Given below is the list of exempted incomes under section 10 of the Income Tax Act:
Agriculture Income (Section 10(1))
Agriculture income is on the list of exempted incomes because the government cannot levy taxes on such income. It covers the income of the cultivators. Moreover, it includes the income of land holders who have rented out agriculture rents. It consists of:
- Firstly, rent or revenue earned from letting of land situated in India & used for agricultural purposes.
- Secondly, income from agriculture or other related activities.
- Thirdly, agricultural income from farm building, required for agriculture purposes. (For example, cleaning, sorting and grading of agri-produce to make it saleable)
- Lastly, income from saplings or seeds grown in a nursery on agricultural land (whether or not basic operations were carried out on land).
Share of Profits (Section 10(2) & (2A))
- Income earned by HUF is assessable in its own hands as HUF is a ‘person’ under Income Tax Act. (Section 10 (2)). For instance, Mr X receives ₹30,000 per month from HUF. The income of HUF is ₹90,000. Moreover, he also earns ₹30,000 as an individual income. Here, Mr X will pay tax on the individual income and not on the income received from HUF.
- Income earned by a Partnership Firm is assessable in its own hands as the Firm is a ‘person’ under Income Tax Act. (Section 10 (2A)).
Interest paid to non-resident of India (Section 10(4)(i), (4)(ii) & (4B))
- As per section 10 (4)(i), interest paid to non-residents on certified bonds and securities is exempt from tax.
- Further, as per section 10 (4)(ii), interest paid to a non-resident on sums of money standing to his credit in a Non-Resident External Account, as per the FEMA Act of 1999, is exempt from tax.
- Lastly, as per section 10 (4)(B), interest paid to a non-resident who is of Indian origin is exempt from tax. Person of Indian origin means if the person or his parents or his grandparents were born in undivided India. Grandparents include both maternal & paternal.
Leave Travel Allowance or Assistance to an Indian Citizen Employee (Section 10(5))
Section 10 (5) entitles an employee to receive an exemption on the leave travel allowance or assistance received or due to him from the employer for himself or his family if:
- An employee is on a leave to any place in India
- Leave to any place in India after retirement or termination of his services.
Remuneration received by a non-resident of India (Section 10(6))
As per the list of exempted incomes, any income earned or received by a non-resident of India is exempt when:
- Firstly, remuneration is received as an ambassador, consular officer of a foreign state, trade commissioner or official representative of India.
- Secondly, remuneration received as an employee of a foreign enterprise.
- Thirdly, remuneration earned during employment on a foreign ship.
- Lastly, remuneration as an employee of a foreign country, during his stay in India for training purposes.
Tax paid on income from foreign firm (Section 10(6A), (6B), (6BB), (6C))
- Section 10 (6A)- When the government or Indian concern renders services from a foreign company, they earn income in the form of royalty or fees. The government or Indian concern pays taxes on the behalf of the foreign company which is an exemption from tax.
- Then, section 10 (6B)- When the government of India or an Indian concern pays tax on behalf of a foreign company in respect of income other than royalty or fees or salary for rendering services is exempt from tax.
- Further, section 10 (6BB)- When the government of India or an Indian concern pays tax on behalf of a foreign company in respect of leasing an aircraft or aircraft engine is exempt from tax.
- Lastly, section (6C)- When a foreign company derives income in respect of royalty or fees for rendering services in or outside India in projects related to national security is exempt from tax.
Allowances of perquisites outside India to an Indian citizen (Section 10(7))
When the Government of India pays allowances and perquisites (not basic salary) to a citizen of India who is rendering services outside India to the Indian government then such income is exempt from tax. For example- Foreign ambassadors and diplomats.
Pension received by Recipient of Gallantry Awards (Section 10(18))
When an individual who was a central or state government employee and received Param Vir Chakra or Maha Vir Chakra or Vir Chakra has received a pension, such income is exempt from tax. Moreover, in the case of the death of the awardee, the family pension is exempt from tax. Also, disability pension granted to disabled personnel of armed force, invalided on account of disability attributable to or aggravated by such service, is exempt from tax. The exemption is not given to an employee retired or superannuation or otherwise.
Maturity amount of a life insurance policy, including bonus (Section 10(10D))
- Any sum received from policy mentioned under section 80DD (treatment of a disabled person) is fully taxable since deduction is already given under section 80DD.
- Sum received under a keyman insurance policy is fully taxable.
- Moreover, sum received on the death of the policyholder under any other policy is fully exempt from tax.
- Sum received under any policy on maturity, not on the death of the policyholder, then:
- If the policy was issued before 1/4/2003, then the income is fully exempt.
- Further, if the policy was issued on or after 1/4/2003 but before 1/4/2012, the exemption is applicable if the yearly premium is less than or equal to 20% of the sum assured.
- Moreover, if the policy was issued during 2012-2013, the exemption is applicable if the yearly premium is less than or equal to 10% of the sum assured.
- Lastly, if the policy was issued on or after 1/4/2013, the exemption is applicable if the yearly premium is less than or equal to 15% of the sum assured (for disabled persons) and 10% of the sum assured (for others).
List of exempted incomes under section 10(8) to section 10(20)
- Foreign employees working under Cooperative Technical Assistance Programme, India (Section 10(8))
- Income of consultant (Section 10(8A))
- Income employees of consultant (Section 10(8B))
- Further, income of family members of a person working under the Cooperative Technical Assistance Programme, India (Section 10(9))
- Gratuity received by Government servants (Section 10(10)(i)) and gratuity Received by a Non-Government Employee, as per Payment of Gratuity Act, 1972 (Section 10(10)(ii))
- When an individual earns commuted pension (Section 10(10A))
- Leave Encashment on Retirement amount (Section 10(10AA))
- Retrenchment Compensation to workmen on relocation (Section 10(10B))
- Any remittance received under Bhopal Gas Leak Disaster Act 1985 (Section 10 (10BB))
- Any income or compensation received in case of any disaster (Section 10(10BC))
- Compensation during retirement from a public sector company or any other company (Section 10(10C))
- When an employer pays tax on perquisites (Section 10(10CC))
- Statutory Provident Fund income (Section 10(11))
- Any income received from Recognized Provident Fund (Section 10(12))
- Then, payment received from approved Superannuation Fund (Section 10(13))
- Further, payment received from House Rent Allowance (Section 10(13A))
- Income from Business Expenditure Allowance (Section 10(14))
- Interest Incomes received (Section 10(15))
- Scholarships are granted to meet education expenses (Section 10(16))
- Daily & Constituency allowance received to MPs & MLAs (Section 10(17))
- Awards or rewards given by the government (in cash/kind) (Section 10(17A))
- Family members of the armed forces receive a family pension for the person who died on duty (Section 10(19))
- Income of local authority or body (Section 10(20))
List of exempted incomes under section 10(21) to section 10(26)
- Scientific Research Association income (Section 10(21))
- Income of a broadcasting or news Agency (Section 10(22B))
- Further, the income of professional Institutions (Section 10(23A))
- Income via Regimental Fund (Section 10(23AA))
- Also, income from the employee welfare fund (Section 10(23AAA))
- Then, income from the pension fund of LIC or any other insurer (Section 10(23AAB))
- Income of village development institutions or bodies (Section 10(23B))
- Income of village industry bodies at khadi or state level (Section 10(23BB))
- Additionally, the income of authorities that manage religious and charitable bodies (Section 10(23BBA))
- Moreover, European Economic Community income received (Section 10(23BBB))
- SAARC Fund for regional projects (Section 10(23BBC))
- Insurance Regulatory and Development Authority income received (Section 10(23BBE))
- Income via Prasar Bharti (Section 10(23BBH))
- Income of certain funds of National Importance set up by Central Government (Section 10(23C))
- Swachh Bharat Kosh
- Clean Ganga Fund or other similar funds
- University/Educational institutions formed solely for educational purposes & not for profit
- Medical institutions or hospitals formed solely for philanthropic purposes.
- Mutual Fund Income (Section 10(23D)
- Securitization trust Income (Section 10(23DA) j)
- Investor Protection Fund income (Section 10(23EA))
- Income of investor protection fund of depository (Section 10(23ED))
- Certain incomes of a Venture Capital company fund (Section 10 (23FB))
- Moreover, the income of authorized Trade Unions (Section 10(24))
- Income via provident and superannuation funds (Section 10(25))
- Further, the income of the Employee’s State Insurance Fund (Section 10 (25A))
- Schedule Tribe Members’ income (Section 10(26) and (26A))
- Then, Sikkimese individual’s income (Section 10(26AAA))
- Marketing activities regulation of agricultural produce (Section 10(26AAB))
- Additionally, the income of corporations uplifting Scheduled Castes, Scheduled Tribes or Backward Classes (Section 10(26B))
- Income of a corporation protecting the interests of Minorities (Section 10(26BB))
- Further, a corporation established for ex-Servicemen (Section 10(26BBB))
List of exempted incomes under section 10(27) to section 10(44)
- Income of cooperative society looking after the interests of Scheduled Castes or Scheduled Tribes or both (Section 10(27))
- Any income of Commodity Boards etc. (Section 10(29A))
- Amount received as subsidies of the Tea Board (Section 10(30))
- Moreover, the amount received as subsidies of the concerned board (Section 10(31))
- Dividend from an Indian company (Section 10(34))
- Income via buyback of shares of an unlisted company (Section 10 (34A))
- Moreover, income from the sale of units of UTI or any other mutual fund (Section 10(35))
- Income of minor clubbed in the hands of a parent up to Rs. 1500 per year per child (Section 10(32))
- Income of National Pension Scheme Trust (Section 10(44))