a __ Chapter Exempted Incomes fe : LEARNING CONTENTS 3.1. CLASSIFICATION OF INCOMES 3.2. EXEMPTED INCOMES U/S 10 3.3 SPECIAL PROVISIONS IN RESPECT OF NEWLY ESTABLISHED UNITS IN SPECIAL ECONOMIC ZONES (SECTION 10AA) ({]ST7 CLASSIFICATION OF INCOMES Incomes can be classified into three categories as per provisions of this Act. These categories are : I. Incomes forming part of total income and subject to tax — These incomes are treated u/s 14 to 80 of the Act and have been explained in detail in Part IT of this book. |. Incomes forming part of total income but entitled to rebate or relief — These incomes are given u/s 86 and have been explained in Part III of this book. Ill. Incomes exempted from tax = These incomes do not form part of total income either fully or partially. (312) EXEMPTED INCOMES U/S 10 Section 10 of Income-tax Act has given a Jong 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. In computing the total income of any previous year of any person, any income falling within any of the following clauses shall be exempted. 1, Agriculture Income [Section 10(1)] Agricultural income from land situated in India is fully exempted. 2. Any sum received by a Co-parcener from Hindu Undivided Family (H.U.F.) [Section 10(2)] Any sum received by an individual as a member of a Hindu Undivided Family, where such sum has been paid out of the income of the family, or in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family is fully exempted. This is subject to the provisions of section 64(2)., = fa Exempted Tete, HUF. rcener 7 oney, it is fully exe: . Out of the income of , if a co-par gets at Ce eceok ly ipted in hands of its co-parceners whether the income of HUF was charg: Example 1. HUF eamed 2 5,00,000 during the previous year co-parcener is an employee and earns a salary of € 20,000 p.m. During the previous year Mr. A c 0000, salary income but any sum of money received from his HUF hands. A receives % 30,000 from his HUF. i i 2023-24 and it is not ble to « Example 2. HUF earned % 90,000 during the previous year 4 and itis no charg ~ str. Aa co-parcener is earning individual income of € 30,000 p.m. Besides his individual income, 17, and paid tax on its income. My. also received % 1,00,000 from HUF. Mr. A will pay tax on + is not chargeable to tax in Mr. Mr. A will pay tax on his individual income but any sum of money received by him from ; HUF is not chargeable to tax in the hands of co-parcener whether income. 3. Share of Income from the Firm [Section 10(2A)] the HUF has paid tax or not on th. In case of 2 person being a partner of a firm, which is separately assessed as such, his share in + total income of the firm shal] be fully exempted. The share of partner in the total income of the firm shall be in same proportion as is given partnership deed. 4. Interest paid to Non-Resident [Section 10(4)(i)] The amount of interest payable to a non-resident on such securities or bonds as the Central Go: may, by notification in the Official Gazette, specify in this behalf, including income by way Premium on the redemption of such bonds, shall be exempt from tax. The exemption under th. section shall not be allowed on interest on bonds or securities issu ied on or after 1-6-2002. 5. Interest to Non-Resident on Non-Resident (External) Account [Section 10(4)(ii)] Any income by way of interest on moneys standing (External) Account in any bank in India shall be exempt from tax in ease of an individual who is Person resident outside India or is a person who has been permitted by the RBI to maintain aforesaid account. to his credit in a Non-Resider: The person residing outside India shall have the same meanin, fi i é 1 as defined under Foreigr Exchange Regulation Act, 1973, FEMA, 1999, This exemption shall not be available on any income b: way of interest paid or credited on or after 1-4-2005. 6. Interest paid to a person of Indian Origi [Section 10(48)] Bip and whe In case of an indi any income from 5 ency or other fore, with the provisions of the Fores on eho emilted from a c 1973, FEMA, 1999 and any ruk is Non-Resident ual being a citizen of India or a person of Indian origin, who is non-residen « Ttificates issued by the Central Government, 4 ication in the Official Gazette, shall be fully exemp: lowed on bonds or Securities issued on or after 1-4- ibed to such certificates ir Ountry outside India in accordan(: les made thereunderBremipted Incomes For this purpose, a person shall be deemed to be of Indian origin if he or either of parents or any of his grandparents, was born in India or in un ided India. 7. Interest payable to a non-resident by an Indian Company or Business Trust section 10(4C)] In case an Indian Company or business trust has borrowed money from a source outside India by way of issue of rupee denominated bonds and such money has been borrowed between 17-9-2018 to | 313-2019 interest payable to a non-resident shall be exempted. Money should not have been borrowed from a company or foreign company, 8. Income of a specified fund as a result of transfer of capital asset referred to in section 47(viiab) [Section 10(4D)] In case a specified fund transfers a capital asset (referred to in clause viiab or section 47) on a recognised stock exchange and located in any International Financial Services Centre and consideration is paid or payable in covertible foreign exchange, any income accrued ot aisen is received in respect of units held by a non-resident shall be exempt. 9. Income of a non-resident from transfer of non-deliverable forward contracts or off shore derivative instramen its or over the counter derivatives with an offshore banking unit of an International Financial Service Centre [Section 10(4E]] Any income accrued or arisen to, or received by a non-resident as a result of (i) transfer of non- deliverable forward contracts or offshore derivative instruments of over the counter derivatives or (li) distribution of income on offshore derivative instruments entered into with an offshore banking unit of an International Financial Services Centre as referred to in sub-section (1A) of section 80LA, which fullfils such conditions as may be prescribed shall be exempt from tax. 10. Royalty or interest income of a non-resident from leasing of an aircraft or a ship which is paid by a unit of an International Financial Services Centre . ALY. 20: [Section 10(4F)] [w. }22-2:3] Any income of a non-resident by way of royalty or interest, on account of lease of an aircraft or a ship in a previous year, paid by a unit of an International Financial Services Centre as referred to in sub-section (1) of section 80LA, shall be exempt from tax if the unit has commenced its operations on or before the 31st day of March, 2024. 11, Exemption of income rece: ete. [Section 10(4G)] ived by a non-resident from portfolio of securities Any income received by a non-resident from (i) portfolio of securities or financial products o funds, managed or administered by any portfolio manager on behalf of such non-resident; or (ii) such activity carried out by such person as may be notified by the central government in the official Guzette, in an account maintained with an Offshore Banking Unit in any International Financial Services Centre, as referred to in section SOLA(IA), to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India. 12. Travel Concession to an Indian Citizen Employee [Section 10(5)] The provisions of section 10(5) relating to leave travel concession have been completely changed ‘Act 1989) which are as follows : ith effect from 14-89, ie, assessment year 1989-90 by the Direct Tax Law (Second Aiwendin oat () Value of any travel concession or assistance received by or due to an individual from hisCS — rit, employer for himself and his family in connection with his proceeding on leave to any py eg in India ; OR (®) Value of any travel concession or assistance received by or due to an ee from hy employer or former employer for himself and his family in connection with fi = Proceed, to any place in India after retirement from service or after the termin: ice; j shall be completely exempt from tax subject to conditions given below - | 1. The concession must have been allowed having regard to the travel concession or assistan.. | , granted to the Central Govt. employees. ; 2. In no case the exempted amount shall exceed the amount of expenses actually incurred f,, the purpose of this travel. 3. The term ‘Family shall mean ; | (a) The spouse and children of the individual ; and (8) The parents, brothers and sisters of the individual or any of them wholly or main), dependent on the individual. | The following new rules have been incorporated for journeys performed on or after 1-10-97; (i) In case journey is performed by air = the leave travel concession shall be exempted upto an amount not exceeding the air economy fair of the National Carrier by the shortest route to the place of journey. (18) In case journey is performed by any mode other than by air - if place of origin of journey and place of destination are connected by rail but journey performed by any mode other than by air, the benefit shall be exempted up to an amount ne: exceeding air conditioned first class rail fare by the shortest route to the place of destination, | (iti) In case place of origin of journey and place of destination are not connected by rail — _ the benefit shall be exempted as following : equal to first class or deluxe class fare, as the case may be, on such transport by shostes! route to the place of destination. (6) where no recognised public system of transport exists the exempted amount shall no! | exceed the air conditioned first class fare for the distance of journey by shortest route as journey is performed by rail With effect from 1-10-1998 the exemption for the benefit of leave travel concession shall be restricted fo feo children only. But this restriction shall not be applicable on children born before 1-10-1998 and also in ct of multiple births after one chitd on or after 1-10-1998, Exemption of Leave Travel Cash Allowance in certain cases [Insertion of second | Proviso and Explanation 2 to section 10(5}] | Wel. Assessment Year 2021-22, the value in lieu of any travel concession or assistance receiv’! by, or due to, such individual shall also be exempt under this clause subject to the fulfilment of such | conditions (including the condition of incurrin, it " Ne 8 such amount of such expenditure within su Period), as may be prescribed. [Second proviso to Section 106)] ” (a) where a recognised public transport system exist, it shall be exempted upto an amou: |a _gxempted Incomes oS ‘The conditions for this purpose shall be prescribed in the Income-tax Rules in due course and shall, inter alia, be as under : (a) The employce exercises an option for the deemed LTC fare in lieu of the applicable LTC in the block period 2018-21; () “Specified expenditure” means expenditure incurred by an individual or a member of his family during the specified period on goods or services which are liable to tax at an aggregate rate of twelve percent or above under various GST Laws and goods are purchased or services procured from GST registered vendors/service providers: (¢) “Specified period” means the period commencing from 12th day of October, 2020 and ending on 31st day of March, 2021; (@ the amount of exemption shall not exceed thirty-six thousand rupees per person or one- third of specified expenditure, whichever is less; (€) The payment to GST registered vendor/service provider is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under Rule 6ABBA and tax invoice is obtained from such vendor/service provider; (f) If the amount received by, or duc to an individual as per the terms of his employment, from his employer in relation to himself and his family, for the LTC is more than what is allowable to such person under the above discussed provisions, the exemption under the proposed amendment would be available only to the extent of exemption admissible under above listed provisions. For the removal of doubts, it is hereby clarified that where an individual claims exemption and the exemption is allowed under the second proviso in connection with the prescribed expenditure, no exemption shall be allowed under this clause in respect of such prescribed expenditure to any other individual. [Explanation 2 to Section 10(5)] Note. Wef. A.Y. 2021-22, exemption under this section shall not be allowed if employee opts to be taxed as per new tax regime u/s 115BAC. 13. Remuneration received by an individual who is not a citizen of India [Section 10(6)] The following incomes are exempt when received by an individual who is not a citizen of India : (i) Remuneration [U/s 10(6)(#9]. (a) The remuneration received by an ambassador or other officials of the Embassy, High Commission or Legation of a foreign State in India. (6) The remuneration by a consular officer of a foreign State in India. (Q) The remuneration received by a trade commissioner or other official representative in India of a foreign State, provided corresponding officials of the Government of India in that country are given a similar concession. (4) The remuneration received by a member of the staff of any of the officials referred to in (a), (B) and (0) above. If the person mentioned above in (a) to (d) is a subject of the country represented, is not engaged in any business, profession or employment in India (otherwise than as a member of such staff), and the country represented gives similar concession to the members of the staff of corresponding, officials of the Government of India. i bineL Pare 3.6] EXEMPLA Into, Gi 5 ; ‘1 Joyee of foreign enterprise [U/s 10(6)(0) (¢ ii) Remuneration received by him as an employ’ cian one aby hae: technician deputed foreign firm to work in India), b ‘ his say in India raed the following conditions are fulfilled—(a) the foreign enterpr: is not engaged in any trade or business in India ; (D) his stay in India does rat exceed in thy aggregate a period of 90 days in such previous year; and (c) such remuneration is not liabj, to be deducted from the income of the employer chargeable under the Act- nt on a foreign ship [U/s 10(6)(vii0]. Any income chargeable under the hea. ‘due to any such individual being a non-resident, as remuneratio,, nent on a foreign ship where his total sta, .d of 90 days in the previous year. . govt. during his stay in India for hi, all be fully exempted if he is taking Gi) Employme “Salaries” received by or for service rendered in connection with his employ in India does not exceed in the aggregate of a perio (iv) Remuneration received by an employee of foreign t ing in India [U/s 10(6)txi)]. Such remuneration sl training in any of the following concern : (a) Institution owned by govt ; (b) A company wholly owned by Central or State partly by State govt; (©) A subsidiary Co. of company referred at point (b) above ; (d) Any corporation established by or under Central, State or Provincial Act ; (c) Any society registered under Societies Registration Act ; 1860 and which is wholly financed by Central or State govt. 14. Tax paid by Government or Indian concern on Income of a Foreign Company [Section 10(6A), (6B), (6BB) and (6C)] (6A) () Where a foreign company renders technical services to Government of India or to a State Government or to an Indian enterprise and for such services a foreign company is paid income by way of royalty or fees. (ii) Such fees of royalty is paid by an India concern in pursuance of an agreement entered into before 1-6-2002 and such agreement is approved by Government of India and it is in accordance with the Industrial Policy of the Government of India. (i) Since royalty or fees paid to a foreign company accrues in India, so such income is liable to be taxed in India and as per agreement the payer of income in India pays tax liability of the foreign company. (iv) Tax so paid by Government of India or a State Government or an Indian enterprise will be exempted iz,, it will not be grossed up with the income of the foreign company. Example. A foreign company renders technical services to an Indian company and as per agreement, foreign company is to be paid a fees of € 1,00,000. Tax of € 30,000 on such fees is also paid by the Indian company. Tax paid by Indian company will be exempt and so it will not be grossed up with the income of the foreign company and such foreign company's income will be only 2 1,00,000. (6B) The tax liability of a non-resident (Not being a company) or a foreign company if paid by an Indian concern or Government of India or a State Government the same will be exempted and so will not be grossed up with the income of the foreign entity. __ (6BB) Tax paid on income received by foreign government or a foreign enterprise on leasing aircraft. In case any income is received by a foreign government or a foreign enterprise from aM govt. or partly owned by Central angPa E B f i. peempted Incomes rE indian company which is engaged in the operation of aircraft and such income is by way of consideration of acquiring an aircraft or an engine of aircraft (other than payment for providing spares or services in connection with the operation of leased aircraft) on lease under an agreement entered into after 31-3-1996 but before 1-4-2007 and approved by the Central Government in this pehalf, and the tax on such income is payable by such Indian company under the terms of agreement, the tax so paid shall be fully exempted, ‘This benefit shall be available only to that foreign enterprise which is non-resident. (6C) Any income derived by a foreign company (so notified by Central govt.) by way of royalty | ox fees for technical services under an agreement for providing services in or outside India in projects ~~ connected with security of India shall be fully exempted. 15. Exemption of income by way of royalty or fee earned by a non-resident from National Pension Technical Research Organisation [Insertion of Section 10(6D)] Any income arising to a non-resident, not being a company, or a foreign company, by way of royalty from or fees for technical services rendered in or outside India to the National Technical Research Organisation shall be exempt. 16. Perquisites and Allowances paid by Government to its Employees serving outside India [Section 10(7)] All the perquisites and allowances paid by the Government to its employees for services rendered outside India, are exempt from tax. This exemption is allowed only to such employees of the Government who are citizens of India. 17. Employees of Foreign Countries working in India under Cooperative ‘Technical Assistance Programme [Section 10(8}] ‘The persons who are working in India under co-operative technical assistance programmes in accordance with an agreement entered into by the Central Government and the Government of a foreign State, the following incomes of such individuals shall be exempt provided the terms of agreements provide for such exemption : (® the remuneration received by him directly or indirectly from the Government of the foreign State for such duties rendered in India ; and (i) any other income of such individual which accrues or arises outside India and is not deemed to accrue or arise in India, in respect of which individual is required to pay any income or social security tax to the Government of that foreign State. 18. Income of a Consultant [Section 10(8A)] Any remuneration or fee received by a consultant from an international organisation who derives its fund under technical assistance grant agreement between such organisation and the Foreign Govt, and any other income accruing or arising to him outside India (which is not deemed to accrue or arise in India) and which is subject to income-tax or social security tax in foreign country, shall be fully exempted. The agreement of the service of consultant must be approved by the competent authority. The consultant means : 4) an individual who is (a) not a citizen of India ; or (b) if citizen but is not ordinarily resident in India; or (i) any person who is non-resident ; and is rendering technical services in India in connection with any technical assistance programme or project.~— Estmpted Iniyy eq 19. Income of Employees of Consultant [Section 10(8B)] In case of an individual who is assigned duties in Indie under technical assistance programm, () the remuneration received by him directly or indirectly from any consultant a5 refc;,, u/s 10 (SA) above; and (G) any other income accruing or arising to him outside India (which is not deemed to accry,.. dre in India) and which is subject to income tax or social security tax in foreign country, shall be fully exempted provided : (3) such individual is not a dtizen of India; or (2) if citizen but is not ordinarily resident; and (i) the contract of service is approved by the competent authority. 20. Income of any member of the family of individuals working in India under eq operative technical assistance programmes [Section 10(9)] ‘The income of any member of the family of any such individual as referred to under Section 1, or (SA) or as the case may be clause 8(B) accompanying him to India, which accrues or arises outs. India is not deemed to accrue or arise in India, in respect of which such member is required to any income or social security tax to the Government of that foreign State or as the case may country of origin of such member. 21. Gratuity [Section 10(10}] (i) Desth-cum-retirement gratuity-any such amount received by the employees working on Ci or Defence services of Govt. of India, or on any part of State Government or Local authori: covered under Revised Pension Rules of the Central Government shall be fully exempted (i Gratuity received under Payment of Gratuity Act-shall be exempted upto an amount « calculated in accordance with the provisions of such Act. (ii) For other employees-Exempted upto least of the following : (@ Statutory Limit @ 20,00,000 (i) 1/2 month's average salary for every one completed year of service ; (#i) Actual gratuity received. Average Salary. The Direct Tax Laws (Amendment) Act 1987 has revised the definition average salary. In future average salary is to be calculated on the basis of average of salary receive during 10 months preceding the month in which death or retirement occurs. Statutory Limit. The present ceiling of % 20,00,000 is applicable for whole service life of 2 employee. With effect from assessment year 1989-90 the monetary ceiling will be such limit as Central Government may by notification in the Official Gazette specify in this behalf keeping in vie the limit applicable to Central Government employees. Salary. The word ‘salary’ here has the same meaning as assigned to it for provident fur purposes, iz., the Basic Pay plus deamess pay plus any portion of D.A. which enters into pay for service benefits. [For details, please see the Chapter on ‘Salaries’] 22. Commuted value of pension received [Section 10(10A)] (i) The full amount of commuted value of pension received is exempted if it is received fro" the Government, a local authority or a statutory corporation.ices En a) Any Payment in commutation of pension receive ther @) Enplover to the extent itdoes notexeeeds sewed under any scheme (rom any (a) ina case where the employee receives any gratuity, the commuted value of 1/3rd of pension which he is normally entitled to receive ; and (b) in any other case the commuted value of 1/2 of such pension, ' amount received as leave encashment on retirement [Section 10(10AA}] \ wo Central sate Govt: Employees—any payment received as the cash equivalent of the jeave salary in respect of the earned leave a it i is retirement shall be | a leave at his credit at the time of his retirement sha @) Other Employees —any payment received as the cash equivalent of the leave salary at his credit at the time of superannuation shall be exempt upto least of the following four amounts : (a) Actual amount received ; () Amount calculated at average salary of 10 months (average salary means average of salary drawn by employee during 10 months immediately preceding the month of his retirement) ; (©) Cash equivalent of leave salary due at the time of retirement. (a) Notified Limit 3,00,000. Excess of amount received over the least of the above shalll be taxable. 94. Retrenchment compensation paid to workmen [Section 10(10B)] ‘The Finance Act, 1975 has inserted a new clause 10B in section 10 of Income-tax Act which provides that retrenchment compensation received by a workman shall be exempted from Income- Fic to the extent such compensation does not exceed : () amount calculated in accordance with the provisions of Section 15F(b) of the Industrial Disputes, Act, 1947, or (i %5,00,000, whichever is less. This exemption will be availa ble only to workmen as defined in Industrial Disputes Act, 1947. 25, Payment received under Bhopal Gas Leak Disaster (Processing of Claims) Act 1985 [Section 10 (10BB)] ‘Any amount received under the provision of such Act or any scheme framed thereunder shall be fully exempted but in case payment is received against a loss or damage, for which deduction has been claimed ealier, it shall be taxable. 26. Compensation received in case of any disaster [Section 10(10BC)] Incase an individual or his legal heir receives any compensation on account of any disaster from Central or State Government or from a local authority, the same shall be exempted. 27. Retirement Compensation from a Public Sector Company or any other Company [Section 10 (10C)] Any amount received is receivable by an employee of : @ a public sector company ; or (i) any other company ; orh CoE Exempted tho, (iii) any authority established under a Central, State or Provincial Act ; or authority, (i) alo (0) a co-operative socie 1 established or corporated by or under a Central, State or Provincial Ac, (ei) a univ aninstitution declared to be university under section 3 of the University ¢,°™ ang | Commission Act, 1956 ; or (rif) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institute of Technology Act, 1961; or such institute of management as the Central Govt. may, by notification in the offic may specify in this behalf. al gazet, (ix) the Central Government. (x) the State Government. at the time of his voluntary retirement, or in case of a public sector companies under a schem, voluntary separation, under a scheme framed in accordance with guidelines issued by " Government and in case of companies or co-operative societies, scheme is approved by che Commissioner or Director General of Income-tax, shall be exempted up to (a) Actual Amoun racvived : (6) € 500,000 (c) 3 month’s ‘salary’ for each completed year of service; or, (@) salary he er of months’ service is left from date of retirement ; whichever is less. 1, ‘ed under this clause, the employee cannot claim exemption for the sain, drawn multiplied by numb case any exemption is claim amount under any other section. of scheme of voluntary retirement from Chief Commissioner of Income Tax «, Director General of Income Tax is not necessary [Link]. assessment year 2001-02. 28, Income by way of tax on perks [Section 10(10CC}] at its option, tax on value of perks given by it to an employee (X, provided by way of monetary payment) shall be fully exempted in the hands of employee. 29. Any sum received under a life insurance policy [Section 10[10D]] ‘Any sum received under a life insurance policy, including the sum allocated by way of bonus « such policy shall be fully exempted except in following cases : (i) If any sum received from insurance company on insurance of a dependent handicappe. member [under subsection (3) of section 80DD]; (i9 If any sum received from insurance company when a dependent, or a member of family from a notified disease [under subsection (3) of section 80DDAI: The approval In case employer pays, suffering (iii) Any sum received under a Key man insurance policy ; “Key man insurance policy” means a life insurance policy taken by a person on the life « another person who is or was the employee of the first mentioned person or is 0 connected in any manner whatsoever with the business of the first mentioned person; ot (ie) Any sum received under an insurance policy issued on or after the Ist day of April, 2003! before 1-4-2012 in respect of which the premium payable for any of the years durin term of the policy exceeds twenty per cent of the actual capital sum assured. (0) Any sum received under an insurance policy issued on or after 1-4-2012 in respect of whi! the premium payable for any of the years during the term of the polcy exceeds 10% of ate acutal capital sum assured. Thus, in case of life insurance policies issued on oF **" og yr was ig theBis: prempted Incomes ET 1-4-2012, the exemption regarding any sum received under a life insurance policy shall be alloyed only if premium paid on such a policy does not exceed 10% of the capital sum asst (e) Any sum received under an insurance policy issued on or after 1-4-2013 on the life of a person with disability (referred u/s 80 U) or suffering from disease as specified in the rules | made u/s 80 DDB in respect of which premium payable for any of the years during the | ee . Policy exceeds 15% of the actual capital sum assured [w.e. Assessment Year Note. Any sum received in respect of policies covered under points (fv) and (v) and (vi) above shall be fully exempt if such sum is received on the death of the person (ie., policy holder). Amendment in Explanation 1 section 10 (10D) regarding key man insurance policy. A key man insurance policy which has been assigned to a person during its term with or without consideration shall continue tobe treated as a key man insurance policy for the purpose of section 10 (100). For the purpose of calculating the actual capital sum assured effect shall be given to the following : {H) of the value of any premiums agreed to be returned, oF (ii) of any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person, [Explanation to sub-section (2A) of section 88 and sub- section 3 of section 80C]. Tax exemption on ULIP procecds capped and made taxable under the head Capital Gains [Insertion of Fourth, Fifth & Sixth Proviso] (i) Income of single ULIP [Insertion of Fourth Provisol. No exemption for amount received with respect to any unit linked insurance policy, issued on or after the Ist day of February, 2021, if the amount of premium payable for any of the previous year during the term of such policy exceeds € 2,50,000. (i) Multiple ULIPs [Insertion of Fifth Provi No exemption for amount received if the premium is payable, by a person, for more than one unit linked insurance policy, issued on or after the Ist day of February, 2021, where the aggregate amount of premium exceeds %2,50,000 in any of the previous year during the term of any of those policies Full exemption continued for ULIP proceeds on the death of a person (Policy holder) [Insertion of Sixth Proviso] (i) Meaning of ‘Unit linked insurance policy’ [Insertion of Explanation 3]: The expression “unit linked insurance policy” has been defined as a life insurance policy which has components of both investment and insurance and is linked to a unit as defined in clause (ce) of regulation (3) of the Insurance Regulatory and Development Authority of India (Unit Linked Insurance Products) Regulations, 2019 issued by Insurance Regulatory and Development Authority under the Insurance Regulatory Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999. Maturity proceeds of LIC policy shall be taxable if premium exceeds RS.5,00,000 [Amendment to Section 10(10D)]. [w.e.f. A.Y. 2024-25] The exemption u/s 10(10D) shall not apply with respect to any life insurance policy other than a unit linked insurance policy, issued on or after Ist April, 2023, if the amount of premium payable for any of the previous year during the term of such policy exceeds T 5,00,000. In other words, if the Premium on Life Insurance Policy issued on or after April 1, 2023, exceeds & 5,00,000, the sum Teceived on maturity (except in case of death) shall be taxable u/s 56(2)(xiii). [Substitution of proviso 6 to section 10(10D)].| applicabl Exempted hon, jum is life insurance poli ‘Also, where the premium is payable, by a person, for more than one life Policy 6, than unit tinked insurance potiy, issued on oF alter April 1, 2029, the exemption under this yn shall apply only with respect to those life insurance policy other than unit linked insurance point’ Where the aggregate amount of premium does not exceeds z snob in any of the previous ye mn 10{T ). ts during the term of any of those policies. [ Proviso 7 #0 Sectior 30. Payment from Statutory Provident Fund [Section 10(12)] " Any amount withdrawn from the statutory provident fund is exempt from tax. This Provision & le on Public Provident Fund also. ee’s annual contribution made on oy Interest on SPF balance made taxable if employ: '50,000. [Insertion of Proviso to after 1,04.2021 to such fund exceeds % 2, section 10(11)] ly to the income by way of interest accrued dun ‘The exemption under this clause shall not app the previous year in the account of a person to the extent it relates to the amount or the aggregate of amounts of contribution made by that person exceeding © 2,50,000 in any previous year in that fund, gn or afier the Ist day of April, 2021 and computed in such manner 2s may be provided by rules, in tribution exceeding € 2,50,000 shall be taxable. However, ifthe there is no contribution by the employer, then interes: other words, interest on annual cont £@ 5,00,000 will be taxable. employee is contributing to a fund in which income on contribution by employee in excess o! 4 from Sukanya Samridhi Account [Section 10(114]] kanya Samridhi Account. Rules- 31. Payment receive Any payment from an account opened in accordance with the 5 2014 shalll be exempted. 32, Payment from Recognised Fund [Section 10(12)] ‘The accumulated balance due and becoming payable to an employee participating in « ided in rule 8 of part A of the Fourth recognised provident fund, is exempt to the extent provi Schedule. Interest on RPF balance made taxable if employee's annual contribution made on or after 14.2021 to such fund exceeds € 2,50,000/% 5,00,000 [Insertion of Proviso to Section 10(12)] The exemption under this clause shall not apply to the income by way of interest accrued during the previous year in the account of a person to the extent it relates to the amount or the aggregate of amounts of contribution made by that person exceeding € 2,50,000 in any previous year in that fund, tn or after the Ist day of April, 2021 and computed in such manner as may be provided by rules In other words, interest on annual contribution exceeding % 2,530,000 shall be taxable. However, if the employee is contributing to the fund and there is no contribution to such fund by the employer, then interest income on contribution by employee in excess of @ 5,00,000 will be taxable. National Pension System Trust to all cred to 33. Partial exemption of payment from subscribers on closure of account or opting out of the pension scheme refe in section BOCCD. [Section 10(124)] ‘Any payment from the National Pension System Trust to all the subscribers or assessees (employees as well as non-employees) on clostire of account or his opting out of the pension scheme referred to in section B0CCD, tothe extent it does not exceed sixty per cent (40% upto A.Y. 2019-20) of- ted Incomes pene = the total amount payable to him at the time of closure or his opting out of the scheme, shall be exempt from tax. Note. ese one this exemption was available only to employees. However, wef. AY. 2019-20, this exemption has been extended to all subscribers. 34. Exemption of partial withdrawl from National Pension System Trust referred to in section 8OCCD. [Insertion of section 10(12B)] [w.e.f. AY. 2018-19] Any partial withdrawal by an employee from National Pension System Trust in accordance with the terms and conditions specified under Pension Fund Regulatory Development Authority Act, 2013 and regulations made thereunder, shall be exempt to the extent it does not exceed 25% of the amount ofcontributions made by him. 35. Exemption of amount received from the Agniveer Corpus Fund [Insertion of section 10(12C)]. [w.e.f. A.Y. 2023-24] 7 ? e Any payment from the Agniveer Corpus Fund under the Agnipath Scheme to a person enrolled under the said Scheme, or to his nominee, shall be exempted. 36. Payment from Superannuation Fund [Section 10(13)] Any payment from an approved superannuation fund made : (i) on the death of a beneficiary ; or (ii) to an employee in licu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement ; or (ii) by way of refund of contribution on the death of beneficiary ; or (io) by way of refund of contribution to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement age or after a specified age or on his becoming incapacitated prior to such retirement, to the extent to which such payment does exceed the contributions made prior to the commencement of this Act and any interest thereon. (®) by way of transfer to the account of the employee under a pension scheme referred to in Section 80CCD and notified by the Central Government. 37. House Rent Allowance [Section 10(13A) Read with Rule 2A] (a) Persons living in rented houses. Any amount of House Rent Allowance received by the employee from his employer is exempted up to the least of the following limits : (i) excess of actual rent paid over 10% of salary + 0% of salary where such accommodation is situated in any one of (i) an amount equal to 5 namely, Bombay, Calcutta, Delhi and Madras and 40% of salary the following places, in other towns ; or (iii) actual amount of House Rent Allowance received. () Persons living in their own houses or not paying any rent but getting HRA—Full HRA received is taxable, No exemption under this provision. [Inserted by Taxation Laws (Amendment) Act 1984 wef. from 1-4-76]. Note, W.e.f. A.Y. 2021-22, exemption under this section shall not be allowed if employee opts to be taxed as per new tax regime u/s 115BAC.catia LIES, x aE Bxempled ty, 38. Proscribed Allowances Received by Employees [Section 10(14)} (t) Certain apocial allowances for performance of official duties [Section 10(14)(4y “Any sich special allowance oF benefit, not being in the nature of a perquisite within the meg oof clause (2) af section 17 specifically gronted to meet expenses wholly, necessarily and exch n ‘of an office or employment of profit, as the Cyr: ea incurred in the performance of the dut : i wnt may, by notification in the Official Gazette, specify, to the extent to which such exper y i Governme are actually: incurred for that purpose. (tf Certain special allowances to meet personal expenses [Section 10(14}(29] ‘Any’ such allowance granted to the assessee cither to meet his personal expenses at the py, where the duties of his office or employment of profit are ordinarily performed by him or at ps where he ordinarily resides, or to compensate him Government may, by notification in the Official Gazette, for the increased cost of living, as the Cen ral specify, to the extent specified in « notification. With effect from 1.4.89, t essment year 1989-90, the Direct Tax Laws (Second Amendmeny) ‘Act 1989 has Inserted the following proviso : llowance in the nature of personal allowance granted to thy Nothing given in sub-clause (i) shal! apply to any al ‘assessee 10 remunerate or compensate him for performing duties of special nature relating to his office or ‘employment unless such allowance is related to the place of his posting or residence Only few allowances covered w/s 10(14) to be exempt under new tax regime as contained in section 115BAC [w.e.f. A.Y. 2021-22} [Notification No. 38/20, dated 26.06.2020} Notwithstanding anything contained in section 10(14), an employee who has exercised his option to be taxeg under section 11SBAC (Le. under new slab rate regime} shall be entitled to exemption only In respect of the following allowances : (a) Any allowance granted to meet the cost of travel on tour or transfer, (6) Daily atlowance granted on tour or for the period of journey in connection with transfer, to meet the ordinary dally charges incurred by an employee on account of absence from his normal place of duty, {c) Any allowance granted to meet the expenditure incurred on coveyance in performance of duties of an office or employement of profit (.¢, conveyance allowance}; {d) Transport allowance upto 3,200 p.m. granted to a divyang (handicapped employee) to meet his ure for commuting between the place of his residence and the place of his duty. expendi 39, Interest Incomes [Section 10(15)] The following interest incomes due to an assessee are exempt from tax : (ia) Income by way of interest, premium on redemption or other payments on such securities bonds, annuity certificates, savings certificates, other certificates issued by the Central Government shall be exempted if such notification is issued by Central Government in Official Gazette and shall be subject to such conditions and limits as prescribed in such notification . (if) In the case of an individual or a [Link]. interest on such Relief Bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf. (iib) Interest on such Capital Investment Bonds held by individual or H.U.F. and so notified. The Central Govt. shall not specify any such bonds on or after 1-6-2002. (lic) Interest on Relief Bonds issued and notified th i ted feet alivlanal sea: by the Central Government is fully exemp'— 0m peempled Incomes Gid) Interest on such notified bonds issued to non-residents and purchased by them in foreign exchange is fully exempted. With effect from 1-6-2002 the Central Govt. shall not notify any such bonds. (ii) Interest on securities held by the Issue Dept. of the Central Bank of Ceylon, constituted under the Ceylon Monetary Law Act, 1949. (iia) Interest payable to any bank incorporated in a country outside India and authorised to perform Central Banking functions in that country on any deposit made by it, with the approval of the Reserve Bank of India, with any Scheduled Bank. (ii) Any interest payable to the Nordic Investment Bank, being a multilateral financial institution constituted by the Governments of Denmark, Finland, Iceland, Norway and Sweden, on a loan advanced by it to a project approved by the Central Government in terms of the Memorandum of Understanding entered into by the Central Government with that Bank on the 25th day of November, 1986. (iiic) Interest payable to the European Investment Bank, on a Joan granted by it in pursuance of the framework-agreement for financial cooperation entered into on the 25th day of November, 1993 by the Central Government with that Bank. (iz) Interest payable— @) by Government or a local authority on money borrowed by it from sources outside india; () by an industrial undertaking in India on money borrowed by it from such financial institution in a foreign country as is approved in this behalf by the Central Government; (¢) by an industrial undertaking in India on any moneys borrowed or debt incurred in a foreign country in respect of its purchase outside India of raw materials or components, plant or machinery, to the extent of amount calculated at the rate approved by the Central Government in this behalf; (@) by the Industrial Finance Corporation of India established by the Industrial Finance Corporation Act, 1948 or the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 or Export Import Bank of India, or the National Housing, Bank ; or the Small Industries Development Bank of India ; or the Industrial Credit and Investment Corporation of India (a company formed and registered under the Indian Companies Act, 1956) on any moneys borrowed by it from sources outside India, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment; (2) by any other financial institution established in India or a banking company to which ies (including bank or banking institution the Banking Regulation Act, 1940 app! referred to in Section 51 of that Act), on any moneys borrowed by it from sources outside India under a loan agreement approved by the Central Government where the moneys are borrowed either for the purpose of advancing loans to industrial undertakings in India for purchase outside India of raw materials or capital plant and machinery of for the purpose of importing any goods which the Central Government may consider necessary to import in the public interest to the extent to which suchExempteg wa) “ st does not exceed the amount of interest calculated at the rate approve intere: Central Government in this behalf, having regard to the terms of the loan a Ny repayment; im India on any moneys borrowed by it in fo, by an industrial undertaking in . 0” conan from sources outside India under approved ra agreement, The in 1-6-2093," agreement isto be approved by the Central Government of India before 1-6:2003, 7 exempted rate of interest is also to be fixed by the Central Government having a to the terms of the loan and its repayment ; For the purposes of this Sub-clause. expression “Industrial undertaking” means any undertaking which is engaged in (@) the manufacture or processing of goods; or (b) the business of generation or distribution of electricity or any other form of Powe, or (in) the business of providing telecommunication services; (0) mining; or (@ the construction of ships; or ; (©) the operation of ships or aircrafts or construction or operation of rail systems, (ja) by a schedule bank on deposits in foreign currency where the acceptance of su. deposits by the bank is approved by Reserve Bank of India. (@ by a public company whose main object is of carrying on the business of providing Jong-term finance for construction or purchase of houses in India for resident: houses, on any money borrowed by it in foreign currency from outside India upto thy rate prescribed by Govt. For exemption u/s 10(15)(iv) (g) the term interest shall not include interest paid ey delayed payment of loan or in default (i) by any public sector company in respect of such bonds or debentures. The holder « such bonds or debentures must register his name and the holding with that company, () by Government on deposits made by an employee of the Central Government or » State Government in accordance with such scheme as the Central Govt. may frame and notify in Official Gazette, out of moneys due to him on account of his retireme: whether on superannuation or otherwise. (v) Interest on securities held by the Welfare Commissioner Bhopal gas victims Bhopal is the Reserve Bank's SGL-A/C No. SL/DH048 shall be fully exempted. Interest on any deposits {60 notified) held for the benefit of victims of Bhopal gas tragedy held with Reserve Bank s! India or any Public Sector Bank shall be fully exempted. (vi) Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme 1999 notified bs Government. (vii) Interest on Bonds (a) issued by a local authority ; and ___ ©) specified by the Central Govt. by notification in the official Gazzete. (viif) Interest on saving bank account in a post office is exempt (@) upto ® 3,500 in the case of an individual account; and (0) upto ® 7,000 in the case of a joint account._psempted Incomes (ix) Interest on bonds issued by State Pooled Finance Entity and specified by the Central Government by notification in the official Gazette shall be exempted from Income Tax ‘State Pooled Finance Entity’ means such entity which is set up In accordance with the guidelines for the Pooled Finance Development Scheme notified by the Central Government Jn the Ministry of Urban Development. (2) Interest on deposit certificates issued under the Gold Monetisation Scheme, 2015 notified by the Central Govt. (x) Any income by way of interest payable to a non-resident by a unit located in an International Financial Services Centre in respect of monies borrowed by it shall be exempt. Money must have been borrowed on or after 1-9-2019. 40. Lease rental income of a foreign government or foreign enterprise from Joasing of aircraft/aircraft engine to an Indian company [Section 10(15A)] Such payment made to acquire an aircraft or an aircraft engine on lease (other than for providing spares, facilities or service in connection with this operation of leased aircraft) to foreign govt. or a foreign enterprise under an agreement entered before 1-4-97 and between 1-4-9 to 31-3-07 and approved by Central Government shall be fully exempted. In case payer of lease rent also pays income tax of the foreign enterprise, the same shall be exempted, f2,, tax paid will not be grossed up with the income of the foreign recipient. 41, Scholarship [Section 10(16)] The full amount of scholarship granted to meet the cost of education is exempted. ‘Cost of education’ includes not only the tuition fees but all other expenses which are incidental to acquiring education. Scholarship may have been given by Govt. University, Board, Trust, etc. The exemption is irrespective of actual expenditure incurred by the recipient to meet the cost of education. 42, Allowance of M.P./M.L.A./or M.L.C. [Section 10(17]] Any income by way of : () Daily allowance received by M.P./M.L.A. or MLC, or any committee thereof is fully exempted. (ii) any allowance received by any person by reason of his membership of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986 is fully exempted. (ii) Constituency allowance received by any person by reason of his membership of any State Legislature or of any Committee thereof, which the Central Government may notify, is also fully exempted. Note. We. A.Y. 2021-22, exemption under this section shall not be available to any M.P./M.L.A./ MLC. if he/she opts to be taxed as per new tax regime u/s 115BAC. 43. Awards Instituted by Government [Section 10(17A)] () Any payment made whether in cash or in kind under any awards instituted in the public interest by the Central or State Government or instituted by any other body and approved by the Central Govt. in this behalf shalll be fully exempted. (i) Any other reward given by Central or State Government for such purposes as may be approved by the Central Government in this behalf in public interest shall also be fully exemptedDg Exempted tng » 44, Pension received by certain winners of gallantry awards [Section 10(18)] me (Any amount received by an individual as pension shall be exempt ifs (a) such individual has been in the service of the Central or State Government, and (8) he/she has been awarded ‘Param Vir Chakra’ or ‘Mahavir Chakra’ or “Vir Chakra, such other notified gallantry awards. * (i) Also, any amount received as family pension by referred above shalll be fully exempted. 45, Family pension received by family members of armet military forces [Section 10(19)] With effect from the Ist day of April, 2005 fami nominated heirs, as the case may be, of a member ot of the Union, where the death of such member has occu such circumstances and subject to such conditions, as may ym one palace of a former ruler [Section 10(19A)] in the occupation of a former ruler shay | alace is letout, its income shall not he | any member of the family of an indivia,, .d forces including para ily pension received by the widow or children o, f the armed forces (including paramilitary forces) | red in the course of operational duties, j, be prescribed shall be fully exempted 46. Income fro: Annual value of any one palace or a portion of a palace \ be exempted but in case such palace or a portion of a p exempted. | 47. Income of a local authority [Section 10[20)] ‘The following types of incomes in the hands of a local authority are exempt from fax : (i) Income from house property, (ii) Capital gains, (iif) Income from other sources, oF (iv) From a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area income of a local authority from trade or business of supply of a commodity This means that the ) outside its jurisdictional area will be taxable. or service (excluding water and electricity 48. Income of scientific research association [Section 10(21)}] Any income of an approved scientific research association and if the same income is applied solely for the purposes of that association, i, for carrying scientific research, The approval given under this section shall be withdrawn in following cases if: (a) the scientific research association has not applied its income as per conditions prescribed ; (6) the scientific research association has not invested or deposited its funds as per conditions prescribed; (0) the activities of the scientific research association are not genuine; (4) the activities of the scientific research association are not being carried on in accordance with conditions subject to which such institution was approved. 49. Income of some Professional Institutions [Section 10(23A)] Any income (other than income chargeable under the head ‘income from house property or any __ income received for rendering any specific services or income by way of interest or dividends derived _stapled lacomes Pres .3.19] from its investments) of an association or institution established in India having its object as the ntrol, supervision, Or encouragement of the profession of law, medicine, accountancy, engineering Gr architecture or such other profession as the Central Government may notify in the Official Gazette. The following conditions are to be satisfied before any exemption is allowed under this clause : () The association or institution applies its income or accumulates it for application, solely to the objects for which it is established. (i) The institution or association is approved for the purpose by the Central Government. ‘The approval given under this section shall be withdrawn in following cases if : (@) the such association or institution has not applied its income as per conditions prescribed ; {b) the activities of the association or institution are conditions subject to which such institution was apy not being carried on in accordance with proved. 50. Exemption of Income Received by Regimental Fund [Section 23AA] Any income received by any person on behalf of any Regimental Fund or Non Public Fund established by the armed forces of India for the welfare of the past and present members of such forces or their dependents shall be exempted from tax. 51, Income of a Fund set-up for the welfare of employees or their dependents [Section 10(23AAA)] Any income ofsuch fund which is approved by Commissioner of Income-tax shall be fully exempted provided its income is applied wholly and exclusively for the objects for which it is established. The CBDT has notified following purposes for which the fund is expected to help its members or their dependents (1) Cash amount given to a member of the fund- (a) on superannuation, or (0) in the event of member’s own illness or illness of his/her spouse or dependent children; or (©) to meet the cost of education of dependent children of members. @) Cash amount given to the dependents of members in the event of death of such a member. 52, Income of a pension fund set up by LIC or other insurer [Section 10(23AAB)] Any income of a fund set up by Life Insurance Corporation of India on or after 1.8.1996 under a pension scherne or by any other insurer shall be fully exempted if contribution to such fund is made by any person for receiving pension from such fund which is approved by the Insurance Regulatory and Development Authority. 53. Income of Institutions established for development of Khadi and Village Industries [Section 10(23B)] . The public charitable trusts and societies registered under the Societies Registration Act, 1860 will beentitled to claim exemption from Income-tax for the income derived by such institutions from the Production, sale or marketing of Khadi or products of village industries. The exemption will not be allowed unless the institution applies its income or accumulates it for application solely for the development of Khadi or Village Industries. Only such institutions will qualify for exemption which “approved by Khadi or Village Industries Commission. ee roExempted », em The approval given under this section shall be withdrawn in following cases if: as per conditions prescribeg (@) such association or institution has not applied its income (0) the activities of the association or institution are not being carried on in accordance wig, conditions subject to which such institution was approved. 54. Income of State Level Khadi and Village Industries Board [Section 10(23pp, } Any income from an authority (whether known as the Khadi and Village Industries Board | any other name) established in a State by or under a State or Provincial Act for the develop, | Khadi or Village Industries in the State, shall be exempted from fax. Authorities set up to manage Religious and Charitable Orb, Ment 55, Income of certain Institutions [Section 10(23BBA]] Any income of any body or authority establish Provincial Act which provides administration of any (a) Public, Religious or Charitable Trusts ; (&) Endowments (including Maths, Guradwaras, Temples, Wakfs etc.) or ligious or charitable purposes registered under Societies Act 1860, shall 4, ed, or appointed by or under any Central, Stare of the following institutions : & (© a society for rel exempted from tax. 56. Income of European Economic Community [Section 10(23BBB)] ean Economic community derived in India by way of interest, dividend », Any income of Europ inder such scheme as the Central Govt. may capital gain from investments made out of its funds ui notify is fully exempted. §7. Income of a SAARC Fund for regional projects [Section 10(23BBC)] ‘Any income of a fund set up as SARC Fund for Regional Projects set up by Colomty Declaration issued on 21st Dec. 1991 by Heads of State or Government of the Member Countries ¢ South Asian Association for Regional Co-operation shall be fully exempted. 58. Any income of Insurance Regulatory and Development Authority [Section 10{23BBE}] Any income of Insurance Regulatory and Development Authority established under Insurance Regulatory and Development Authority Act 1999 shall be fully exempted. 59, Income of Prasar Bharti [Section 10(23BBH]] [Inserted by the Finance Act 2012, w.e.f. 2013-14] Any income of the Prasar Bharti (Broadcasting Corporation of India) established under sectit 3(0) of the Prasar Bharti (Broadcasting Corporation of India) Act, 1990, shall be exempt. 60. Any income received by a person on behalf of Fun [Section 10(23C)] of following Funds Any income received by i tee 'y any person on behalf of following funds set up by the Cent (i) The Prime Minister’s National Reli itizen ; e Pri lief Fund or the Pi inister’s Citi stance a Relief in Emergency Situations Fund (PM Cares Fund); or Miners Cesena (i) The Prime Minister's Fund (Promotion of Folk Art); or (ii) The Prime Minister's Aid to Student's Fund ; ora grempted Incomes (iia) The National Foundation for Communal Harmony ; (ian) Swachh Bharat Kosh (iam) Clean Ganga Fund jiianna) The Chief Minister's Relief Fund or The Lieutenant Governor's Relief Fund ) Any university or other educational institution which is a non profit earning body and is wholly or substantially financed by the Government ; or Any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or reception and treatment of persons during convalescence or of persons requiring medical attention and existing solely for philanthropic purposes and which is wholly or substantially financed by the Government ; oF (iad) Any university or other educational institution which is a non profit earning body and the receipts of the person from such university or universities or educational institution or educational institutions do not exceed % 5 crore ; or Any hospital or other institution (as stated above) and the receipts of the person from such hospital or hospitals or institution or institutions do not exceed @ 5 crore ; of Important point in respect of Section 10(23C)(fiiad) and Section 10230 [Explanation] [For the pusposes of sub-clauses (iiiad) and (iiiae), it is hereby clarified that if the person has receipts from university or universities or educational institution or institutions as Ireferred to in sub-clause (jiiad), as well as from hospital or hospitals or institution or institutions as referred to in sub-clause (fiiae), the exemptions under these clauses shall Inot apply, if the aggregate of annual receipts of the person from such university or luniversities or educational institution or institutions or hospital or hespitals or institution lor institutions, exceed five crore rupees; (jv) Any other fund or institution established for charitable purposes which may be approved by the Principal Commissioner or Commissioner ; or () Any trust or institution set up wholly for religious purposes or purpose which may be approved by the Principal Commissioner or Commissioner ; or (e) Any university or other educational institution which is a non profit earning body other than those mentioned at (a) and (b) above but are approved by the Principal Commissioner or Commissioner; or (cia) Any hospital or other institution other than those mentioned at (a) and (b) above but is approved by the Principal Commissioner or Commissioner. In case annual receipts of such an institution exceeds @ 1 crore in a previous year, it has to file an application upto 30th September in the succeeding financial year. Under Section 10(23C) income of institutions specified above shall be exempt from income tax. In cettain cases, approvals are required to be taken from prescribed authority in the prescribed manner to became eligible for claiming exemption. ‘Meaning of ‘substantially financed bythe’Government’ erie ic OTeHL SN (iia (ie) (iiiae) e) Any university or other educational institution, hospital or other institution referred in section 10(23C), shall be considered as being substantially financed by the Government for any previous year, if the government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total feceipts including any voluntary contribution as may be prescribed, of such university or other educational institution, hospital or other institutions, as the case may be, during the relevant previous year.~ i Bxempte Pe ney sts with specific di fied trusts to other specified tru ie Pe ated ‘as application of Income for the donor trust. Unsertion LAN. 2018-19] a fF income of ary ther medical institu s roluntary contribution 12AA, being ¥ ul le shall not be treated a5 application of in Contribution made by certaln 51 forming part of corpus shall not 12th proviso to section 10(23C)] [we Any amount credited of paid out © ‘educational institution or any hospital oro! any trust or institution registered under section 1 they shall form part of corpus of the recipient trust, 61. Income of Mutual Fund [Section 10(23D)] of such Mutual Fund set up by other public sector bank or a public financiy fund authorised by Securities & Exchange Board of India or Reserve Bank of in, ditions as the Central Govt. may, by notification in the Official Gazer, fund of trust or institution oF any university o, in sub-clauses (iv, (V) oF (vi) oF (yg ion referred to made with a specific ditectign | come for the donor, nae! Any income institution or any ‘and subject to such con 1 its subsidiary banks and all othe, specify in this behalf. “Other Public Sector Banks’ means the State Bank of India, all riks and rationalised banks. The expression ‘public financial institution’ shall have the meaning assigned to in Section 4A of the Companies Act, 1956. (23DA)] e of a securitisation trust [Section 10 ‘Any income ofa securitisation trust from the activity of securitisation shall be exempt. 63. Income of Investor Protection Fund [Seetion 10(23EA)] vay of contributions received from ‘Any income received by an Investor Protection Fund by w recognised stock exchanges and the members thereof shall be fully exempted. From the assesssment year 2007-08 similar exemption has been extended to Investor Protection Fund set up by Commodity Exchanges also. ption of income of investor protection fun 62. Exemption of incom 64. Exem d of depository [Section 10(23ED)] Any income, by way of contrit set up in accordance with the regu! ‘Act, 1996 by a depository, as the Central Government may specify, Gazette. 65. Exemption of inc Any specified income of su corporation and so verified in the bution received from a depository, of such Investor Protection Fund lations made under SEBI Act, 1992 and the Depositorie: by notification in the Official ome of Core Settlement Guarantee Fund [Section 10(23EE)] ch Core Settlement Guarantee Fund set up by recognised cleering Official Gazette by Central Government shall be exempt. mes of a Venture Capital Company or Venture ified Business or Industries [Section 10 (23F5]] ble only in respect of income of ® jertaking 66. Exemption for Certain Inco: Capital Fund from Certain Speci As per this amendment, the exemption will now be availal Venture Capital Company or Venture Capital Fund from investment ina venture capital und engaged in certain specified businesses or industries. New definition of “Venture Capi fe i i pital Company”, “Venture Capital Fund” and Capital undertaking” [Explanation 1 of section 10 C3FB)] me ae (a) Meets ot venue Capital Company. A company which has been registered befor ee La ne SEB] Regulations, 1996 (Venture Capital Fund Regulation) or whic he gistered as venture capital fund being a sub category of category 1 Alterna gy erventuteaa _geempted Incomes Investment Fund under the SEBI Regulation 2012 (Alternative Investment Fund Regulations). f The Company has to satisfy the conditions mentioned in clause (a). } ww Meaning of Venture Capital fund. A trust which has been registered before 21-5-2012 under the Venture Capital Fund Regulations or which has been registered as venture capital fund being a sub-category of category 1 Alternative Investment Fund under the Alternative Investment Funds Regulations. The trust has to satisfy the conditions mentioned in clause (). (9 Meaning of venture Capital undertaking. As defined under the Venture Capital Fund Regulation or under the Alternative Investment Funds Regulation. No exemption of income of certain Venture capital companies or Venture capital funds [Insertion of proviso to Section 10(23FB)] No exemption shall be available to a venture capital company or venture capital fund, being an investment fund specified in clause (a) of the Explanation 1 to section 115 UB, for any previous year relevant to the assessment year beginning on or after the Ist day of April, 2016. 67. Exemption of non business/ profession income of an Investment fund section 10(23FBA)] Any income of an investment fund other than the income chargeable under the head “Profits and gains of business or profession” shall not be included in the total income of such fund. 68. Exemption of income accruing or arising or received by a unit holder of an investment fund [Section 10(23FBB)] Any income of a person accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head "Profits and gains of business or profession” shall not be included in total income of such person. 69. Exemption of interest income of a business trust [Section 10(23FC)] Any income of a business trust by way of interest received or receivable from a ‘special purpose vehicle’ shall not be included in the total income of the trust. For this purpose, the term ‘special purpose vehicle means an Indian company in which the business trust holds controlling interest and any specific percentage of sharcholding or interest, as may be required by the regulation under which such trust is granted registration. Any income of a business trust by way of interest or dividend received or receivable from a special purpose vehicle shalll also be exempt. 70, Exemption of rental income of Real Estate Investment Trust [Section 10(23FCA}] Any income of a business trust, being a real estate investment trust, by way of renting or leasing or letting out any real estate asset owned directly by such business trust, shall not be included in the total income. 71. Exemption of any distributed income referred to in section 115UA for a unit holder [Section 10(23FD)] Any distributed income, referred to in section 115UA, received by a unit holder from the business * not being that proportion of the income which is of the same nature as the income referred to in aExeny Cary Met Ia, shore the special purpose vehicle has exer; Satin 1OZ3FC\a) ar 1O23FCUD) (in a case Ww Sear holder option u/s LISBAA), shall not be included in the total income of sud Seana babe hy Any distributed income from a business trust or dividend receiv ry a all also ’ exempted. ; 72. Exemption of income of a wholly owned subsidiary of Abu Dhabi Investment Authority and of Sovereign Wealth Fund Unser tone 39) Section 10(23FE) by Finance Act 2020, w.e.f. A.¥. toe Any income of a specified person in the nature of dividend, interest or long-term capital p.. arising from an investment made by it in India, whether in the form of debt or share capital or yng : Ciseq thy the investment: (0 is made on or after the Ist day of April, 2020 but on or before the 31st day of March, 2924, (i) is held for at least three years; and (i) isin— | (a) abusiness trust referred to in sub-clause (i) of clause (13A) of Section 2; or (6) a company or enterprise or an entity carrying on the business of developing, .. operating and maintaining, or developing, operating and maintaining “yy, infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) oF Section 80-1A or such other business as the Central Government may, by notification in the Official Gazette, specify in this behalf; or a Category-I or Category-II Alternative Investment Fund regulated under the Securi ties and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, mag, under the Securities and Exchange Board of India Act, 1992 (15 of 1992), having not les: than 50% investment in one or more of the company or enterprise or entity referred tg in item (b); (d) a domestic company, set up and registered on or after the 1st day of April, 2021, having minimum seventy-five percent investments in one or more of the companies or enterprises or entities referred to in item (6); or (©) a non-banking financial company registered as an infrastructure Finance Company as referred to in notification number RBI/2009-10/316 issued by the Reserve Bank of India or in an infrastructure Debt Fund, a non-banking finance company, as referred to in the infrastructure Debt Fund-Non-Banking Financial Companies (Reserve Bank) Directions, 2011, issued by the Reserve Bank of India, having minimum ninety per cent lending to one or more of the companies or enterprises or entities referred to in ( item (b). 73. Capital Gains to a non-resident from transfer of shares of a resident company by the resultant fund [Section 10(23FF)] [W.c.f. April 1, 2022] Any income of the nature of capital gains, arising or received by a non-resident, which is on account of transfer of share of a company resident in India, by the resultant fund and such shares were transferred from the original fund on the resultant fund in relocation, shall be exempt where capital gains on such shares were not chargeable to tax if that relocation had not taken place. 74. Income of Registered Trade Unions [Section 10(24)] The following incomes of registered trade unions are exempt from taxpanned comes Ea (p Income from house property, {iy Income from other sources, pe trade union muust be a registered one and formed primarily for the purpose of regulating the jyfons Between workmen and employer or between workmen and workmen. This benefit shall aiifeavailable fo an association of registered trade unions, as 7s. Income of Provident and Superannuation Funds [Section 10(25)] @ Interest on securities which are held by ot are the property of any provident fund to which Provident Funds Act, 1925 applies and any capital gains of the fund arising from the sale, exchange or transfer of such securities, (ii) Any income received by the trustees on behalf of a recognised provident fund. ii) Any income received by the trustees on behalf of an approved superannuation fund. 76. Income of Employee’s State Insurance Fund [Section 10 (25A)] Income of such fund is fully exempted. [Link] of Schedule Tribe Members [Section 10(26) and 10(26A)] Certain types of incomes of the members of Scheduled Tribes living in tribal areas are exempt from tax. The Scheduled Tribes to which this exemption applies are defined in Clause (25) of Article x6 of the Constitution, residing in any areas specified in Part A or Part B of the table appended to paragraph 20 of the Sixth Schedule of the Constitution or in the State of Arunachal Pradesh, Manipur, ‘Tripura, Mizoram and Nagaland or in the Ladakh region of the State of Jammu & Kashmir. The exempted incomes are incomes which accrue or arise to him: () from any source in the area, State, or Union Territories aforesaid, or (ii) by way of dividend. This means that if a member of a Schedule Tribe sets up a business at any place other than nentioned above, profit from such business will be taxable. 78. Income of Sikkimese individual [Section 10(26AAA)] ‘The following incomes which accures or arises to a Sikkimese individual shall be exempt from income tax— (2) income from any source in the State of Sikkim; or () income by way of dividend or interest on securities. This exemption will not be available to a Sikkimese women who, on or after 1-4-2008 marries a ton Sikkimese individual. 79. Regulating the marketing of agricultural produce [Section 10(26AAB)] le Any income of an agricultural produce market committee or board constituted under any law for a being in force for the purpose of regulating the marketing of agricultural produce shall be 80. Income of a corporation set-up for promoting the interests of Scheduled tes, Scheduled Tribes or Backward Classes [Section 10(26B]] Brome of such corporation or body, institutions or associations which are wholly financed by me and which have been set-up to promote the interest of above mentioned communities shall be Yexempted, .Ey oom 81. Income of a corporation set-up to protect the interests of Minorities [Section 10/2688) ! Income of such a corporation is fully exempted. 82. Any income of a corporation for ex-servicemen [Section A oBEPH Ss Anyincome jon established by a Central, State or provincial Act for the wey, Fs ccanse mame OF corporation established bye Cenwrel shall be fully exempted, **°a, economic upliftment of ex-servicemen being the citize “Ex-serviceman” means a person who has served in any rank, whether as combatant OF no, | combatant in the armed forces of the Union oF armed forces of the Indian States bef “| commencement of Constaton (but excuding the Assam Rifles. Defence Security Corps, Reserve Enginerng Fore Lak Sakayak Sena, anim and Keehn Militia and Terra Ange ™ a continuous period of not less than six months after attestation and has been release, oh than by way of dismissal or discharge on account of misconduct or ineficiency, and in the ea deceased or incapacitated ex-servicemen includes his wife, children, father, mother, minor brotha! widowed daughter arid widowed sister, fully dependent upon such ex-serviceman immediaty, before his death or incapacitation. 83. Income of cooperative society looking after the interests of Sche: or Scheduled Tribes or Both [Section 10(27]] Such income shall be fully exempted provided the membership of such society consists of on Purposes and the finances ofthe society are provigc, Ee duled Castes other cooperative societies formed for similar by Government and such other societies. 84. Any income accruing or arising to Commodity Boards etc. Any income accruing to (a) the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942), in any . Previous year relevant to any assessment year commencing on or after the Ist day of Apri, » 1962 or the previous year in which such Board was constituted, whichever is later; y [Section 10/294), () the Rubber Board constituted under sub-section (1) of section 4 of the Rubber Board Act, 1947 (24 of 1947), in any previous year relevant to any assessment year commencing on o: after the Ist day of April, 1962 or the previous year in which such Board was constituted, whichever is later ; (0 the Tea Board established under section 4 of the Tea Act 1953 (29 of 1953), in any previous year relevant to any assessment year commencing on or after the Ist day of April, 1962 o the previous year in which such Board was constituted, whichever is later ; (@) the Tobacca Board constituted under the Tobacco Board Act, 1975 (4 of 1975), in any Previous year relevant to any assessment year commencing on or after the Ist day of April 1975 or the previous year in which such Board was constituted, whichever is later; (©) the Marine Products Export Development Authority established under section 4 of the Marine Products Export Development Authority Act, 1972 (13 of 1972), in any previous year relevant to any assessment year commencing on or after the Ist day of April, 1972 or the Previous year in which such Authority was constituted, whichever is later ; () the Agricultural and Processed Food Products Export Development Authority establishe! under section 4 of the Agricultural and Processed Food Procets Export Development Act 1985 (2 of 1986), in any previous year relevant to any assessment year commencing of 0rr t pa tacos Pass 3.27 aiter the Ist day of April, 1985 or the 7 Previous year in which such Authority was i whichever is later constituted, \ ; ) the Spices Board constituted under sub-section (1) of section 3 of the Spices Board Act, 1986 (10 of 986). in any previous year relevant to any assessment year commencing on oF after the Ist day of April, 1986 or the previous year in which such Board was constituted, whichever is later. (9 the Coir Board established under section 4 of the Coir Industry Act, 1953. | t 5. Amount received as subsidy from or through the Tea Board [Section 10(30)] This exemption is available to assessee carrying on the business of growing and manufacturing ea in India. The subsidy received by such assessee from or through the Tea Board under any such heme for replantation or replacement of tea bushes or for rejuvenation or consolidation of areas for tea cultivation (inserted by Finance Act, 1984) as the Central Government may notify in the Official Gazette is exempt. For getting this exemption, the assessee is required to furnish to assessing Officer, along with his return of income a certificate from the Tea Board showing the amount of subsidy received by him during the previous year. The A.O. may allow the assessee such time as he thinks desirable and the assessce is required to submit the said certificate within the allowed time. 86. Amount received as subsidy from or through the concerned Board [Section 10(31}] Any amount received as subsidy from or through the concerned Board for replantation or replacement of Rubber, Coffee, cardamom plants or plants for growing of such other commodities or for any other scheme so notified shall be fully exempted. 87. Income of child clubbed u/s 64 (1A) [Section 10(32)] In case income of a minor child is clubbed with the income of his parent, the parent can claim exemption upto actual income of child clubbed or ® 1,500 whichever is less in respect of each minor child whose income is included. Note. [Link]. A.Y. 2021-22, exemption under this section shall not be available to a parent if he/she opts to be taxed as per new tax regime u/s 115BAC. 88. Income from transfer of capital assets of UTI [Section 10(33)] Any income arising from the transfer of a capital asset, being a unit of the Unit Scheme, 1964 ‘elemed to in Schedule I to the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 and where the transfer of such asset takes place on or after the 1st day of April, 2002 shall be fully exempted. 9. Income by way of dividend from Indian company [Section 10(34)] [Abolished Wel. AY. 2021-23) tant Finance Act 2020 has abolished this section and wef. A/Y 2021-22, dividend has been made safe Fur it simply, any income by way of dividend received on or after the Ist day of April, 2020 be fully taxable in the hands of shareholders. ce Exemption of income to a shareholder on buyback of shares of unlisted any [Section 10 (34A)] Compa” income arising to an assessee being a shareholder, on account of buyback of shares by the 'Pany’ as referred to in section 115QA shall be exempt. aae ‘Exenipted Incomes |= a 91. sg 4 ofan Irene clfied dividend income of a unit of IFSC which is engaged in leasing Aut (Section 10(348)) Iwe.t ay, 2024-25) imarily engaged in the business of re iol 8 Unit of Any International financial Services Centre, ace a Unit of any Intermanon. casing of an aircrat, by Way of dividends from 3 Company Ee ational Financial Serys vo j ines shall be exempt." Services Centre primarily engaged in the busin 92. Income from un: (35)] its of UTI and other mutual funds (Section 10(35) : .22, any income from ‘ The Finance Act 2020 has amended this section and now wee. A/Y 2021 22, any ‘units of UT] and other mutual funds has been made taxable. | by shall be fully To put it simply, any income in respect of units received on or after April 1, 2020 by , taxable in the hands of unit holders. 93. Income from sale of shares in certain cases [Section 10(36)] i , gible equity share Any income arising from the transfer of a long-term capital asset, being an eligible equity share in if March 2004 a 4 Company purchased on or after the Ist day of March, 2003 and before the Ist day o! ind held for a period of twelve months or more For the purposes of this clause, “eligible equity shares” means : () any equity share in a company being a constituent of BSE-500 Index of the Stock Pachange Mumbai as on the Ist of March, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognised stock exchange in India ; (ii) any equity share in a company allotted through a public issue on or after the 1st day of March, 2003 and listed in a recognised stock exchange in India before the 1st day of March 2004 and the transaction of sale of such share is entered into on a reco; ignised stock exchange in India. 94, Capital Gain on com: [Section 10(37)] In the case of an assessee, chargeable under the head” Ca exempted, where : pulsory acquisition of urban Agricultural Land being an individual or a Hindu individual family, any incom: pital gain” arising from the transfer of agricultural la ind, shall be (i) Such land is situated in any area referred to in, item (a) or item (b) of sub-clause (iii) of clause (14) of Section 2; (i) Such land, during the period of two years immediately Preceding the date of transfer, w25 being used for agricultural purposes by such Hindu undivided family or individual, ot ? parent of his ; (ii) Such transfer is by wai consideration for which Reserve Bank of India ; of compulsor ; YY acquisition under any law, or a transfer U 'S determined or approved by the Central Government or (iv) Such income has arisen fr }om the com, by such pensation or consi assesses on or after the Ist day of April, 2004, It may be noted in this conne ction that exemption is avai 7 sition 1 taken place on or after 1-4-2004, Exemption is te 'S available only if compulsory acquis A 7 as ce efor’ 7442004 bnt compensation has been received onc ate Lee! acquisition has taken pla ed deration for such transfer rece"