that retrenchment compensation received by a workman shaJI be exempted from Income-
t:1x to the extent such [Link] does not exceed ·
(i) amount calculated in accordance with the provisions of Section l5F(b) of the Industrial
Disputes. Act. 1947. or
(ii) f 5.00.000.
wbJcbever 1s le~s.
This exemption will be available onJy to workmen as defined in Industrial Disputes Act. l 947.
~ Payment received under Bhopal Gas Leak Disaster (Processing of Claims) Ad
r 1985 [Section 10 (l0BB)]
Any amount received under the provi~ion of ::,uch Act or any scheme framed thereunder shall be
fuJJy exempted but in case payment is received agnmst a loss or damage. for "hich deduction has been
claimed caller. it shall be taxable.
L1.84 J (income To Law and P, •

26 C · · [S ction l 0(l0BC)] .
. / ompensatron. received in case of any disaster e . , ount of any disaster from
,_. I · · m,auon on ace
n case an mdiv1dual or his legaJ heir receives any compe halJ be exempted.
Central or State Government or from a local authority, the same 5 any other Company
27. Retirem e_nt_ Comne ~ tinn__fr.nm-a_lrubJic .-[Link] ompany or
• .JBiO ,, ..----- --~~m~
-~-cr,:nr-ur~mpmy ctc1n~~-ror'"- -';\J\[Link]\T1".,.,n.-.-,,..
,_Payment received from Sukanya Samridhi Account lSectron lO(llA))
An) payment from un account opened m accordan<.~ with the [Link])J SJmndhi AcCtlunr Ru le,
201-' [Link] be exempted
~ Payment from Recognised Fund (Section 10(12)]
The accumulated balance due and becorrung pnyable Lo un emplo)ee part1c1p!llln~ m u rC<.OfOJ,t.'d
pro, 1c.kn1 fund. 1s exempt 10 Lhe e"ttent provided in rule 8 of part ,.\ of rhc Fourth Sch~dule
37J1ouse Rent Allowance [Section 10(13A) Read with Rule 2A]
r-{aJ Persons living in rented houses. Any amount of House Rent Allowance received by the
emplo)ee from hH, employer is exempted up to the least of the following limits :
( 1) excess of actual rent paid over 10% of salary ;
( 11 J an amount equal to 50% of salary where such accommodation is situated in any one
of the
foUowing places, namely, Bombay. Calcutta, Delhi and Madras and 40% of salary in other
towns , or
(111) actual amount of House Rent Allowance received.
(b) Penons living in their own houses or nol paying any rent but getting HRA-Full HRA
received I taxable. No exemption under this provision. [Inserted by Taxation Laws (Amendment) Act
1984 w cf from 1-4-76).
 eJemPled, i.t.. a:x pUl[S::On 10(16)]
tarsh•P h
A nt of sc [Link] granted to meet the cost of educatmn •~ c"cmplcd
full amou . , .
·cosl of cducauon inc 1udes. not only the tuition f ecs but all other ex pen
•..[Link] to acqui~ . · g [Link]. Scholarsh ·
ip may have been giv . en b G
y ov1.. l JmvenHly, Board T
ilJCI""
n f actual exp . .
enditure incurred by the rec1p1
. is arrespccuve o enl to meet the cor: of _ _,,...__~.
i,.e exemption f M p /M.L.A./or [Link]. [Sectio .
AlloW•nce o · · n 10(17)]
,z. AnY I
·nc om e by way of .
received by M.P./M.L.A. or M.
(i) Daily allowance L.C. or any comrmnec lt Cfi f
.:\ exe~mp tedwa
allo . nce received by any person by
reason of his membership of Par
(11, an 1
f Parliament (Constituency Allow . l1amen1
_____......,
Me 0 anc e) Ru les. 19 86 1s fully exemp
mb ers
• :'I consotuenc
y -'lowance received by any person ted
w by reason of his membership m
( 111
' Legislature or of any Comm .
ittee thereof. which the Central )
Government may notify,
fully exempted
W.d. A.Y 2021-22. exempaon und
er this sec non shall not be available
.. . f _ . a,11 ., be me d as per to any M p JM LA JM ~
new tax regime u/s l l 58 AC

4 Awards Instituted by Government [Section 10 (17A)]

3..
r (i) Any payment made \\ hether in cash or in kind
by the Central or State Governm under any awards inst.11uted m the
ent or instituted by any other public LC.ereS1
Central Go, t m this behalf shall be body and [Link] b) ~
fully exempted.
(ii) Any other reward gn en
by Central or Stale Governmen
b) the Central Gov~mment in this t for such purposes as ma y be app
behalf in public interest shall als ro ed
44. Pension receiftd by certain o be full} exempted.
wi nn er s of ga lla nt ry aw ar ds [S
r" (,) An) IIDOUDl m:-cn-ed b) an individual as pensio ection 10(18))
n shall be exempt if ·
(a) socb mdh,du:11 ~ been in the
service of the Central or State Go
(b) be/sbr bas been awarded ·Param , ernment. and
Vi r Ch ak ra' or 'M ah av ir Ch ak
od a llObficd [Link]) S\\ "W S. ra' or ·vrr Chakra" or suc h
(u) Abo. Ill) -H IM recc1,c:d as fam
ily pension by any member
rdtutd abmic sball be ful l) exem of the family of an md.h 1dual
pted.
45.