TAX-FREE INCOMES
Agricultural Income [Section 10(1)]
As
per section 10(1), agricultural income earned by the taxpayer in India is
exempt from tax.
Agricultural
income is defined under section 2(1A) of the Income-tax Act. As per section
2(1A),
agricultural
income generally means:
(a)
Any rent or revenue derived from land which is situated in India and is used
for
agricultural
purposes.
(b)
Any income derived from such land by agriculture operations including
processing of
agricultural
produce so as to render it fit for the market or sale of such produce.
(c)
Any income attributable to a farm house subject to satisfaction of certain
conditions
specified
in this regard in section 2(1A).
Any
income derived from saplings or seedlings grown in a nursery shall be deemed to
be
agricultural
income.
Amount received by a member of the HUF from
the income of the HUF, or in case of
impartible estate out of income of family
estate [Section 10(2)]
As
per section 10(2), amount received out of family income, or in case of
impartible estate,
amount
received out of income of family estate by any member of such HUF is exempt
from tax.
Share of profit received by a partner from the
firm [Section 10(2A)]
As
per section 10(2A), share of profit received by a partner from a firm is exempt
from tax in the
hands
of the partner. Further, share of profit received by a partner of LLP from the
LLP will be
exempt
from tax in the hands of such partner. This exemption is limited only to share
of profit
and
does not apply to interest on capital and remuneration received by the partner
from the
firm/LLP.
Certain interest to non-residents [Section
10(4)]
As
per section 10(4)(i), in the case of
a non-resident any income by way of interest on certain
notified
securities or bonds (including income by way of premium on the redemption of
such
bonds)
is exempt from tax.
As
per section 10(4)(ii), in the
case of an individual, any income by way of interest on money
standing
to his credit in a Non-Resident (External) Account in any bank in India in
accordance
with
the Foreign Exchange Management Act, 1999, and the rules made thereunder is
exempt
from
tax.
Exemption
under section 10(4)(ii) is available only if such individual is a person
resident outside
India
as defined in clause (q) of section 2 of the said Act or is a person who
has been permitted
by
the Reserve Bank of India to maintain the aforesaid Account.
Interest on notified savings certificates
[Section 10(4B)]
As
per section 10(4B), in the case of an individual, being a citizen of India or a
person of Indian
origin,
who is a non-resident, any income by way of interest on notified savings
certificates
(subscribed
in convertible foreign exchange) issued before the 1st day of June, 2002 by the
Central
Government is exempt from tax.
[As amended by Finance Act, 2016]
Leave travel concession [Section 10(5)]
An
employee can claim exemption under section 10(5) in respect of Leave
Travel Concession.
Exemption
under section 10(5) is available to all employees (i.e. Indian as
well as foreign
citizens).
Exemption
is available in respect of value of any travel concession or assistance
received or due
to
the employee from his employer (including former employer) for himself and his
family
members
in connection with his proceeding on leave to any place in India. Other
provisions to be
kept
in mind in this regard are as follows:
Where journey is performed by air: Amount of exemption will be lower of amount of
economy
class air fare of the National Carrier by the shortest route or actual amount
spent.
Where journey is performed by rail: Amount of exemption will be lower of amount of air-
conditioned
first class rail fare by the shortest route or actual amount spent. The same
rule will
apply
where journey is performed by any other mode and the place of origin of journey
and
destination
are connected by rail.
Where the place of origin and destination are
not connected by rail and journey is
performed by any mode of transport other than
by air:
The
exemption will be as follows:
(a) If recognised public transport exists: Exemption
will be lower of first class or deluxe
class
fare by the shortest route or actual amount spent.
(b) If no recognised public transport exists: Exemption
will be lower of amount of air-
conditioned
first class rail fare by the shortest route (considering as if journey is
performed
by rail) or actual amount spent.
Block: Exemption
is available for 2 journeys in a block of 4 years. The block applicable
for
current
period is calendar year 2014-17. The previous block was of calendar year
2010-2013.
Carry over: If an
employee has not availed of travel concession or assistance in respect of one
or
two permitted journeys in a particular block of 4 years, then he is entitled to
carry over one
journey
to the next block. In this situation, exemption will be available for 3
journeys in the next
block.
However, to avail of this benefit, exemption in respect of journey should be
utilised in the
first
calendar year of the next block. In other words, in case of carry over,
exemption is available
in
respect of 3 journeys in a block, provided exemption in respect of at least 1
journey is claimed
in
the first year of the next block.
Exemption
is in respect of actual expenditure on fare, hence, if no journey is performed,
then no
exemption
is available.
Family: Family
will include spouse and children of the individual, whether dependent or not
and
parents,
brothers, sisters of the individual or any of them who are wholly or mainly
dependent on
him.
Exemption
is restricted to only 2 surviving children born after October 1, 1998 (multiple
births
after
first single child will be considered as one child only), however, such
restriction is not
applicable
to children born before October 1, 1998.
[As amended by Finance Act, 2016]
Remuneration received by specified diplomats
and their staff [Section 10(6)(ii)]
As per section 10(6)(ii), in case of an
individual who is not a citizen of India, remuneration
received
by him as an official (by whatever name called) of an embassy, high Commission,
legation,
Commission, consulate or trade representative of a foreign State, or member of
the staff
of
any of that official is exempt from tax, if corresponding Indian official in
that foreign country
enjoys
a similar exemption.
Salary of a foreign employee and non-resident
member of crew [Section 10(6)(vi), (viii)]
As
per section 10(6)(vi), the remuneration received by a foreign national
as an employee of a
foreign
enterprise for services rendered by him during his stay in India is exempt from
tax,
provided
the following conditions are fulfilled—
(a) the foreign enterprise is not
engaged in any trade or business in India ;
(b) his stay in India does not exceed in
the aggregate a period of 90 days in such year ; and
(c) such remuneration is not liable to
be deducted from the income of the employer.
As
per section 10(6)(viii), any salaries received by or due to a
non-resident foreign national for
services
rendered in connection with his employment on a foreign ship where his total
stay in
India
does not exceed in the aggregate a period of 90 days in the year is exempt from
tax.
Remuneration of a foreign trainee [Section
10(6)(xi)]
As
per section 10(6)(xi), the remuneration received by a foreign trainee as an
employee of
foreign
Government during his stay in India in connection with his training in any
establishment
or
office of, or in any undertaking owned by,—
i.
the Government ; or
ii.
any company owned by the Central Government, or any State Government
iii.
any company which is a subsidiary of a company referred to in item (ii)
; or
iv.
any corporation established by or under a Central, State or Provincial Act ; or
v.
any co-operative society wholly financed by the Central Government, or any
State
Government
Tax paid on behalf of foreign company deriving
income by way of royalty or fees for technical
services [Section 10(6A)]
Tax
paid by Central Government, State Government or an Indian concern on behalf of
a foreign
company
deriving income by way of royalty or fees for technical services in pursuance
of an
agreement
made after March 31, 1976 but before June 1, 2002 will be exempt from tax in
the
hands
of such foreign company provided such agreement is in accordance with the
industrial
policy
of the Indian Government or it is approved by the Central Government.
Tax paid on behalf of foreign company or
non-resident in respect of other income [Section
10(6B)]
Tax
paid by Central Government, State Government or an Indian concern on behalf of
a foreign
company
or non-resident in respect of any income (not being salary, royalty or fees for
technical
services)
will be exempt from tax in the hands of such foreign company or non-resident if
such
income
is received in pursuance of an agreement entered into before June 1, 2002 by
the Central
[As amended by Finance Act, 2016]
Government
with the Government of a foreign State or international organisation or any
other
related
agreement approved by the Central Government.
Tax paid on behalf of foreign Government or
foreign enterprise deriving income by way of
lease of aircraft or aircraft engine [Section
10(6BB)]
Tax
paid by an Indian company, engaged in the business of operation of aircraft, on
behalf of
foreign
Government or foreign enterprise deriving income by way of lease of aircraft or
aircraft
engine
will be exempt from tax in the hands of such foreign Government or foreign
enterprise if
such
lease rental is received under an agreement which is approved by Central
Government and
entered
during the period between 31-3-1997 to 1-4-1999, or after 31-3-2007.
Technical fees received by a notified foreign
company [Section 10(6C)]
Section
10(6C) grants exemption from tax in respect of income arising to notified
foreign
company
by way of royalty or fees for technical services received in pursuance of an
agreement
entered
into with that Government for providing services in or outside India in
projects
connected
with security of India.
Allowance/perquisites to Government employee
outside India [Section 10(7)]
As
per section 10(7), any allowances or perquisites paid or allowed as such
outside India by the
Government
to a citizen of India for rendering service outside India is exempt from tax.
Income of foreign Government employee under
co-operative technical assistance programme
[Section 10(8)]
As
per section 10(8), remuneration received directly or indirectly by an
individual, from the
foreign
Government in connection with a co-operative technical assistance programme and
projects
in accordance with an agreement entered into by the Central Government and such
foreign
Government, is exempt from tax. Further, exemption is available in respect of
any other
income
of such an individual which accrues or arises outside India and is not deemed
to accrue
or
arise in India, provided such individual is required to pay income-tax/ social
security tax to the
foreign
Government.
Remuneration or fees received by a
non-resident consultant/its foreign employees [Section
10(8A), (8B)]
Under
section 10(8A), (a) remuneration or fees received by a
consultant* directly or indirectly
out
of the funds made available to an international organisation, under a technical
assistance
agreement
between such organisation and the Government of a foreign State and (b)
any other
income
which accrues or arises to him outside India and is not deemed to accrue or
arise in India,
in
respect of which such consultant is required to pay income-tax/social security
tax to the
foreign
Government of the country of his origin, is exempt from tax.
*Consultant
means any individual who is either not a citizen of India, or being a citizen
of India,
is
not ordinarily resident in India or any other person who is a non-resident and
is engaged by the
international
organization for rendering technical services in India in accordance with an
agreement
entered into by the Central Government and the said international organization
and
the
agreement relating to engagement of consultant is approved by the prescribed
authority.
[As amended by Finance Act, 2016]
Section
10(8B) grants similar exemption to the employee of the above discussed
consultant, if
such
employee is either not a citizen of India or being a citizen of India, is not
ordinarily resident
in
India and the contract of his service is approved by prescribed authority
before the
commencement
of his service.
Income of a family member of an employee
serving under co-operative technical assistance
programme [Section 10(9)]
As
per section 10(9), the income of any member of the family of any such
individual as is
referred
to in section 10(8)/(8A)/(8B) accompanying him to India, which accrues or
arises
outside
India and is not deemed to accrue or arise in India, in respect of which such
member is
required
to pay any income or social security tax to the Government of that foreign
State or
country
of origin of such member, as the case may be, is exempt from tax.
Death-cum-retirement gratuity received by
Government servants [Section 10(10)(i)]
Section
10(10)(i) grants exemption to gratuity received by Government employee (i.e.,
Central
Government
or State Government or local authority).
Gratuity received by a non-Government employee
covered by Payment of Gratuity Act, 1972
[Section 10(10)(ii)]
As
per section 10(10)(ii), exemption in respect of gratuity in case of employees
covered by the
Payment
of Gratuity Act, 1972 will be lower of following :
•
15 days’ salary × years of service.
•
Maximum amount specified, i.e., Rs. 10,00,000.
•
Gratuity actually received.
Note:
1)
Instead of 15 days’ salary, only 7 days salary will be taken into consideration
in case of
employees
of seasonal establishment.
2)
15 days’ salary = Salary last drawn × 15/26
3)
Salary for this purpose will include basic salary and dearness allowance only.
Items other
than
basic salary and dearness allowance are not to be considered.
4)
In case of piece rated employee, 15 days’ salary will be computed on the basis
of average
of
total wages (excluding overtime wages) received for a period of three months
immediately
preceding the termination of his service.
5)
Part of the year, in excess of 6 months, shall be taken as one full year.
Gratuity received by a non-Government employee
not covered by Payment of Gratuity Act,
1972 [Section 10(10)(iii)]
As
per section 10(10)(iii), exemption in respect of gratuity in case of employees
not covered by
the
Payment of Gratuity Act, 1972 will be lower of following :
•
Half month’s salary for each completed year of service, i.e.,
[Average
monthly salary × ½] × Completed years of service. .
•
Rs. 10,00,000.
[As amended by Finance Act, 2016]
•
Gratuity actually received.
Note:
1)
Average monthly salary is to be computed on the basis of average of salary for
10 months
immediately
preceding the month of retirement.
2)
Salary for this purpose will include basic salary, dearness allowance, if the
terms of
service
so provide and commission based on fixed percentage of turnover achieved by the
employee.
3)
While computing years of service, any fraction of a year is to be ignored.
Pension [Section 10(10A)]:
As
per section 10(10A), any commuted pension, i.e., accumulated pension in lieu of
monthly
pension
received by a Government employee is fully exempt from tax. Exemption is
available
only
in respect of commuted pension and not in respect of un-commuted, i.e., monthly
pension.
Exemption
in respect of commuted pension in case of a non-Government employee will be as
follows:
•
If the employee receives gratuity, one third of full value of commuted pension
will be
exempt
from tax under section 10(10A).
•
If the employee does not receive gratuity, one half of full value of commuted
pension will
be
exempt from tax under section 10(10A).
Leave salary [Section 10(10AA)]
As
per section 10(10AA), leave encashment by a Government employee at the time of
retirement
(whether
on superannuation or otherwise) is exempt from tax. In the hands of
non-Government
employee
exemption will be least of the following:
1.
Period of earned leave standing to the credit in the employee’s account at the
time of
retirement
(*) × Average monthly salary ($).
2.
Average monthly salary ($) × 10 (i.e., 10 months’ average salary).
3.
Maximum amount as specified by the Government, i.e., Rs. 3,00,000.
4.
Leave encashment actually received at the time of retirement.
(*)Leave
credit to the account of the employee at the time of retirement should be
restricted to 30
days
per year of service if leave entitlement as per service rules exceeds 30 days
per year of
actual
service.
($)
Salary for the above purpose means average salary drawn in the past ten months
immediately
preceding
the retirement (i.e., preceding the day of retirement) and will include
basic salary,
dearness
allowance (if considered for computing all the retirement benefits) and
commission
based
on fixed percentage of turnover achieved by the employee.
Apart
from the above items, salary for this purpose does not include any other
allowances or
perquisites.
Retrenchment compensation [Section 10(10B)]
As
per section 10(10B), compensation received at the time of retrenchment is
exempt from tax to
the
extent of lower of the following:
[As amended by Finance Act, 2016]
(a) An amount calculated in accordance
with the provisions of section 25F(b) of the
Industrial
Dispute Act, 1947; or
(b) Maximum amount specified by the
Central Government (Rs. 5,00,000);
(c) Actual amount received.
Under
the Industrial Dispute Act, a workman is entitled to retrenchment compensation,
equal to
15
days’ average pay for each completed year of continuous service or any part in
excess of six
months.
Compensation
in excess of aforesaid limits is taxable as salary. However, the aforesaid
limit is
not
applicable in cases where compensation is paid under any scheme approved by the
Central
Government.
Compensation for Bhopal Gas Leak Disaster
[Section 10(10BB)]
Compensation
[in accordance with Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985]
received
by victims of Bhopal gas leak disaster is exempt from tax. However,
compensation
received
for any expenditure which is allowed as deduction from taxable income is not
exempt.
Compensation on account of any disaster
[Section 10(10BC)]
Any
amount received from the Central Government or State Government or a Local
Authority by
an
individual or his legal heirs as compensation on account of any disaster is
exempt from tax.
However,
no deduction is available in respect of the amount received or receivable to
the extent
such
individual or his legal heirs has been allowed a deduction under the Act on
account of loss
or
damage caused due to such disaster. Disaster here means any disaster due to any
natural or
man-made
causes or by accident/negligence which results in substantial loss of human
life or
damage
to property or environment and the magnitude of such disaster is beyond coping
capacity
of
community of the affected area.
Payment at the time of voluntary retirement
[Section 10(10C)]
As
per section 10(10C), any compensation received at the time of voluntary
retirement or
termination
of service is exempt from tax, if the following conditions are satisfied:
•
Compensation is received at the time of voluntary retirement or termination (or
in the
case
of an employee of public sector Company, at the time of voluntary separation).
•
Compensation is received by an employee of following undertakings-
a)
public sector company ; or
b)
any other company ; or
c)
an authority established under a Central, State or Provincial Act ; or
d)
a local authority ; or
e)
a co-operative society ; or
f)
a University established or incorporated by or under a Central, State or
Provincial Act
and
an institution declared to be a University under section 3 of the University
Grants
Commission
Act, 1956 (3 of 1956) ; or
g)
an Indian Institute of Technology within the meaning of clause (g) of
section 3 of the
Institutes
of Technology Act, 1961 (59 of 1961) ; or
[As amended by Finance Act, 2016]
h)
any State Government; or
i)
the Central Government; or
j)
Notified institutes having importance throughout India or in any State or
States,
k)
Notified institute of management
•
Compensation is received in accordance with the scheme of voluntary
retirement/separation,
which is framed in accordance with guidelines prescribed under
Rule
2BA of Income-tax Rules, 1962*.
•
Maximum amount of exemption is Rs. 5,00,000.
•
Where exemption is allowed to an employee under section 10(10C) for any
assessment
year,
no exemption under this section shall be allowed to him for any other
assessment
year.
•
With effect from assessment year 2010-11, section 10(10C) has
been amended to provide
that
where any relief has been allowed to an assessee under section 89 for any
assessment
year
in respect of any amount received or receivable on his voluntary retirement or
termination
of service or voluntary separation, no exemption under section 10(10C)
shall
be
allowed to him in relation to such or any other assessment year.
*Guidelines prescribed under Rule 2BA of Income-tax Rules.
1962
Voluntary
retirement scheme should be framed in accordance with the following guidelines:
i.
it should apply to an employee who has completed 10 years of service or
completed 40 years
of
age. This requirement would not be in case of amount received by an employee of
a public
sector
company under the scheme of voluntary separation framed by such public sector
company.
ii.
it should apply to all employees (by whatever name called) including workers
and executives
of
a company or of an authority or of a co-operative society, as the case may be,
excepting
directors
of a company or of a co-operative society;]
iii.
the scheme of voluntary retirement or voluntary separation should be drawn to
result in
overall
reduction in the existing strength of the employees;
iv.
the vacancy caused by the voluntary retirement or voluntary separation is not
to be filled up;
v.
the retiring employee of a company shall not be employed in another company or
concern
belonging
to the same management
vi.
the amount receivable on account of voluntary retirement or voluntary
separation of the
employee
does not exceed the amount equivalent to
-
3 months salary* for each completed year of service or
-
salary at the time of retirement multiplied by the balance months of service
left before the
date
of his retirement
*Salary
for this purpose will include basic salary, dearness allowance, if the terms of
service so
provide
and commission based on fixed percentage of turnover achieved by the employee.
[As amended by Finance Act, 2016]
Tax on perquisites paid by the employer
[Section 10(10CC)]
Perquisites
to employees mean any facility provided by the employer to the employees. There
are
two types of perquisites, viz., monetary and non-monetary. Value of
perquisite is charged to
tax
in the hands of the employees, however, the employer may at his will pay tax
(on behalf of
employees)
on such perquisites. In such a case, the amount of tax paid on such perquisites
by the
employer
on behalf of the employees will be treated as income of the employees and is
charged
to
tax in his (i.e., in employee’s) hands. However, by virtue of section
10(10CC) tax paid by
employer
(on behalf of employee) on non-monetary perquisites will be exempt from tax in
the
hands
of employees.
Such
tax paid by the employer shall not be allowed as a deductible expenditure in
the hands of
employer
under section 40. Section 10(10CC) provides exemption only in respect of
tax on non-
monetary
perquisites. In other words, this section does not provide exemption in respect
of
perquisites
or tax paid on monetary perquisites.
Amount paid on life insurance policy [Section
10(10D)]
As
per section 10(10D), any amount received under a life insurance policy,
including bonus is
exempt
from tax. Following points should be noted in this regard:
•
Exemption is available only in respect of amount received from life insurance
policy.
•
Exemption under section 10(10D) is unconditionally available in respect of sum
received
for
a policy which is issued on or before March 31, 2003. However, in respect of
policies
issued
on or after April 1
st
,
2003, the exemption is available only if the amount of
premium
paid on such policy in any financial year does not exceed 20% (10% in respect
of
policy taken on or after 1
st
April,
2012) of the actual capital sum assured. With effect
from
1-4-2013, in respect of policy taken in the name of a person suffering from
diseases
specified
under section 80DDB or in the name of a person suffering from disability
specified
under section 80U, the limit will be increased to 15% of capital sum assured.
•
Value of premium agreed to be returned or of any benefit by way of bonus (or
otherwise),
over
and above the sum actually assured, which is received under the policy by any
person,
shall not be taken into account while calculating the actual capital sum
assured.
•
Amount received on death of the person will continue to be exempt without any
condition.
Note:
No exemption would be available in case of any sum received under section
80DD(3) or
under
Keyman insurance policy.
Exemption in respect of amount received from
public provident fund/statutory provident fund/
recognised provident fund/ un-recognised
provident fund [Section 10(11)/(12)]
The
tax treatment of various items in case of different provident funds is as
follows:
Statutory Provident Fund
Employer’s
Contribution
Employer’s
contribution to such fund is not treated as
income
of the employee.
Interest
Interest
credited to such fund is exempt in the hands
of
the employee.
[As amended by Finance Act, 2016]
Amount
received at the time of
termination
Lump
sum amount received from such fund, at the
time
of termination of service is exempt in the hands
of
employees.
Recognised Provident Fund
Employer’s
Contribution
Employer’s
contribution to such fund, up to 12% of
salary
is not treated as income of the employee (see
Note
1).
Interest
Interest
credited to such fund up to 9.5% per annum
is
exempt in the hands of the employee, interest in
excess
of 9.5% is charged to tax in the hands of the
employee.
Amount
received at the time of
termination
If
certain conditions are satisfied, then lump sum
amount
received from such fund, at the time of
termination
of service, is exempt in the hands of
employees.
(see Note 2)
Un-recognised Provident Fund
Employer’s
Contribution
Employer’s
contribution to such fund is not treated as
income
of the employee.
Interest
Interest
credited to such fund is exempt in the hands
of
the employees.
Amount
received at the time of
termination
(See
note 3)
Public Provident Fund
Employer’s
Contribution
Employers
do not contribute to such fund.
Interest
Interest
credited to such fund is exempt.
Amount
received at the time of
termination
Lump
sum amount received from such fund at the
time
of termination of service is exempt from tax.
Notes:
1. Salary for this purpose will include
basic salary, dearness allowance, if the terms of service so
provide
and commission based on fixed percentage of turnover achieved by the employee.
2. Accumulated
balance paid from a recognised provident fund will be exempt from tax in
following
cases:
[As amended by Finance Act, 2016]
(a) If the employee has rendered a
continuous service of 5 years or more. If the accumulated
balance
includes amount transferred from other recognised provident fund maintained by
previous
employer, then the period for which the employee rendered service to such
previous
employer shall also be included in computing the aforesaid period of 5 years.
(b) If the service of employee is
terminated before the period of 5 years, due to his ill health
or
discontinuation of business of the employer or other reason beyond his control.
(c) If on retirement, the employee takes
employment with any other employer and the
balance
due and payable to him is transferred to his individual account in any
recognised
fund
maintained by such other employer, then the amount so transferred will not be
charged
to tax.
Except
above situations, payment from a recognised provident fund will be charged to
tax
considering
such fund as un-recognised from the beginning (See note 3 given below
for tax
treatment
of un-recognised provident fund).
3. Treatment of payment (at the time of
termination) from un-recognised provident fund:
Payment
on termination will include 4 things, viz., employee's contribution and
interest thereto
and
employer’s contribution and interest thereto, the tax treatment of such payment
is as follows:
•
Employee's contribution is not chargeable to tax; interest on employee
contribution is
taxed
under the head “Income from other sources”.
•
Employer's contribution and interest thereon are taxed as salary income,
however, an
employee
can claim relief under section 89 in respect of such payment.
Payment from account opened in accordance with
the Sukanya Samriddhi Account Rules,
2014 [Section 10(11A)]
As per section 10(11A), any payment from an account opened in
accordance with the
Sukanya Samriddhi Account Rules, 2014 made under the Government
Savings Bank Act,
1873 is exempt from tax. In other words, interest and
withdrawals from such account will be
exempt from tax under section 10(11A).
Payment from the National Pension System Trust
to an employee [Section 10(12A)]
Any
payment from the National Pension System Trust to an employee on closure of
account or
his
opting out of the pension scheme referred to in section 80CCD, to the extent it
does not
exceed
40 % of the total amount payable to him at the time of closureor his opting out
of the
scheme,
is exempt from tax.
Payment from approved superannuation fund in
specified circumstances and subject to
certain limits [Section 10(13)]
Approved
superannuation fund means superannuation fund which is approved by the
Commissioner
of Income-tax. Tax treatment of such fund is as follows:
•
Employer’s contribution is exempt from tax, however, from assessment year
2010-11
employer’s
contribution in excess of Rs. 1,50,000 per annum is charged to tax as
perquisite.
Employee’s contribution qualifies for deduction under section 80C and
interest
on accumulated balance is not liable to tax.
[As amended by Finance Act, 2016]
•
Payments made from the fund are exempt from tax under section 10(13) in
following
cases:
✓
Payment on death of beneficiary; or
✓
Payment to employee in lieu of, or in commutation of an annuity on his
retirement at or
after
the specified age or on his becoming incapable prior to such retirement; or
✓
Payment by way of refund of contributions on the death of a beneficiary; or
✓
Payment to employee by way of refund of his contributions on leaving the
service in
connection
with which the fund is established otherwise than by retirement at or after a
specified
age or on his becoming incapacitated prior to such retirement; or
✓
Payment to employee by way of transfer to his account under a pension scheme
referred
to
in section 80CCD.
House rent allowance [Section 10(13A)]
As
per section 10(13A), read with rule 2A, the exemption in respect of HRA
will be lower of the
following
amounts:
(1)
50% of salary, when residential house is situated at Mumbai, Kolkata, Delhi or
Chennai
and
40% of salary where residential house is situated at any other place.
(2)
HRA actually received by the employee in respect of the period during which
rental
accommodation
is occupied by the employee during the previous year.
(3)
Rent paid in excess of 10% of salary.
Salary
will include basic salary, dearness allowance forming part of salary while
computing all
retirement
benefits and commission based on fixed percentage of turnover achieved by the
employee.
Apart from this, salary for this purpose does not include any other
allowances/perquisites.
Salary
for this purpose shall be computed on due basis in respect of period during
which the
accommodation
is occupied by the employee in the previous year. Hence, any payments not
pertaining
to the previous year or not pertaining to the period of occupation of the
accommodation
shall be excluded.
Prescribed allowances or benefits [Section
10(14)]
As
per section 10(14), read with rule 2BB following allowances granted to an
employee are
exempt
from tax subject to certain limit:
Allowances
Exemption Limit
Children
Education Allowance
Up
to Rs. 100 per month per child up to a
maximum
of 2 children is exempt
Hostel
Expenditure Allowance
Up
to Rs. 300 per month per child up to a
maximum
of 2 children is exempt
Transport
Allowance granted to an employee to
meet
expenditure on commuting between place of
residence
and place of duty
Up
to Rs. 1,600 per month (Rs. 3,200 per
month
for blind and handicapped
employees)
is exempt
[As amended by Finance Act, 2016]
Allowance
granted to an employee working in any
transport
business to meet his personal expenditure
during
his duty performed in the course of running
of
such transport from one place to another place
provided
employee is not in receipt of daily
allowance.
Amount
of exemption shall be lower of
following:
a)
70% of such allowance; or
b)
Rs. 10,000 per month.
Conveyance
Allowance granted to meet the
expenditure
on conveyance in performance of
duties
of an office
Exempt
to the extent of expenditure
incurred
for official purposes
Travelling
Allowance to meet the cost of travel on
tour
or on transfer
Exempt
to the extent of expenditure
incurred
for official purposes
Daily
Allowance to meet the ordinary daily charges
incurred
by an employee on account of absence
from
his normal place of duty
Exempt
to the extent of expenditure
incurred
for official purposes
Helper/Assistant
Allowance
Exempt
to the extent of expenditure
incurred
for official purposes
Research
Allowance granted for encouraging the
academic
research and other professional pursuits
Exempt
to the extent of expenditure
incurred
for official purposes
Uniform
Allowance
Exempt
to the extent of expenditure
incurred
for official purposes
Special
compensatory Allowance (Hilly Areas)
(Subject
to certain conditions and locations)
Amount
exempt from tax varies from Rs.
300
to Rs. 7,000 per month.
Border
area, Remote Locality or Disturbed Area or
Difficult
Area Allowance (Subject to certain
conditions
and locations)
Amount
exempt from tax varies from Rs.
200
to Rs. 1,300 per month.
Tribal
area allowance in (a) Madhya Pradesh (b)
Tamil
Nadu (c) Uttar Pradesh (d) Karnataka (e)
Tripura
(f) Assam (g) West Bengal (h) Bihar (i)
Orissa
Up
to Rs. 200 per month
Compensatory
Field Area Allowance. If this
exemption
is taken, employee cannot claim any
exemption
in respect of border area allowance
(Subject
to certain conditions and locations)
Up
to Rs. 2,600 per month
Compensatory
Modified Area Allowance. If this
exemption
is taken, employee cannot claim any
exemption
in respect of border area allowance
(Subject
to certain conditions and locations)
Up
to Rs. 1,000 per month
Counter
Insurgency Allowance granted to members
of
Armed Forces operating in areas away from their
permanent
locations. If this exemption is taken,
Up
to Rs. 3,900 per month
[As amended by Finance Act, 2016]
employee
cannot claim any exemption in respect of
border
area allowance (Subject to certain conditions
and
locations)
Underground
Allowance to employees working in
uncongenial,
unnatural climate in underground
mines
Up
to Rs. 800 per month
High
Altitude Allowance granted to armed forces
operating
in high altitude areas (Subject to certain
conditions
and locations)
a)
Up to Rs. 1,060 per month (for altitude
of
9,000 to 15,000 feet)
b)
Up to Rs. 1,600 per month (for altitude
above
15,000 feet)
Highly
active field area allowance granted to
members
of armed forces (Subject to certain
conditions
and locations)
Up
to Rs. 4,200 per month
Island
Duty Allowance granted to members of
armed
forces in Andaman and Nicobar and
Lakshadweep
group of Island (Subject to certain
conditions
and locations)
Up
to Rs. 3,250 per month
Interest on securities [Section 10(15)]
Interest
incomes which are exempt under section 10(15) could be explained with the help
of the
following
table-
Section
Income
Exemption
to
10(15)(i)
Interest,
premium on redemption, or other payment on
notified
securities, bonds, certificates, and deposits, etc.
(subject
to notified conditions and limits)
All
assessees
10(15)(iib)
Interest
on notified Capital Investment Bonds notified
prior
to 1-6-2002
Individual/HUF
10(15)(iic)
Interest
on notified Relief Bonds
Individual/HUF
10(15)(iid)
Interest
on notified bonds (notified prior to 1-6-2002)
purchased
in foreign exchange (subject to certain
conditions)
Individual
- NRI/
nominee
or survivor
of
NRI/individual to
whom
bonds have
been
gifted by NRI
10(15)(iii)
Interest
on securities
Issue
Department of
Central
Bank of
Ceylon
10(15)(iiia)
Interest on deposits made with scheduled bank with
approval
of RBI
Bank
incorporated
abroad
[As amended by Finance Act, 2016]
10(15)(iiib)
Interest payable to Nordic Investment Bank
Nordic
Investment
Bank
10(15)(iiic)
10(15)(iiic) Interest payable to the European Investment
Bank
on loan granted by it in pursuance of framework-
agreement
dated 25-11-1993 for financial corporation
between
Central Government and that bank
European
Investment
Bank
10(15)(iv)(a)
Interest received from Government or from local
authority
on moneys lent to it before 1-6-2001 or debts
owed
by it before 1-6-2001, from sources outside India
All
assessees who
have
lent money,
etc.,
from sources
outside
India
10(15)(iv)(b)
Interest received from industrial undertaking in India on
moneys
lent to it under a loan agreement entered into
before
1-6-2001
Approved
foreign
financial
institution
10(15)(iv)(c)
Interest at approved rate received from Indian industrial
undertaking
on moneys lent or debt incurred before 1-6-
2001
in a foreign country in respect of purchase outside
India
of raw materials, components or capital plant and
machinery,
subject to certain limits and conditions
All
assessees who
have
lent such
money,
or in favour
of
whom such debt
has
been incurred
10(15)(iv)(d)
Interest received at approved rate from specified
financial
institutions in India on moneys lent from
sources
outside India before 1-6-2001
All
assessees who
have
lent such
moneys
10(15)(iv)(e)
Interest received at approved rate from other Indian
financial
institutions or banks on moneys lent for
specified
purposes from sources outside India before 1-
6-2001
under approved loan agreement
All
assessees who
have
lent such
moneys
10(15)(iv)(f)
Interest received at approved rate from Indian industrial
undertaking
on moneys lent in foreign currency from
sources
outside India under loan agreement approved
before
1-6-2001
All
assessees who
have
lent such
moneys
10(15)(iv)(fa)
Interest payable by scheduled bank, on deposits in
foreign
currency when acceptance of such deposits by
bank
is approved by RBI
Non-resident
or
individual/HUF
who
is
not ordinarily
resident
in India
10(15)(
iv)(g) Interest received at approved rate, from Indian public
companies
eligible for deduction under section
36(1)(viii)
and formed with main object of providing
long-term
housing finance, on moneys lent in foreign
currency
from sources outside India under loan
agreement
approved before 1-6-2003
All
assessees who
have
lent such
moneys
10(15)(
iv)(h) Interest received from any public sector company in
respect
of notified bonds or debentures and subject to
All
assessees
[As amended by Finance Act, 2016]
certain
conditions
10(15)(
iv)(i) Interest received from Government on deposits in
notified
scheme out of moneys due on account of
retirement
Individual
–
Employee
of Central
Government/State
Government/Public
sector
company
10(15)(v)
Interest
on securities held in Reserve Bank’s SGL A/c
No.
SL/DH-048 and Deposits made after 31-3-1994 for
benefit
of victims of Bhopal Gas Leak Disaster held in
such
account with RBI or with notified public sector
bank
Welfare
Commissioner,
Bhopal
Gas Victims,
Bhopal
10(15)(vi)
Interest
on Gold Deposit Bonds issued under the Gold
Deposit
Scheme, 1999 or deposit certificates issued
under
the Gold Monetisation Scheme, 2015
All
assessees
10(15)(vii)
10(15)(vii)
Interest on notified bonds issued by a local
authority/State
Pooled Finance Entity
All
assessees
10(15)(viii)
Interest on deposit made on or after 1-4-2005 in an
Offshore
Banking Unit referred to in section 2(u) of the
Special
Economic Zones Act, 2005
Non-resident
or
person
who is not
ordinarily
resident
Lease rent of an aircraft [Section 10(15A)]
Lease
rent of an aircraft or an aircraft engine paid to a foreign Government or to a
foreign
enterprise
by an Indian company, engaged in the business of operation of aircraft is not
taxable
in
the hands of such foreign Government or non-resident concern, if such payment
is in
pursuance
of an agreement (approved by the Central Government) made before April 1, 1997
or
after
March 31, 1999 but before April 1, 2007. If such agreement is entered into
during April 1,
1997
and March 31, 1999 or after March 31, 2007, then exemption under section 10(15A)
is not
available.
However, in such a case, if tax on such payments is borne by the payer, then
tax so
borne
by the payer is exempt in the hands of payee under section 10(6BB),
provided agreement is
approved
by the Central Government.
Educational scholarship [Section 10(16)]
Any
amount received as educational scholarship (i.e., scholarship to meet
the cost of education is
exempt
from tax in the hands of recipient).
Daily allowance to a Member of Parliament
[Section 10(17)]
Following
allowances are exempt from tax in the hands of a Member of Parliament and a
Member
of State Legislature—
•
Daily allowance received by a Member of Parliament or by a Member of State
Legislature
or by member of any committee thereof.
[As amended by Finance Act, 2016]
•
Any other allowance received by a Member of Parliament under the Members of
Parliament
(Constituency Allowance) Rules, 1986.
•
Any Constituency allowance received by a Member of State Legislature.
Awards [Section 10(17A)]
Any
payment received in pursuance of following (whether paid in cash or in kind) is
exempt
from
tax:
•
Any award instituted in the public interest by the Central Government or State
Government
or by any other body approved by the Central Government in this behalf.
•
Any reward by the Central Government or any State Government for such purpose
as
may
be approved by the Central Government in this behalf in the public interest.
Pension to gallantry award winner [Section
10(18)]
Pension
received by an individual who was employee of the Central Government or State
Government
and who has been awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or
any
other notified gallantry award is exempt from tax.
Family
pension received by any member of such individual is also exempt.
Family pension received by the family members
of armed forces [Section 10(19)]
From
the assessment year 2005-06, family pension received by the widow or children
or
nominated
heirs, of a member of armed forces (including paramilitary forces) of the
Union, is
exempt
from tax in the hands of such family members, if the death of such member of
armed
forces
has occurred in the course of operational duty in prescribed circumstances and
subject to
such
conditions as may be prescribed (see rule 2BBA for prescribed
circumstances and
conditions).
Annual value of one palace [Section 10(19A)]
Annual
value of any one palace in the occupation of a former ruler is exempt from tax
under
section
10(19A).
Income of local authority [Section 10(20)]
The
following income of a local authority is exempt from tax:
a)
Income which is chargeable under the head “Income from house property”,
“Capital gains” or
“Income
from other sources” or
b)
Income 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 own jurisdictional area
or
c)
Income from business of supply of water or electricity within or outside its
own jurisdictional
area.
Income of research association [Section
10(21)]
Any
income of a research association, approved under section 35(1)(ii)/(iii)
is exempt from tax,
if
following conditions as specified in section 10(21) are satisfied:
1)
Income should be applied or accumulated wholly and exclusively for the objects
for it
established.
[As amended by Finance Act, 2016]
2)
Funds should not be invested or deposited for any period during the previous
year otherwise
than
in any one or more of the forms/modes specified in section 11(5). However, this
condition
is not applicable in respect of the following:-
(i)
any assets held by the research association where such assets form part of the
corpus of
the
fund of the association as on the 1st day of June, 1973;
(ii)
Debentures of a company acquired by the research association before the 1st day
of
March,
1983;
(iii)
any accretion to the shares, forming part of the corpus of the fund mentioned
in sub-clause
(i),
by way of bonus shares allotted to the research association;
(iv)
voluntary contributions received and maintained in the form of jewellery,
furniture or any
other
article as the Board may, by notification in the Official Gazette, specify,
Note:
1.
Exemption shall not be denied in relation to voluntary contribution [other than
voluntary
contribution
in cash or voluntary contribution of the nature referred to in (i), (ii), (iii)
or (iv)
supra]subject
to the condition that such voluntary contribution is not held by the research
association
otherwise than in any one or more of the forms or modes specified in sub-
section
(5) of section 11, after the expiry of one year from the end of the previous
year in
which
such asset is acquired.
2.
Exemption is not available in relation to any income of the research
association, being
profits
and gains of business, unless the business is incidental to the attainment of
its
objectives
and separate books of account are maintained by it in respect of such business
Income of a news agency [Section 10(22B)]
Any
income of a notified news agency, set-up in India solely for collection and
distribution of
news
is exempt from tax provided that the news agency applies its income or
accumulates it for
application
solely for collection and distribution of news and does not distribute its
income in
any
manner to its members.
Income of a professional association [Section
10(23A)]
Any
income (other than income from house property and income from rendering any
specific
service
or income by way of interest or dividend on investment) of an professional
institution/association
is exempt from tax, if the following conditions are satisfied:
1)
Professional institution is established in India for the purpose of control,
supervision,
regulation
or encouragement of the profession of law, medicine, accountancy, engineering
or
architecture
or such other notified profession.
2)
The institution applies its income, or accumulates it for application, solely
to the objects for
which
it is established.
3)
The institution is approved by the Central Government by general or special
order.
Income received on behalf of Regimental Fund
[Section 10(23AA)]
[As amended by Finance Act, 2016]
Any
income received by any person on behalf of any Regimental Fund or Non-Public
Fund
established
by the armed forces of the Union for the welfare of the past and present members
of
such
forces or their dependents, is exempt from tax.
Income of a fund established for welfare of
employees [Section 10(23AAA)]
Any
income received by any person on behalf of a fund established, for such purpose
as may be
notified
by the Board in Official Gazette, for the welfare of employees or their
dependents and of
which
fund such employees are members, is exempt from tax, if such fund applies or
accumulates
its income for exclusive application towards its objects, invests its funds in
the
modes
specified in section 11(5) and such fund is approved by the Principal
Commissioner or
Commissioner
in accordance with rule made in this behalf (see rule 16C and Form No.
9).
Income of pension fund [Section 10(23AAB)]
Any
income of a fund set-up by the Life Insurance Corporation of India on or after
August 1,
1996
or any other insurer to which contribution is made by any person for receiving
pension
from
such fund, and which is approved by the Controller of Insurance or the
Insurance
Regulatory
and Development Authority, is exempt from tax.
Income from Khadi or village industry [Section
10(23B)]
Income
of an institution constituted as a public charitable trust or society which is
established for
the
development of khadi and village industries (not for profit purpose) is exempt
from tax, if
following
conditions are satisfied:
1)
Income is attributable to the business of production, sale, or marketing, of
khadi or products
of
village industries.
2)
Institution applies its income, or accumulates it for application, solely for
the development of
khadi
or village industries or both
3)
Institution is approved by the Khadi and Village Industries Commission.
Income of Khadi and Village Industries Boards [Section 10(23BB)]
Any
income of Khadi and Village Industries Boards is exempt from tax under section
10(23BB).
Incomes of statutory bodies for the
administration of public charitable trust [Section
10(23BBA)]
Any
incomes of bodies or authority established or constituted or appointed under
any Central,
State
or Provincial Act for the administration of public, religious or charitable
trust or
endowments
(including any place of religious worship) or societies for religious or
charitable
purpose,
is exempt from tax. However, this exemption shall not apply to income of any
such
trust,
endowment, or society.
Income of European Economic Community [Section
10(23BBB)]
Any
income of European Economic Community derived in India by way of interest,
dividends or
capital
gains, from investments made out of its funds under a notified scheme is exempt
from
tax.
Income of SAARC fund [Section 10(23BBC)]
Any
income of SAARC fund for Regional Projects is exempt from tax under section 10(23BBC).
[As amended by Finance Act, 2016]
Income of Secretariat of Asian Organisation of
Supreme Audit Institutions [Section
10(23BBD)]
Any
income of Secretariat of Asian Organisation of Supreme Audit Institutions is
exempt from
tax
for the assessment years 2001-02 to 2010-11.
Income of Insurance Regulatory and Development
Authority [Section 10(23BBE)]
Any
income of the Insurance Regulatory and Development Authority established under
section
3(1)
of the Insurance Regulatory and Development Authority Act, 1999 is exempt from
tax.
Income of North-Eastern Development Financial
Corporation Limited [Section 10(23BBF)]
No
exemption is available under section 10(23BBF) from assessment year 2010-11.
Income of Central Electricity Regulatory
Commission [Section 10(23BBG)]
Income
of Central Electricity Regulatory Commission is exempt from tax from the
assessment
year
2008-09.
Income of the Prasar Bharati [Section
10(23BBH)]
Any
income of the Prasar Bharati (Broadcasting Corporation of India) established
under section
3(1)
of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is exempt
from tax.
Income of certain national funds[Section
10(23C)(i)/(ii)/(iii)]
Any
income received by any person on behalf of the Prime Minister’s National Relief
Fund, the
Prime
Minister’s Fund (Promotion of Folk Art) or the Prime Minister’s Aid to Students
Fund is
exempt
from tax under clause (i), (ii) and (iii) of section 10(23C) respectively.
Income of National Foundation for Communal
Harmony [Section 10(23C)(iiia)]
Any
income of National Foundation for Communal Harmony is exempt from tax under
section
10(23C)(iiia).
Income of Swachh Bharat Kosh [Section
10(23C)(iiiaa)]
Income of the Swachh Bharat Kosh, set up by the Central
Government is exempt under section
10(23C)(iiiaa).
Income of Clear Ganga Fund [Section
10(23C)(iiiaaa)]
Income of the Clear Ganga Fund, set up by the Central Government
is exempt under section
10(23C)(iiiaaa).
Income of Educational Institutions [Section 10(23C)(iiiab)/(iiiad)/(vi)]
Section 10(23C)(iiiab)
Income
of any university or other educational institution existing solely for
educational purposes
and
not for purposes of profit, and which is wholly or substantially financed by
the Government
would
be exempt under section 10(23C)(iiiab).
Section 10(23C)(iiiad)
Income
of any university or other educational institution existing solely for
educational purposes
and
not for purposes of profit would be exempt under section 10(23C)(iiiad) if the
aggregate
annual
receipts of such university or educational institution do not exceed Rs. 1
Core.
Section 10(23C)(vi)
[As amended by Finance Act, 2016]
Income
of any university or other educational institution existing solely for
educational purposes
and
not for purposes of profit, other than those mentioned in sub-clause (iiiab)
or sub-clause
(iiiad)
and which may be approved by the prescribed authority. CBDT authorize the
Commissioners
of Income-tax (Exemptions) for this purpose via Notification No. 76/2014 dated
1-12-2014.
Income of Hospital [Section 10(23C)(iiiac)/(iiiae)/(via)]
Income
arises to any hospital or other institution for the reception and treatment of
persons
suffering
from illness or mental defectiveness or for the reception and treatment of
persons
during
convalescence or of persons requiring medical attention or rehabilitation,
existing solely
for
philanthropic purposes and not for purposes of profit, shall be exempt from tax
under
following
situations:
1) If the hospital or other institution
is wholly or substantially financed by the Government then
exemption
would be available under section 10(23C)(iiiac).
2) If the aggregate annual receipt of
such hospital or institution do not exceed Rs. 1 Crore then
exemption
would be available under section 10(23C)(iiiae).
3) If the hospital is approved by the
prescribed authority, i.e., by Commissioners of Income-tax
(Exemptions)
as authorized by CBDT via Notification No. 76/2014 dated 1-12-2014 then
exemption
would be available under section 10(23C)(via).
Income of Charitable Institution or Fund
[Section 10(23C)(iv)]
Any
income of a charitable institution or fund which is approved by the prescribed
authority
having
regard to its objects and its importance throughout India or throughout any
State or States
is
exempt from tax.
CBDT
has authorized Commissioners of Income-tax (Exemptions) via Notification No.
75/2014
dated
1-12-2014 for granting approval under this section.
Income of religious/charitable trust [Section
10(23C)(v)]
Income
of any trust (including any other legal obligation) or institution formed
wholly for public
religious
purposes or wholly for public religious and charitable purposes, which is
approved by
the
prescribed authorityhaving regard to the manner in which the affairs of the
trust or institution
are
administered and supervised for ensuring that the income accruing thereto is
properly applied
for
the objects thereof, is exempt from tax.
CBDT
has authorized Commissioners of Income-tax (Exemptions) via Notification No.
75/2014
dated
1-12-2014 for granting approval under this section.
Conditions for claiming exemption under
section 10(23C)(iv)/(v)/(vi)/(via)
In
order to claim exemption under section 10(23C)(iv)/(v)/(vi)/(via), the fund or
trust or
institution
or any university or other educational institution or any hospital or other
medical
institution,
as the case may be, had to comply with the following conditions:
1.
An application in Form No. 56 (for claiming exemption under section 10(23C)(iv)
and (v) or
continuance
thereof) and in Form No. 56D (for claiming exemption under section 10(23C)(vi)
and
(via) or continuance thereof) has to filed with prescribed authority, i.e.,
Commissioners of
Income-tax
(Exemptions).
[As amended by Finance Act, 2016]
2.
It should furnish such documents (including audited annual accounts) or
information, which
the
prescribed authority, i.e., Commissioners of Income-tax (Exemptions) may
consider
necessary
in order to satisfy itself about the genuineness of the activities of such fund
or trust
or
institution or any university or other educational institution or any hospital
or other medical
institution,
as the case may be.
3.
It should apply its income, or accumulates it for application, wholly and
exclusively to the
objects
for which it is established and in a case where more than fifteen per cent of
its income
is
accumulated on or after the 1st day of April, 2002, the period of the
accumulation of the
amount
exceeding fifteen per cent of its income shall in no case exceed five year.
4. Funds should not be invested or
deposited for any period during the previous year otherwise
than
in any one or more of the forms/modes specified in section 11(5). However, this
condition
is not applicable in respect of the following:-
(i)
any assets which form part of the corpus of the fund, trust or institution or
any university
or
other educational institution or any hospital or other medical institution as
on the 1st
day
of June, 1973;
(ii)
Equity shares of a public company, held by any university or other educational
institution
or
any hospital or other medical institution where such equity shares form part of
the
corpus
of any university or other educational institution or any hospital or other
medical
institution
as on the 1st day of June, 1998
(iii)
Debentures of a company acquired by the fund, trust or institution or any
university or
other
educational institution or any hospital or other medical institution before the
1st day
of
March, 1983;
(iv)
any accretion to the shares, forming part of the corpus of the fund mentioned
in point no.
(i)
and (ii), by way of bonus shares allotted to the fund, trust or institution or
any
university
or other educational institution or any hospital or other medical institution;
(v)
voluntary contributions received and maintained in the form of jewellery,
furniture or any
other
article as the Board may, by notification in the Official Gazette, specify,
Note:
1.
Exemption shall not be denied in relation to voluntary contribution [other than
voluntary
contribution
in cash or voluntary contribution of the nature referred to in (i), (ii),
(iii), (iv) or
(v)
supra]subject to the condition that such voluntary contribution is not held by
the fund,
trust
or institution or any university or other educational institution or any
hospital or other
medical
institution, as the case may be, otherwise than in any one or more of the forms
or
modes
specified in sub-section (5) of section 11,
after the expiry of one year from the end of
the
previous year in which such asset is acquired.
2.
Exemption is not available in relation to any income of the fund, trust or
institution or any
university
or other educational institution or any hospital or other medical institution,
as the
case
may be, being profits and gains of business, unless the business is incidental
to the
attainment
of its objectives and separate books of account are maintained by it in respect
of
such
business
[As amended by Finance Act, 2016]
5.
For claiming exemption under section 10(23C)(iv) and (v), the fund, trust or
institution, as the
case
may be, should disinvest by March 30, 1993, all the investment made before
April 1,
1989,
otherwise than in any one or more of the forms or modes specified in section
11(5).
6.
For claiming exemption under section 10(23C)(vi) and (via), the university or
other
educational
institution or any hospital or other medical institution, as the case may be,
should
disinvest
by March 30, 2001, all the investment made before June 1, 1998, otherwise than
in
any
one or more of the forms or modes specified in section 11(5).
7.
If taxable income [before giving exemption under section 10(23C)] exceeds the
exemption
limit,
the institution should get books of account audited in Form No. 10BB and audit
report
should
be submitted along with return of income.
8. Where any fund,
trust or institution or any university or other educational institution or any
hospital
or other medical institution, as the case may be, has been approved or
notified for
claiming exemption under section 10(23C)(iv)/(v)/(vi)/(via)
then it would not be entitled to
claim any benefit of exemption under other provisions of
section 10 (except the exemption in
respect of agricultural income.
Note:
For
the purpose of claiming exemption under section 10(23C), where any income is
required to
be
applied or accumulated, then, for such purpose the income shall be determined
without any
deduction
or allowance by way of depreciation or otherwise in respect of any asset,
acquisition
of
which has been claimed as an application of income under this clause in the
same or any other
previous
year.
Income of mutual fund [Section 10(23D)]
Any
income of following mutual funds (subject to provisions of sections 115R to
115T) is
exempt
from tax:
•
A mutual fund registered under the Securities and Exchange Board of India Act or
regulation
made thereunder.
•
A mutual fund set-up by a public sector bank, or a public financial institution
or
authorised
by RBI (subject to conditions notified by the Central Government).
Income of a securitisation trust [Section
10(23DA)]
Any income of a securitisation trust from the activity of
securitisation is exempt from tax.
Income of notified investor protection fund
[Section 10(23EA)]
Any
income by way of contributions received from recognised stock exchanges and the
members
thereof,
of a notified Investor Protection Fund set up by recognised stock exchanges in
India is
exempt
from tax.
Provided
that where any amount standing to the credit of the Fund and not charged to
income-tax
during
any previous year is shared, either wholly or in part, with a recognised stock
exchange,
the
whole of the amount so shared shall be deemed to be the income of the previous
year in
which
such amount is so shared and shall accordingly be chargeable to income-tax.
Income of Credit Guarantee Fund Trust [Section
10(23EB)]
[As amended by Finance Act, 2016]
Any
income of Credit Guarantee Fund Trust for Small Industries, being a trust
created by the
Government
of India and the Small Industries Development Bank of India, is exempt from tax
for
5 years relevant to the assessment years 2002-03 to 2006-07.
Income of the notified investor protection
fund set-up by commodity exchange [Section
10(23EC)]
Any
income by way of contributions received from commodity exchanges and the members
thereof,
of a notified Investor Protection Fund set up by commodity exchanges in India
is exempt
from
tax.
Provided
that where any amount standing to the credit of the Fund and not charged to
income-tax
during
any previous year is shared, either wholly or in part, with a commodity
exchange, the
whole
of the amount so shared shall be deemed to be the income of the previous year
in which
such
amount is so shared and shall accordingly be chargeable to income-tax.
Income of Investor Protection Fund set by a
depository [Section 10(23ED)]
Any
income, by way of contributions received from a depository, of notified
Investor Protection
Fund
set up by a depository in accordance with the regulations made under the SEBI
Act and
Depository
Act is exempt from tax.
Provided
that where any amount standing to the credit of the Fund and not charged to
income-tax
during
any previous year is shared, either wholly or in part with a depository, the
whole of the
amount
so shared shall be deemed to be the income of the previous year in which such
amount is
so
shared and shall, accordingly, be chargeable to income-tax.
Income of Core Settlement Guarantee Fund [Section
10(23EE)]
Section 10(23ED) grants exemption to Income of any specified
income of such Core Settlement
Guarantee Fund, set up by a recognised clearing corporation in
accordance with the regulations,
as the Central Government may, by notification in the Official
Gazette, specify in this behalf.
It should be checked that where any amount standing to the
credit of the Fund and not charged to
income-tax during any previous year is shared, either wholly or
in part with the specified person,
the whole of the amount so shared shall be deemed to be the
income of the previous year in
which such amount is so shared and shall, accordingly, be
chargeable to income-tax.
"Recognised clearing corporation" shall have the same
meaning as assigned to it in clause (o) of
sub-regulation (1) of regulation 2 of the Securities Contracts
(Regulation) (Stock Exchanges and
Clearing Corporations) Regulations, 2012 made under the
Securities and Exchange Board of
India Act, 1992 and the Securities Contracts (Regulation) Act,
1956.
"Regulations" means the Securities Contracts
(Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, 2012 made under the Securities and
Exchange Board of India Act,
1992 and the Securities Contracts (Regulation) Act, 1956.
"specified income" shall mean,—
(a) the income by way of contribution received from specified
persons;
(b) the income by way of penalties imposed by the recognised
clearing corporation and credited
to the Core Settlement Guarantee Fund; or
[As amended by Finance Act, 2016]
(c) the income from investment made by the Fund;
"Specified person" shall mean :
(a) any recognised clearing corporation which establishes and
maintains the Core Settlement
Guarantee Fund.
(b)
any recognised stock exchange being a shareholder
in such recognised clearing corporation
or a contributor to the Core Settlement Guarantee Fund.
(c)
any clearing member contributing to the Core
Settlement Guarantee Fund.
Income of a venture capital fund or a venture
capital company from investment in a venture
capital undertaking [Section 10(23FB)]
Income
of a venture capital fund or a venture capital company from investment in a
venture
capital
undertaking is exempt from tax from assessment year 2001-02. However, this
exemption
is
subject to satisfaction of conditions specified in section 10(23FB).
These provisions shall not apply in respect of any income of a
venture capital company or
venture capital fund, being an investment fund specified in
clause (a) of the Explanation 1 to
section 115UB, of the previous year relevant to the assessment
year beginning on or after the 1st
day of April, 2016.
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” is exempt under Section
10(23FBA).
"Investment fund" shall have the same meaning assigned
to it in clause (a) of the Explanation
1 to section 115UB.
Income referred to in section 115UB of a unit
holder of an investment fund [Section
10(23FBB)]
Any income referred to in section 115UB, 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" is exempt under section
10(23FBB).
"Investment fund" shall have the same meaning assigned
to it in clause (a) of the Explanation
1 to section 115UB.
Income of a of a Business Trust [Section
10(23FC)]
Any
income of a business trust by way of:
a)
interest received or receivable from a special purpose vehicle; or
b)
dividend referred to in section 115-O(7)
“special
purpose vehicle” means an Indian company in which the business trust holds
controlling
interest
and any specific percentage of shareholding or interest, as may be required by
the
regulations
under which such trust is granted registration.
Certain income of a business trust being a
real estate investment trust[Section 10(23FCA)]
[As amended by Finance Act, 2016]
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 is exempt under section
10(23FCA).
"Real estate asset" shall have the same meaning as
assigned to it in clause (zj)of sub-regulation
(1) of regulation 2 of the Securities and Exchange Board of
India (Real Estate Investment Trusts)
Regulations, 2014 made under the Securities and Exchange Board
of India Act, 1992.
Distributed Income of a Unit Holder from the
Business Trust [Section 10(23FD)]
Any
distributed income, referred to in section 115UA, received by a unit holder
from the
business
trust, not being that proportion of the income which is of the same nature as
the income
referred
to in sub-clause (a) of clause (23FC) or clause (23FCA) of section 10 is exempt
from
tax.
Income of a registered trade union [Section
10(24)]
Any
income chargeable under the head “Income from house property” and “Income from
other
sources”
of a registered union within the meaning of the Indian Trade Union Act, 1926,
formed
primarily
for the purpose of regulating the relation between workmen and employers or
between
workmen
and workmen is exempt from tax. Similar exemption is available to an
association of
registered
unions.
Income of provident fund [Section 10(25)]
Following
income is exempt from tax under this section:
•
Interest on securities held by a statutory provident fund and any capital gains
arising from
such
securities.
•
Any income received by the trustee on behalf of a recognised provident fund or
an
approved
superannuation fund or an approved gratuity fund; and
•
Any income received by the Board of Trustees on behalf of Deposit-linked
Insurance
Fund.
Income of the Employees’ State Insurance Fund
[Section 10(25A)]
Any
income of the Employees’ State Insurance Fund of the Employees’ State Insurance
Corporation
set-up under the provisions of the Employees’ State Insurance Act, 1948 is
exempt
from
tax under section 10(25A).
Income of a member of a Scheduled Tribe
[Section 10(26)]
Income
of a member of a Scheduled Tribe [as per article 366(25) of the Constitution]
is exempt
from
tax, if following conditions are satisfied:
•
Such member resides in any area in the State of Nagaland, Manipur, Tripura,
Arunachal
Pradesh,
Mizoram or district of North Cachar Hills, Mikir Hills, Khasi Hills, Jaintia
Hills
and
Garo Hills or in the Ladakh region of the State of Jammu and Kashmir.
•
Such exemption is available in respect of income which accrues/arises from any
source in
such
areas or income by way of dividends/interest on securities arises from any
area.
Income of a “Sikkimese” individual [Section
10(26AAA)]
[As amended by Finance Act, 2016]
Following
income of a Sikkimese individual [as explained in section 10(26AAA)], is
exempt
from
tax:
•
Any income from the State of Sikkim; or
•
Income by way of dividend or interest on securities (generated in Sikkim or any
other
place).
This exemption is not available to a Sikkimese woman who, on or after April 1,
2008
marries a non- Sikkimese individual.
Income of an Agricultural Produce Marketing
Committee/Board [Section 10(26AAB)]
With
effect from assessment year 2009-10, any income of an Agricultural Produce
Marketing
Committee/Board
constituted under any law for the purpose of regulating the marketing of
agricultural
produce is exempt from tax under section 10(26AAB).
Income of corporation or other body or
institution or association established for promoting the
interest of members of Scheduled Caste, etc.
[Section 10(26B)]
Any
income of a corporation established by a Central, State or Provincial Act or of
any other
body,
institution or association (wholly financed by the Government), formed for
promoting the
interests
of the members of the Scheduled Castes/Tribes/backward classes or of any two or
all of
them
[as explained in section 10(26B)], is exempt from tax under section 10(26B).
Income of corporation established for
promoting interest of minority caste [Section 10(26BB)]
Any
income of a corporation established by the Central Government or State
Government for
promoting
the interests of the members of such minority community as notified by the
Central
Government
from time-to-time, is exempt from tax under section 10(26BB).
Income of corporation established for
ex-servicemen [Section 10(26BBB)]
From
assessment year 2004-05, any income of a statutory corporation established by
Central,
State
or Provincial Act for the welfare and economic upliftment of ex-servicemen
(being citizen
of
India) is exempt from tax under section 10(26BBB).
“ex-serviceman”
means a person who has served in any rank, whether as combatant or non-
combatant,
in the armed forces of the Union or armed forces of the Indian States before
the
commencement
of the Constitution (but excluding the Assam Rifles, Defence Security Corps,
General
Reserve Engineering Force, Lok Sahayak Sena, Jammu and Kashmir Militia and
Territorial
Army) for a continuous period of not less than six months after attestation and
has
been
released, otherwise than by way of dismissal or discharge on account of
misconduct or
inefficiency,
and in the case of a deceased or incapacitated ex-serviceman includes his wife,
children,
father, mother, minor brother, widowed daughter and widowed sister, wholly
dependant
upon
such ex-serviceman immediately before his death or incapacitation
Income of a co-operative society formed for
promoting the interests of the members of
Scheduled Castes or Scheduled Tribes [Section
10(27)]
Any
income of a co-operative society formed for promoting the interests of the
members of
Scheduled
Castes or Scheduled Tribes or both [as given in section 10(26B)] is
exempt from tax.
Exemption
is available only if the membership of the co-operative society consists of
only other
[As amended by Finance Act, 2016]
co-operative
societies formed for similar purposes and the finances of the society are
provided by
the
Government and such other societies [Section 10(27)].
Income of coffee board, rubber board, etc.
[Section 10(29A)]
Any
income of Coffee Board, Rubber Board, Tea Board, Tobacco Board, Marine Products
Export
Development Authority, Agricultural and Processed Food Products Export
Development
Authority,
Spices Board and Coir Board, is exempt from tax under section 10(29A).
Subsidy from the Tea Board [Section 10(30)]
In
the case of a taxpayer, who carries on business of growing and manufacturing
tea in India, the
amount
of any subsidy received from or through the Tea Board under the notified scheme
for
replantation
or replacement of tea bushes or for rejuvenation or consolidation of the area
used for
cultivation
of tea, is exempt from tax (for notified schemes see Notification No.
S.O. 3616, dated
September
27, 1976).
To
claim exemption, a certificate from the Tea Board as to the amount of subsidy
paid to the
taxpayer
during the year is to be obtained.
A
similar exemption is available under section 10(31) in respect of
subsidy received by an
taxpayer
engaged in the business of growing and manufacturing rubber, coffee, cardamom
or
such
other commodities as the Central Government may by notification specify
[Section 10(31)].
Income of minor [Section 10(32)]
Under
section 64(1A) income of a minor child is clubbed along with the income of
his/her
parent,
subject to certain conditions.. If
the income of an individual includes any income of
his/her
minor child, then such individual can claim exemption (in respect of each minor
child) of
lower
of following amount:
(a)
Rs. 1,500 per minor child; or
(b)
Amount of income of each minor child (which is clubbed).
Capital gains on transfer of US 64 [Section
10(33)]
As
per section 10(33), long-term or short-term capital gains arising on transfer
of units of Unit
Scheme,
1964 (US 64) are exempt from tax if the transfer of such asset takes place on
or after
1/04/2002.
Dividends and interest on units [Section
10(34)/(35)]
Following
incomes are not chargeable to tax from the assessment year 2004-05:
•
Any income by way of dividends covered by section 115-O [i.e., any
dividends from a
domestic
company other than dividends covered under section 2(22)(e)];
However, as per
section
115BBDA (as inserted by Finance Act, 2016), in the case of resident
individual/HUF/firm,
dividend shall be chargeable to tax at the rate of 10% if aggregate
amount
of dividend received during the year exceeds Rs. 10,00,000.
•
Any income in respect of units of a mutual fund;
•
Income received by a unit holder of UTI;
•
Income in respect of units of a specified company.
[As amended by Finance Act, 2016]
Note:
1.
Under section 115-O and section 115R, the person paying the dividends on share
or
income
on units will have to pay distribution tax on dividend/income distributed.
2.
It should be noted that under this clause, Income on transfer of units is not
exempt.
Income of a shareholder on account of buy back
of shares by the company [Section 10(34A)]
Any
income arising to an assessee, being a shareholder, on account of buy back of
shares (not
being
listed on a recognised stock exchange) by the company as referred to in section
115QA is
exempt
from tax under section 10(34A). This exemption is available only in those cases
where
additional
income-tax is payable on distributed income under section 115QA by the company
opting
for buy back of such shares.
Income of an investor received from a
securitisation trust [Section 10(35A)]
Any
distributed income referred to in section 115TA received from a securitisation
trust by any
person
being an investor of the said trust is exempt from tax under section 10(35A).
Note:
The exemption shall not be available from 1
st
June
2016.
Capital gains in case of compulsory acquisition
of urban agricultural land [Section 10(37)]
An
individual or Hindu Undivided Family (HUF) can claim exemption in respect of
capital gain
arising
on transfer by way of compulsory acquisition of agricultural land situated in
an urban
area
providedcompensation is received on or after April 1, 2004. This exemption is
available if
the
land was used by the taxpayer (or by his parents in the case of an individual)
for agricultural
purpose
for a period of 2 years immediately preceding the date of its transfer.
Long-term capital gains on transfer of equity
shares or units of an equity oriented mutual
fund or a unit of a business trust covered by
securities transaction tax [Section 10(38)]
Long-term
capital gains arising on transfer of securities are not chargeable to tax in
the hands of
any
person, if following conditions are satisfied:
1.
The asset transferred should be equity shares of a company or units of an
equity oriented
mutual
fund or a unit of a business trust.
2.
The transaction should be liable to securities transaction tax, at the time of
transfer.
3.
Such asset should be a long-term capital asset.
4.
Transfer should have taken place on or after October 1, 2004.
Equity
oriented mutual fund means a mutual fund specified under section 10(23D)
and 65% of
its
investible funds, out of total proceeds are invested in equity shares of a
domestic company.
Note:
(1)
With effect from 1-4-2016, exemption from capital gains under Section 10(38)
shall be
available
even in respect of long-term capital gains arising from transfer of units of a
business
trust which were acquired in lieu of shares of special purpose vehicle as
referred to
in
section 47(xvii) and on which securities transaction tax has been paid.
(2)
Exemption from long term capital gains under section 10(38) shall be available
w.e.f April
1,
2017 even where STT is not paid, provided that -
[As amended by Finance Act, 2016]
-
transaction is undertaken on a recognised stock exchange located in any
International
Financial
Service Centre, and
-
consideration is paid or payable in foreign currency
Income from international sporting event
[Section 10(39)]
From
the assessment year 2006-07, any specified income of notified person, arising
from an
international
sporting event held in India is exempt from tax, if the event is approved by
the
international
body and is notified by the Central Government and has participation by more than
two
countries.
Grants received by specified subsidiary
company [Section 10(40)]
Income
of any subsidiary company by way of grant or otherwise received from its Indian
holding
company
which is engaged in the business of generation/ transmission/distribution of
power is
exempt,
if such receipt is for settlement of dues in connection with reconstruction or
revival of
an
existing business of power generation. The exemption is available, if the
reconstruction or
revival
is by way of transfer of business to the Indian company notified under section
80
IA(4)(v)(a).
Under
section 10(41), any capital gain arising in the above case is not chargeable to
tax, if the
transfer
has taken place before April 1, 2006.
Income of certain non-profit body or authority
[Section 10(42)]
Any
specified income of non-profit body/authority notified by the Central
Government and
established,
constituted or appointed under a multilateral treaty agreement or convention to
which
Central Government is a signatory is exempt from tax under section 10(42).
Loan in the case of reverse mortgage [Section
10(43)]
Any
amount received by an individual as a loan (either in lump sum or in
instalments) in a
transaction
of reverse mortgage referred to in section 47(xvi), is not chargeable to tax.
Income of New Pension System Trust [Section
10(44)]
With
effect from assessment year 2009-10, any income received by any person for, or
on behalf
of
the New Pension System Trust established on 27-2-2008 under the provisions of
the Indian
Trust
Act, 1882 will be exempt from tax.
Any notified allowance or perquisite paid to
the Chairman/retired Chairman or any other
member/retired member of the UPSC [Section
10(45)]
As
per section 10(45), any allowance or perquisite, as may be notified by the
Central
Government
in the Official Gazette in this behalf, paid to the Chairman or a retired
Chairman or
any
other member or retired member of the Union Public Service Commission is exempt
from
tax.
Exemption of specified income of notified
body/ authority/trust/board/commission [Section
10(46)]
Under
section 10(46), any specified income arising to any notified
body/authority/Board/
Trust/Commission
(by whatever name called) which has been established or constituted by or
under
a Central, State or Provincial Act, or has been constituted by the Government
or a State
Government
with the object of regulating or administering any activity for the benefit of
the
[As amended by Finance Act, 2016]
general
public and is not engaged in any commercial activity and is notified by the
Central
Government
in the Official Gazette for the purposes of this clause is exempt from tax.
Any income of a notified infrastructure debt
fund set-up in accordance with prescribed
guidelines [Section 10(47)]
As
per section 10(47), any income of a notified infrastructure debt fund set-up in
accordance
with
the guidelines prescribed in Rule 2F of the Income-tax Rules is exempt from
tax.
Income received by certain foreign companies
in Indian currency for import of crude oil etc.
[Section 10(48)]
Any
income received in India in Indian currency by a foreign company on account of
sale of
crude
oil, any other notified goods or rendering of notified services to any person
in India is
exempt
from tax provided-
(i)
receipt of such income in India by the foreign company is pursuant to an
agreement or an
arrangement
entered into by the Central Government or approved by the Central Government;
(ii)
having regard to the national interest, the foreign company and the agreement
or arrangement
are
notified by the Central Government in this behalf; and
(iii)
the foreign company is not engaged in any activity, other than receipt of such
income, in
India.
Any income of a foreign company on account of
storage and sale of crude oil [Section
10(48A)]
Any
income arising to a foreign company through storage of crude oil in a facility
in India and
sale
therefrom to any person resident in India is exempt from tax provided that-
a)
the storage and sale by the foreign company is pursuant to an agreement or an
arrangement
entered
into by the Central Government or approved by the Central Government; and
b)
having regard to the national interest, the foreign company and the agreement
or
arrangement
are notified by the Central Government in this behalf; ]
Tax exemption to National Financial Holdings
Company Limited [Section 10(49)]
As
per section 10(49), any income of the National Financial Holdings Company
Limited, being a
company
set-up by the Central Government, of any year relevant to any assessment year
commencing
on or before the 1st day of April, 2014 is exempt from tax.
Income subject to equalisation levy [Section
10(50)]
Any
income arising from specified services which is chargeable to equalisation levy
is exempt
from
tax.
Other important exemptions
Apart
from above discussed exemption of section 10 following is the list of other
important
exemptions:
•
Section 10A provides for exemption in respect of income of newly established
undertakings
in free trade zone or electronic hardware technology park or electronic
software
technology park.
[As amended by Finance Act, 2016]
•
Section 10AA provides for exemption in respect of income of newly established
units in
Special
Economic Zones.
•
Section 11 and 12 provide exemption in respect of income of a public charitable
or
religious
trust.
•
Section 13A provides exemption in respect of income of a political party.
•
Section 13B provides exemption in respect of income of an electoral trust.
[As amended by Finance Act, 2016]
MCQ on TAX-FREE INCOMES
Q1. Section _________ grants
exemption to gratuity received by Government employee (i.e.,
Central
Government or State Government or local authority).
(a)
10(5)
(b)
10(10)(i)
(c)
10(10)(ii)
(d)
10(10A)
Correct answer : (b)
Justification of correct answer :
Section
10(10)(i) grants exemption to gratuity received by Government employee (i.e.,
Central
Government
or State Government or local authority).
Thus,
option (b) is the correct option.
Q2. Exemption under section
10(10D) is not available in respect of policy taken in the name of a
person
suffering from diseases/disability specified under section 80DDB/80U.
(a)
True
(b)
False
Correct answer : (b)
Justification of correct answer :
Exemption
under section 10(10D) is unconditionally available in respect of sum received
for a
policy
which is issued on or before March 31, 2003. However, in respect of policies
issued on or
after
April 1
st
,
2003, the exemption is available only if the amount of premium paid on such
policy
in any financial year does not exceed 20% (10% in respect of policy taken on or
after 1
st
April,
2012) of the actual capital sum assured. With effect from 1-4-2013, in respect
of policy
taken
in the name of a person suffering from diseases specified under section 80DDB
or in the
name
of a person suffering from disability specified under section 80U, the limit
will be
increased
to 15% of capital sum assured.
Thus,
the statement given in the question is false and hence, option (b) is the
correct option.
Q3. While computing the
exemption in respect of House Rent Allowance under section 10(13A)
read
with rule 2A, salary will include only basic salary and dearness allowance
forming part of
salary
while computing all retirement benefits.
(a)
True
(b)
False
Correct answer : (b)
Justification of correct answer :
While
computing the exemption in respect of House Rent Allowance As per section 10(13A),
read
with rule 2A, salary will include basic salary, dearness allowance forming part
of salary
while
computing all retirement benefits and commission based on fixed percentage of
turnover
achieved
by the employee. Apart from this, salary for this purpose does not include any
other
allowances/perquisites.
Thus,
the statement given in the question is false and hence, option (b) is the
correct option.
[As amended by Finance Act, 2016]
Q4. As per section _______
any income of the Prasar Bharati (Broadcasting Corporation of
India)
is exempt from tax.
(a)
10(20)
(b)
10(21)
(c)
10(23BBE)
(d)
10(23BBH)
Correct answer : (d)
Justification of correct answer :
As
per section 10(23BBH), any income of the Prasar Bharati (Broadcasting
Corporation of India)
established
under section 3(1) of the Prasar Bharati (Broadcasting Corporation of India)
Act,
1990
is exempt from tax.
Thus,
option (d) is the correct option.
Q5. The amount of exemption
available under section 10(32) is lower of Rs. ____________ per
minor
child or amount of income of each minor child (which is clubbed).
(a)
Rs. 500
(b)
Rs. 1,000
(c)
Rs. 1,500
(d)
Rs. 2,000
Correct answer : (c)
Justification of correct answer :
Under
section 64(1A) income of a minor child is clubbed along with the income of
his/her
parent,
subject to certain condition. If
the income of an individual includes any income of his/her
minor
child, then such individual can claim exemption (in respect of each minor
child) of lower
of
following amount:
(a)
Rs. 1,500 per minor child; or
(b)
Amount of income of each minor child (which is clubbed).
Thus,
option (c) is the correct option.
Q6. Any income arising to an
assessee, being a shareholder, on account of buy back of shares
(not
being listed on a recognised stock exchange) by the company as referred to in
section
115QA
is exempt from tax under section________.
(a)
10(34)
(b)
10(34A)
(c)
10(35)
(d)
10(35A)
Correct answer: (b)
Justification of correct answer :
Any
income arising to an assessee, being a shareholder, on account of buy back of
shares (not
being
listed on a recognised stock exchange) by the company as referred to in section
115QA is
exempt
from tax under section 10(34A).This exemption is available only in those cases
where
additional
income-tax is payable on distributed income under section 115QA by the company
opting
for buy back of such shares. Thus, option (b) is the correct option.
Q7. Under section 10(37), a
partnership firm can claim exemption in respect of capital gain
arising
on transfer of agricultural land situated in an urban area by way of compulsory
acquisition.
(a)
True
(b)
False
[As amended by Finance Act, 2016]
Correct answer : (b)
Justification of correct answer :
As
per section 10(37), an individual or Hindu Undivided Family (HUF) can claim
exemption in
respect
of capital gain arising on transfer by way of compulsory acquisition of
agricultural land
situated
in an urban area providedcompensation is received on or after April 1, 2004.
This
exemption
is available if the land was used by the taxpayer (or by his parents in the
case of an
individual)
for agricultural purpose for a period of 2 years immediately preceding the date
of its
transfer.
Thus,
the statement given in the question is false and hence, option (b) is the
correct option.
Q8. To claim exemption under
section 10(38), the assets transferred should be a long-term
capital
assets being equity shares of a company or units of an equity oriented mutual
fund or
__________.
(a)
Units of debt oriented mutual funds
(b)
Preference shares
(c)
Debentures
(d)
Units of a business trust
Correct answer : (d)
Justification of correct answer :
To
claim exemption under section 10(38), the assets transferred should be a
long-term capital
assets
being equity shares of a company or units of an equity oriented mutual fund or
units of a
business
trust.
Thus,
option (d) is the correct option.
Q9. As per section 10(48),
any income received in India in Indian currency by a foreign
company
on account of sale of crude oil, any other notified goods or rendering of
notified
services,
to any person in India is exempt from tax.
(a)
True
(b)
False
Correct answer : (a)
Justification of correct answer :
As
per section 10(48), any income received in India in Indian currency by a
foreign company on
account
of sale of crude oil, any other notified goods or rendering of notified
services to any
person
in India is exempt from tax provided-
(i)
receipt of such income in India by the foreign company is pursuant to an
agreement or an
arrangement
entered into by the Central Government or approved by the Central Government;
(ii)
having regard to the national interest, the foreign company and the agreement
or arrangement
are
notified by the Central Government in this behalf; and
(iii)
the foreign company is not engaged in any activity, other than receipt of such
income, in
India.Thus,
the statement given in the question is true and hence, option (a) is the
correct option.
Q10. Section _________ grants
exemption to interest and withdrawals from an account
opened
in accordance with the Sukanya Samriddhi Account Rules, 2014
made under the Government
Savings Bank Act, 1873.
(a)
10(5)
(b)
10(10)(i)
(c)
10(10)(ii)
(d)
10(11A)
[As amended by Finance Act, 2016]
Correct answer : (d)
Justification of correct answer :
As per section 10(11A), any payment from an account opened in
accordance with the Sukanya
Samriddhi Account Rules, 2014 made under the Government Savings
Bank Act, 1873 is exempt
from tax. In other words, interest and withdrawals from such
account will be exempt from tax
under section 10(11A).
Thus,
option (d) is the correct option.
Q11. Section 13A provides
exemption in respect of income of ________.
(a)
A political party
(b)
An electoral trust
(c)
A public charitable or religious trust
(d)
Units established in SEZ
Correct answer : (a)
Justification of correct answer :
Section
13A provides exemption in respect of income of a political party.
Thus,
option (a) is the correct option.
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