CMA VIPUL SHAH CS EXECUTIVE – JUNE/ DEC 21 INCOME EXEMPT FROM TAX

CHAPTER 3: INCOME EXEMPT FROM TAX

Section Topics

10(1) Agriculture income

10(2) to 10(50) Other income exempt from tax

10AA Special Economic Zone

11 to 13 Assessment of Trust

13A Political Party

13B Electoral Trust

INTRODUCTION

 As per Section 10(1) agricultural income is exempt from tax. The Indian Constitution, however, gives
exclusive power to state make provisions with respect to taxes on agricultural income
 However, it is taken into account to determine tax on non-agricultural income.
 It is, therefore, necessary to study the definition and provisions regarding agricultural income.

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MEANING OF AGRICULTRAL INCOME SEC 2(1A)

1 Any rent or revenue derived from a land, which is situated in India & is used for agricultural
purposes.

a Rent may be in cash or in kind.

b Assessee may be the owner or tenant of such land.

2 Any income derived from such land by agricultural operation.

3 Any income derived from such land by

a The cultivator by processing the agricultural produce raised;

The receiver of rent in kind by processing the agricultural produce received; so as to render
b
it fit for sale in market.

4 Any income derived from such land on sale made by

a The cultivator of the agricultural produce raised;

The receiver of rent in kind of the agricultural produce received. Without carrying on any
b
process, other than the process required to render it fit for the market.

5 Any income derived from a building subject to fulfilment of the following conditions

a The building should be occupied by the cultivator or receiver of rent in kind.

The building should be on or in the immediate vicinity of the land, being situated in India
b
and used for agricultural purposes.

c The building should be used as dwelling house or store-house or other out building.

d The land is assessed to land revenue or situated in rural area.

Note Profit on transfer of agricultural land: Profit on transfer of agricultural land shall not be treated
as agricultural income.

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CONDITIONS

1. Land must be situated in India. [Urban /Rural]

Definition of
Urban Area a Any area which is comprised within the jurisdiction of a municipality or a
cantonment board having a population of > 10,000/- ; or

b Any area within such distance, not being more than prescribed kilometres, from
the local limits of any municipality or cantonment board, as the Central
Government may specify in this behalf

Prescribed Kilometres Population of municipality of Cantonment board

2 Kms >10,000 but < 1,00,000

6 Kms >1,00,000 but < 10,00,000

8 Kms >10,00,000

“Population” means the population according to the last preceding census of which
the relevant figures have been published before the first day of the previous year

Taxpoint: Where such land or building is used for non-agricultural purpose then any
income derived from such land or building shall not be treated as agricultural income.

2. Land used for Agricultural purpose

The Act nowhere defines the term agricultural operations or agricultural purposes.
However, the Supreme Court laid down guidelines for the determination of the scope of
these terms in accordingly for the purpose, agricultural activity is divided into two parts.

a) Basic Operation: It means application of human skill & labour upon the land,
prior to germination, e.g. Tiling of land, sowing of seeds, planting irrigation etc.
Taxpoint: Any spontaneous growth from land itself (i.e. without any human

effort) cannot be termed as agricultural operation.

b) Subsequent Operation: It means operations:

 Which fosters the growth and preserves the produce;

 For rendering the produce fit for sale in market, and
 Which are performed after the produce sprouts from the land.
E.g. digging the soil around the growths, removal of undesirable

undergrowth’s, weeding, tending pruning, cutting harvesting etc.

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Taxpoint:

Activity Whether treated as

agricultural activity or not

Mere Basic Operation Agricultural activity

Mere Subsequent Operation Not an agricultural activity

Subsequent operation together with basic operation Agricultural activity

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Agricultural income

Conditions to treat income as Agri income

Land must be situated in India Land used for Agri Purpose

Rural Area Urban Area Basic Subsequent

Operation operation

Application of To Preserve the

Human skills Produce
&efforts

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MY NOTES

INSTANCES OF AGRICULTURAL (AGRO) INCOME

1 Income from growing trade or commercial products like jute, cotton, etc. is an agro income.

2 Income from growing flowers and creepers is an agro income.

3 Plants sold in pots are an agro income provided basic operations are performed.

4 Remuneration and interest to partner: Any remuneration (salary, commission, etc.) received by a
partner from a firm engaged in agricultural operation is an agro income.

5 Interest on capital received by a partner from a firm, engaged in agricultural operation is an agro
income.

6 Any income derived from saplings or seedlings grown in a nursery shall be deemed to be
agricultural income.

7 Compensation received from an insurance company

INSTANCES OF NON-AGRICULTURAL (NON-AGRO) INCOME

1 Salary received by an employee from any business (having agricultural income) is non-agro
income.

2 Dividend received from a company engaged in agricultural operation is non-agro income.

3 Income from fisheries is non-agro income.

4 Income from poultry farming is non-agro income.

5 Income from dairy farming, butter & cheese making etc. is non-agro income.

6 Breeding & rearing of livestock is non-agro income.

7 Interest received by a moneylender in the form of agricultural produce is non-agro income.

8 Profit on sale of standing crops after harvest, where such crops were acquired through purchase is
non-agro income.

9 Royalty income from mines in non-agro income.

10 Remuneration to a Director or Managing Director from a company engaged in agricultural business

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is non-agro income. The provision holds good even when such remuneration is on the basis of
certain percentage of net profit.

11 Interest on arrears of rent receivable in respect of agricultural land is non-agro income.

12 Income from a land situated outside India is non-agro income and taxable under the head
“Income from other sources”.

13 Income on supply of water for agricultural operation is non-agro income.

14 Income from sale of trees and grasses grown spontaneously (without any human effort). Is non-
agro income.

MY NOTES

PARTLY AGRICULTURAL INCOME [RULES 7 AND 8]

The income which is partially agricultural income and partially non-agricultural income chargeable to tax
under the head PGBP.

DISINTEGRATION OF INCOME IN SPECIFIC COMPOSITE BUSINESS

Rule Contents Agricultural Non-Agricultural

7A Growing and manufacturing rubber 65% agricultural 35% taxable

7B Growing and manufacturing coffee grown and cured 75% agricultural 25% taxable

7B Growing and manufacturing coffee grown, cured, 60% agricultural 40% taxable
roasted and grounded

8 Growing and manufacturing tea 60% agricultural 40% taxable

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Any other business
 In determining that part which is chargeable to income tax the market value of any agricultural
produce which has been raised by the assessee or received by him as rent in kind and which has
been utilized as a raw material in such business shall be deducted and no further deduction shall be
made in respect of any expenditure by the assessee as cultivator or receiver of rent in kind.
For the purpose of the above rule market value shall be deemed to be

1 Where the agricultural produce is ordinarily sold in the market, the average price at which it has
been sold, during the relevant previous year; or

2 Where the agricultural produce is not ordinarily sold in the market the aggregate of the following
shall be its market value

a The expenses of cultivation;

b The land revenue or rent paid for the land on which it was grown and

c The profit which in the opinion of the Assessing Officer is reasonable.

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PARTIAL INTEGRATION OF AGRICULTURAL INCOME WITH NON-AGRICULTURAL INCOME IF

a) Assessee is an individual or HUF, A BOI, an AOP or an AJP.

b) Agricultural income exceeds Rs. 5,000, And

c) Non-agricultural income exceeds Basic Exemption limit. [2.5L/ 3L/ 5L]

Then tax shall be calculated in the following manner:

Step-1 Add agricultural with non-agricultural income and calculate the tax on the aggregate as if it
is the total income

Step-2 Compute the tax on (Basic Exemption + agricultural income) as if it is the total income

Step-3 Steps 1 – Step 2 will be the tax payable.

Step-4 Claim Relief u/s. 87A – if Applicable

Step-5 Add SC (if Applicable) Add H & EC

Example Assesse Agri Income Non-Agri Income Total Income

Mr. Sunami 12,000 2,90,000 3,02,000

Mr. Tumeri 4,000 2,90,000 2,90,000

Mr. Humeri 12,000 2,40,000 2,40,000

X Ltd 12,000 2,90,000 2,,90,000

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PRACTICAL QUESTIONS ON AGRICULTURAL INCOME

Illustration 1
Mr. Sourav Dadely age 42 years has non-agro income of Rs. 3,50000 and agro income of Rs. 1,80,000.
Compute his tax liability for the A.Y. 2021-21.

Illustration 2
Mr. Tom Joshi age 42 years has non-agro income of Rs. 400000 and agro income of Rs. 4,000. Compute
his tax liability for the A. Y. 2021-22.
Particular Rs. Rs.

Income 4,00,000

Upto 2,50,000 NIL

2, 50,000 to 4, 00,000 (5%) 7,500

Less: rebate/s 87A NA

= Tax 7,500

(+) 4% H & EC 300

= Tax liability 7,800

Note: As Agri income Rs.4000 does not exceed Rs.5000 hence it shall be ignored for tax propose.

Illustration 3
Full Loss Ltd. grows sugarcane to manufacture sugar. Details for the previous year 2020-21 are as
follows:
Particulars Rs. In Lacs

Cost of cultivation of sugarcane (5000 tons) 10

Sugarcane sold in market (1000 tons) 3

Sugarcane used for sugar manufacturing (4000 tons) --

Cost of conversion 5

Salary to staff 6

Sugar produced & sold in market 25

Compute income of Full Loss Ltd.

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Illustration 4
Mr. Tony Shinde had estate in Rubber, Tea and Coffee. He derives income from them. He has also a
nursery wherein he grown plants and sells. For the PY 20-21 he provides following details of his income.
a) Manufacturer of Rubber Rs. 5,00,000
b) Manufacturer of Coffee grown and Cured Rs. 3,50,000
c) Manufacturer of Tea Rs. 7,00,000
d) Sale of plants from Nursery Rs. 1,00,000
Compute his income for AY 21-22.

Illustration 5
Mr. Sourav Dadely age 42 years has non-agro income of Rs. 4,50000 and agro income of Rs. 1, 80,000.
Compute his tax liability for the A.Y. 202122.

Illustration 6
Compute the tax liability of G who is 62 years old and resident in India for assessment year 2021-22
S.N Particulars Rs.

A rent of agricultural land 1,00,000

Land revenue paid to state government 10,000

Collection charges to recovery of agricultural rent 5,000

B Interest on arrears of land revenue received from tenants 12,000

C Income from manufacturing business carried on by G 5,50,000

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AGRICULTURAL INCOME

MULTIPLE CHOICE QUESTIONS

1. In case of an individual or HUF, agricultural d. Interest received by a money lender in the

income is: form of agricultural produce
a. Exempted
b. Exempted but included in the total income 5. There will be no partial integration, if the
for the rate purpose agricultural income does not exceed:
c. Fully taxable provided it is earned from India a. Rs.5,000
d. Taxable at a flat rate of 10% b. Basic exemption limit
c. Rs.50,000
2. Income accruing from agriculture in a foreign d. None of the above
country is taxable in the case of an assesse
who is: 6. Agricultural income is exempt under section
a. Resident of the Indian Income tax Act, 1961
b. Non-resident a. 10(1)
c. Not ordinary resident b. 2(1A)
d. None of the above c. 10(2A)
d. 10A
3. Profit on sale of agricultural land is
a. Exempt as agricultural income 7. An assesse who is engaged in the business of
b. Taxable as ‘Capital Gain’ growing and manufacturing rubber in India
c. Taxable as ‘Income from Other Sources’ will have agricultural income of:
d. Exempt under section 10(2A) a. 60% of income of assesse
b. 65% of income of assesse
4. Which of the following is an agriculture c. 35% of income of assesse
income? d. 75% of income of assesse
a. Dividend paid by a company to its
shareholders out of agricultural income 8. Any rent or revenue derived from land may
b. Share of Profit of a Partner from a firm be treated as an agricultural income if:
engaged in an agriculture land a. It is derived from land
c. Income from supply of water by a assesse b. The land is used for agricultural purpose
from a tank in agriculture land c. The land is situated in India
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d. All the above conditions are satisfied
13. Which of the following incomes received by

9. Mr. Monty is engaged in growing and an assesse are exempt under section 10 of

manufacturing tea in India. His income from the Income Tax Act, 1961?

this business is Rs. 1,40,000. His agriculture a. Agriculture Income

income will be: b. Salary of a partner from a firm
a. Rs.70,000 c. Salary received by a member of a ship’s
b. Rs.84,000 crew

c. Rs.1,40,000 d. Cash gift of Rs.5,00,000 received from a

d. Rs.56,000 friend

10. Mr. Bunty aged 42 years has non-agro 14. There will be no partial integration of

income of Rs. 4,00,000 and agro income of agricultural income with non-agricultural

Rs. 1,50,000. His tax liability for the A.Y. income, if the non-agricultural income does

2021 – 22 shall be: not exceed

a. Rs.2600 a. Rs.2,50,000

b. Rs.20,600 b. Rs.5,000

c. Rs.13,390 c. Rs.1,50,000

d. None of the above d. It will always be integrated

11. Receipts from TV serial shooting in farm 15. Which of the following is an agricultural

house is: income:

a. Agricultural income a. Income from brick making

b. Non-agricultural income b. Income from agricultural land situated in

c. Not an income Pakistan

d. None of the above c. Compensation received from insurance

company on account of loss of crop

12. Remuneration to partner from a firm

engaged in the business of growing and 16. Income from saplings shall be considered as

manufacturing of rubber in India is: ______________.

a. Partly agricultural income and partly non – a. Agricultural Income

agricultural income b. Business Income

b. Agricultural income c. Partly agricultural income and partly

c. Non-agricultural income business income

d. Exempted income d. Income from other sources

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b) Land is situated in any rural area in India
17. Which of the followings is not an agriculture c) Land is situated whether in India or outside
income: India
a. Rent received from a land situated in India
for agriculture purpose 22. If the assessee is engaged in the business of
b. Income derived from agriculture produce growing and manufacturing tea in India, the
c. Income derived from land being let out for agricultural income in that case shall be:
marriage of a farmer a) 40% of the income from such business
d. Income from production of tea leaves b) 60% of the income from such business
c) Market value of the agricultural produce
18. Agricultural income is exempt provided the: minus the expenses on cultivation of such
a. Land is situated in India agricultural produce
b. Land is situated in any rural area of India
c. Land is situated whether in India or outside 23. If the assessee is engaged in the business of
India manufacturing of tea, such income shall be:
d. Land is situated outside India a) Exempt
b) Fully taxable
19. In case of an assesse engaged in the c) 40% of such income shall be taxable and
business of manufacturing of tea, his the balance 60% shall be exempt
agricultural income is:
a. 60% of total receipt of the business 24. If the assessee is engaged in the business of
b. 60% of income of the business growing and manufacturing of rubber, the
c. Nil agricultural income in that case shall be:
d. 40% of income of the business a) 40% of the income from such business
b) 60% of the income from such business
20. Following activity shall be considered as c) 65% of the income from such business
agricultural activity:
a. Subsequent operation on the agricultural land 25. If the assessee is engaged in the business of
b. Basic operation on the agricultural land growing and curing of coffee, the agricultural
c. Marketing operation of the agricultural income in that case shall be:
produce a) 60% of the income from such business
d. None of the above b) 75% of the income from such business
c) 65% of the income from such business
21. Agricultural income is exempt provided the:
a) Land is situated in India

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26. If the assessee in employed in the business a) The market value of such agricultural
of growing curing roasting and grounding of produce shall be treated as his agricultural
coffee, the agricultural income in that case income.
shall be: b) The market value of the agricultural produce
a) 60% of the income from such business minus the cost of cultivation shall be
b) 75% of the income from such business treated as his agricultural income
c) 65% of the income from such business c) Nothing shall be treated as his agricultural
d) 40% of the income from such business income.

27. If the assessee is engaged in the business of 30. An assessee has incurred Rs. 1, 00,000 on
manufacturing some products other than tea, the cultivation of agricultural produce. 50%
rubber or coffee for which he uses his own of the produce has been sold for Rs. 1,10,000
agricultural produce, then agricultural income and the balance 50% has been used by the
in that case shall be: assessee for his self – consumption, the
a) 40% of the income from such business of agricultural income in this case shall be:
growing and manufacturing the products out a) Rs. 10,000
of it b) Rs. 60,000
b) 60% of such income c) Rs. 1,20,000
c) Market value of such agricultural produce
minus the expenses incurred for cultivation 31. The partial integration of agricultural income
of such agricultural produces. with non-agricultural income is done in case
of:
28. If the assessee uses its own agricultural a) All assessee
produce for the purpose of manufacturing b) Any assessee other than who is liable to be
certain products other than tea, rubber or taxes at flat rate of income tax
coffee the cost of such manufacturing shall c) Individual HUF, AOP or BOI & artificial
be: Judicial person
a) Cost of producing such agricultural produce
b) Market value of such agricultural produce as 32. Agricultural income is:
on the date of use a) Fully exempt
c) None of these two b) Partially taxable
c) Fully taxable
29. If an assessee uses the agricultural produce
grown by him for his own consumption then: 33. The partial integration of agricultural income
is done to compute tax on;

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a) Agricultural income a) Rs. 2,50,000
b) Non-agricultural income b) Rs. 2,00,000
c) Both agricultural and non-agricultural income c) Rs. 5,000

34. If a firm earns agricultural income, it will be 38. Income derived from rubber plantation in
exempt: Singapore but received in India shall be
a) In the hands of firm treated as:
b) In the hands of firm but taxable in the a) Agricultural income and hence exempt
hands of the partners b) Agricultural income but taxable under the
c) In the hands of firm as well its partners head income from other source
d) In the hands of the firm as well its partners c) Exempt as earned outside India.
but would be included in the other income
of partners for computations of tax on his 39. Mr. X has agricultural land in Delhi which
other incomes. he has sold and has earned gains of Rs. 10
Lakhs. This is his:
35. If a company declares dividend out of a) Agriculture income
agricultural income, such dividend declared b) Income from salary
by the company shall be: c) Income from capital gains
a) Exempt in the hands of the shareholder but d) Income from other sources
dividend tax will be payable by the company
b) Not be subject to any income tax, either in 40. Mr. K is employed in MP Agricultural
the hands of company or the shareholders University and getting a Basic Pay of Rs.
c) Included in the total income of the 20,000 pm and claims that it is his
shareholders Agricultural Income? State whether it is:
a) Exempt as Agriculture income
36. There will be no partial integration of b) Chargeable under the head of salary
agricultural income with non-agricultural c) Chargeable under the head of business and
income, if the non – agricultural income of profession
A who is less than 60 years not exceed: d) None of the above
a) Rs. 5,000
b) Rs. 2,50,000 41. If any person earns income from allied
c) Rs. 1,80,000 activities like animal husbandry, diary
farming, fishery etc. then it is:

37. There will be no partial integration, if the a) Considered to be Agricultural Income

agricultural income does not exceed: b) Considered to be Income of PGBP.

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c) Both of the above b) An area within 1.5 kms from the local limits
d) None of the above of a municipality and has a population of
12.000as per last census
42. Which of the following is an agricultural c) An area within 2 kms from the local limits
land assuming that crops are being of a municipality and has a population of
cultivated on such land and such land is 11,00,000 as per last census
situated in – d) An area within 8 kms from the local limits
a) An area within 3 kms from the local limits of a municipality and has a population of
of a municipality and has a population of 10.50.000 as per last census
80.000as per last census

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OTHER INCOMES EXEMPT FROM TAX SECTION 10(2) TO (48)

SN Section Explaination
1 10(1) Agricultural Income: Refer chapter Agricultural Income.
2 10(2) Member’s share in income of HUF [Sec. 10(2)]
Any sum received by an individual as a member of a Hindu Undivided Family :-
 Where such sum has been received out of the income of the family; or
 Where such sum has been received out of the income of an impartible estate
belonging to the family.
3 10(2A) Share in Profit of firm Exempt in the hands of partner.
4 10(5) Leave Travel Concession : Refer chapter Salaries
5 10(6) 1 Remuneration of foreign citizens
Remuneration received by an official of an embassy, high commission,
legation commission, consulate, trade representation of a Foreign State, or
as a member of the staff of any of these officials, of services in such
capacity, subject to the following conditions:
a Remuneration of the corresponding officials or member of staff of
the Indian government resident for similar purposes in that country
shall be exempt in that country
b Members of such staff are not engaged in any business or
profession or employment in Indian otherwise than as members of
such staff.
2 Remuneration received by him as an employee of a foreign enterprises
(which doesn’t carry any business in India) for services rendered by him
during his stay in India = < 90 days.
3 In case he is a non-resident, any remuneration due to his employment on
a foreign ship provided his total stay in India = < 90 days in the PY.
4 Any remuneration received by an employee of the foreign government in
connection with his training in any specified establishment or office, to
the extent of his stay in India.
6 10(7) Allowance or perquisite paid outside India
Any allowance or perquisite paid outside India by the Government to a citizen of
India for rendering services outside India.

7 10(10) Death-cum-retirement-gratuity:

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Refer chapter Salaries.
8 10(10A) Commutation of Pension:
Refer chapter Salaries.
9 10(AA) Leave Salary
Discussed under the head “Salaries”
10 10(10B) Workmen’s retrenchment compensation
Refer chapter Salaries.
11 10(10C) Payment under voluntary retirement scheme
Refer chapter Salaries :
12 10(10BC) 1 Compensation on account of any DISASTER
Any amount received or receivable from the Central Government or a State
Government or a local authority by an individual or his legal heir by way of
compensation on account of any disaster.
2 However, of the individual or his legal heir has been allowed any deduction
under this act on account of any loss or damage by such disaster, then
compensation received will be taxable to the extent of such deduction and
excess, if any, will be exempt.
3 Ex- 1: - if loss of 26 lakhs is claimed as deduction-
Case 1- compensation received is Rs. 32 lakhs, then Rs. 26 lakhs will be
taxable
and balance amount of Rs. 6 lakhs shall be exempt u/s 10(10BC)
Case 2- if compensation received is Rs. 20 lakhs, then the whole
compensation
amount of Rs. 20 lakhs shall be taxable
Case 3- if no deduction is claimed in respect of loss-the whole compensation
received will be exempt from tax
13 10(10CC) Tax paid by employer on behalf of employee on non-monetary perquisites u/s.
17(2)
Refer chapter Salaries & TDS
14 10(10D) Any sum received under the life insurance policy, including bonus on such
policy. However the following sums are not exempt:
A Sum received from a policy u/s 80DD (Handicap policy); or
B Sum received under a Keyman insurance policy; or
“Keyman Insurance Policy” means a life insurance policy taken by a
person of the life of another person who is or was the employee or is or

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was connected or is any manner whatsoever with the business of such
person and includes such policy which has been assigned to a person, at
any time during the term of the policy, with or without any consideration.
C Any sum received under an insurance policy issued between 1-4-2003 and
31-03-2012 in respect of which the premium payable for any year > 20%
of the actual capital sum assured; or
Exception: any sum received on the death of a person is not taxable
D Any sum received under an insurance policy issued on or after 01/04/2012
but before 31-03-13 in respect of which the premium payable for any of
the years > 10% of the actual capital sum assured:
Exception: Any sum received on the death of a person is not taxable
E In case of policy issued on or after 1/4/2013, on life of following persons,
10% shall be taken as 15%
1 A person with disability or severe disability as referred to u/s 80U; or
2 Suffering from disease or ailment as specified in the rules made u/s
80DDB
15 10(11) Payment from Statutory or Public Provident Fund:
Refer chapter salary.
16 10 (11A) Payment from Sukanya Samriddhi Account
1 A special small savings instrument for the welfare of the girl child was
announced in the Union Budget in July 2014. To give effect to this
announcement, Sukanya Samriddhi Account Rules, 2014 have been
introduced.
2 The following are the tax benefits envisaged in the Sukanya Samriddhi
Account Scheme:
a The investments made in the scheme will be eligible for deduction
under section 80C.
b The interest accruing on deposits in such account will be exempt from
income tax.
c The withdrawal from the said scheme in accordance with the rules of
the said scheme will be exempt from tax.
17 10(12) Payment from Recognised Provident Fund:
Refer chapter Salaries.

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18 10(12A) Payment from NPS Trust to an assessee on closure of his account or on his
opting out of the pension scheme exempt
1 As per section 80CCD, any payment for National Pension System Trust on
an employee on account of closure or his opting out of the pension scheme
is chargeable to tax.
2 Any payment from National Pension System Trust to an assessee on
account of closure or his opting out of the pension scheme referred to in
section 80CCD, to the extent it does not exceed 60% of the total amount
payable to him at the time of closure or his opting out of the scheme,
shall be exempt from tax.
19 10(12B) Payment to assessee on partial withdrawal from NPS.
Any payment from the National Pension System Trust to an assessee under the
pension scheme referred to in section 80CCD, on partial withdrawal made out of
his account in accordance with the terms and conditions, specified under the
Pension Fund Regulatory and Development Authority Act, 2013 and the regulations
made thereunder, to the extent it does not exceed 25% of the amount of
contributions made by him
20 10(15) 1 Post office savings bank account to an extent of interest of Rs. 3,500 for
an individual account & Rs. 7,000 for a joint account
2 Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999
or
21 10(16) Educational Scholarship
Scholarship granted to meet the cost of education. i.e., tuition fee and all other
necessary expenses for acquiring education. It is not necessary that the whole
amount of such scholarship is spent on education alone and even if some amount
is saved from the total payment, the whole amount will be exempt.
22 10(17) Daily Allowance, etc. to MP and MLA
Any income by way of :-
a Daily allowance received by any person by reason of his membership of
parliament or of any State Legislature or of any Committee thereof.
b Any allowance received by any person by reason of his membership of
Parliament
c Constituency Allowance received by any person by reason of his
membership of State legislature
23 10(17A) Awards and rewards

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Any payment made, whether in cash or in kind :
a In pursuance of any award instituted in the public interest by the Central
Government or any State Government or by any other approved body; or
b As a reward by the Central Government or any State Government for
approved purposes
24 10(18) Pensions to gallantry award winners
Any pension received by an individual who has been awarded “Paramvir Chakra” or
“Mahavir Chakra” or “Vir Chakra” or such other gallantry award as notified by the
government. It includes family pension.
25 10(19) Family pension to widow or children of armed force
Family pension received by the widow or children or nominated heirs, of a member
of the armed forces (including para-military forces) of the Union, where the death
of such member has occurred in the course of operational duties, in such
circumstances and subject to such conditions, as may be prescribed.
26 10(19A) Palace of ex-ruler
The annual value in respect of any one palace, which is in the occupation of an
ex-ruler.
27 10(20) Income of local authority: Following income of a local authority is exempt:
a Income chargeable under the head income from House Property. Capital
Gains or Income from other Sources
b Income from the supply of commodities (other than water or electricity) or
services, within its own jurisdiction
c Income from the supply of water services or electricity within or outside its
jurisdiction
28 10(21) Income of scientific research association:
Any income of a scientific research association (being approved for the purpose of
Sec. 35(1)(ii) or research association which has its object, undertaking research in
social science or statistical research [being approved and notified for the purpose
of Sec. 35(1)(iii)], is exempt.
Provided such association:-
a a) Applies its income, or accumulates it for application, wholly and
exclusively to the objects for which it is established; and
b Invest or deposit its funds in specified Investments.
29 10(22B) Income of news agency [eg: - UNI / PTI]
Any income of a news agency, set up in any India solely for the purpose of

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collection and distribution of news as the Central Government may notified in the
official gazette. It shall apply its income or accumulate it solely for the above
purposes and shall not distribute its income in any manner to its members.
30 10(23A) Income of professional institutions
Any income (other than ‘Income from House Property’ or any income received
for rendering any specific services or income by way of interest from its
investments) shall be exempt from tax provided the following conditions are
satisfied:
1 It is established in India with the object of control, supervision, regulation
or encouragement of the profession of law, medicine, accountancy,
engineering, architecture, or any other notified profession;
2 It applies its income, or accumulates it for application, wholly and
exclusively for the objects for which it was established
3 It is for the time being approved by the Central Government by general or
special order.
31 10 Income of Prasar Bharati broadcasting corporation of India will be exempt from
(23BBH) tax.
32 10(23C) 1 Any Income received from by any person on behalf of the following :
a Prime Ministers national Relief Fund; or
b Prime Ministers Fund (Promotion of Folk Art); or
c Prime Ministers Aid to Students Fund; or
d National Foundation for Communal Harmony; or
e Swachh Bharat Kosh, set up by the Central Government; or
f Clean Ganga Fund, set up by the Central Government;
g The Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief
Fund in respect of any State or Union territory
2 Any University or other educational institution existing solely for
educational purposes and not for purpose of profit, and –
a It is wholly or substantially financed by the Government; or
b If it is privately financed, its aggregate annual receipts = < Rs. 1
Crore, or
c If it is privately financed and its aggregate annual receipts > Rs. 1
Crore, it has been approved by the CCIT.
3 Any hospital or other institution, subject to following conditions
a Income is from the reception and treatment of persons

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 Suffering from illness or mental defectiveness; or
 During convalescence; or
 Requiring medical attention or rehabilitation.
b It exist solely for philanthropic purposes and not for purposes of
profit, and
c It is wholly or substantially financed by the Government, or
d If it is privately financed, its aggregate annual receipts > Rs. 1 Crore,
it has been approved by the CCIT.
4 Any notified charitable fund or institution, or Any notified trust or
institution wholly for public religious and charitable purposes.
Amendment Finance Act 2020
The scheme of section 10(23C) has been modified with effect from October 1,
2020. All funds or trusts or institutions or universities or other educational
institutions or hospitals or other medical institutions which are currently approved
for the purpose of section 10(23C)(iv) / (v) / (vi) / (via), are required to apply
for a fresh approval under the amended scheme of section 10(23C). likewise, all
new entities which want exemption under section 10(23C) are required to apply
for approval under the amended provisions. The process of approval for the new
and existing entities will be completely electronic under which a unique approval
number shall be issued to all new and existing entities. Moreover, new entities
(which are yet to start their activities) will get provisional approval for 3 years.
The table given below summaries these amendments:

Different Time limit Time limit For which Validity of

entities for uploading for grant of date / year approval
approval approval approval will (Second
application (Ninth be available proviso to
(First proviso proviso to (Eighth sec. 10(23C))
to sec. sec. 10(23C) proviso to
10(23C)) sec. 10(23C))

Existing On or before Within 3 From the 5 years

entities December 31, months from assessment

(which have 2020 the end of year from

approval for the month in which such

section which approval trust or

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10(23C) on or application is institution
before uploaded was earlier
September 30, granted
2020) approval

Entity which At least 6 Within 6 From the 5 years (to be

has approval months prior months from assessment granted after

(given after to expiry of the end of year satisfying

September 30, approval under the month in immediately about the

2020) for section which approval following the object of the

section 10(23C) application is financial year trust and

10(23C) received in which genuineness

approval of its
application is activities)
received

New entities At least 1 Within 1 From the Provisional

(which do not month prior to month from assessment approval for a

have approval the the end of year period of 3

for section commencemen the month in immediately years from

10(23C) up to t of the which approval following the the

September 30, previous year application is financial year assessment

2020) or any relevant to uploaded in which year from

other entity the approval which approval

not covered assessment application is is sought

by this table year from uploaded

which approval
is sought

Entity which At least 6 Within 6 From the first 5 years (to be

is provisionally months prior months from of the granted after

approved for to expiry of the end of assessment satisfyimng

section provisional the month in years for about the

10(23C) approval or which approval which it was object of the

within 6 application is provisionally trust and
months of uploaded approved genuiness of
commencemen its activities)
t of its (5 years time

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activities, – limit to be
whichever is counted from
earlier the first year
of provisional
approval)
33 10(23D) Income of Mutual fund
Registered under SEBI.
Set by Public sector Bank or Public financial institution or authorized by RBI.
34 Sec 10(24) Income of trade Union
Any income chargeable under the heads “Income from House property” and
Income from Other Sources” of:
a A registered union within the meaning of the Trade Unions Act, 1926
formed primarily for the purpose of regulating the relations between
workmen and employers or between workmen; or
b An association of such registered unions.
35 Sec 10(25) Income of provident fund
The following incomes are exempt from tax:
1 Interest on securities which are held by an provident fund to which the
Provident Funds Act, 1925 applies, and any capital gains arising from the
transfer of such securities;
2 Any income received by the trustees on behalf of a RPF;
3 Any income received by the trustees on behalf of an ASF
4 Any income sale by the trustees on behalf of an AGF;
5 Any income received by -
a The board of trustees on behalf of the deposited-linked Insurance
Fund established u/s 3G of the Coal Mines Provident Fund &
Miscellaneous Provisions Act, 1948, or
b The board of trustees on behalf of the deposit-linked insurance fund
established u/s 6C the EPF and Miscellaneous Provisions Act, 1952.
36 10(25A) Income of ESIF
Any income of the employees state insurance fund set up under the provisions of
the employees State Insurance Act, 1948
37 Sec 1 The following income, which accrues or arises to a Sikkim’s
10(26AAA) individual, would be exempt from income tax
a Income from any source in the State of Sikkim; or

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b Income by way of dividend or interest on securities
2 However, this exemption will not be available to a Sikkim’s woman who, on
or after 1st April, 2008, marries a non-Sikkim’s individual.
Explanation. – For the purpose of these clause, “Sikkim’s” shall mean
a An individual, whose name is recorded in the registered maintained
under the Sikkim Subjects Regulation, 1961, immediately before the
26th day of April, 1975; or
b An individual, whose name is included in the Register of Sikkim
Subjects by virtue of the Government of India Order No. 26030/36/90-
I.C.I., dated the 7th August, 1990 and Order of even number dated the
8th April, 1991; or
c Any other individual, whose name does not appear in the Register of
Sikkim Subjects, but it is established beyond doubt that the name of
such individual’s father or husband or paternal grandfather or brother
from the same father has been recorded in that register
38 10(32) Income of Minor
Income upto Rs. 1500 is exempt in respect of each minor child whose income is
clubbed u/s. 64(1A)
39 10(33) Income on transfer of units of US 64
Any on transfer of a capital asset, being a unit of the Unit Scheme. 1964 where
such transfer takes place on or after the 1st day of April, 2002.
40 10(34) (Amendment Finance Act 2020)
Dividend Income
Section 10(34) exempts income by way of dividends referred to in section 115 – O
except the income by way of dividend chargeable to tax in accordance with the
provisions of section 115BBDA. As a consequence of removal of dividend
distribution tax under section 115 – O (with effect from April 1, 2020), section
10(34) has been amended so as to provide that the exemption of section 10(34)
shall not apply to dividend received on or after April 1, 2020. However, the
exemption shall apply in respect of dividend on which tax under section 115 – O
and section 115BBDA (wherever applicable) has been paid.
41 10(34A) Income of a shareholder on account of buy back of shares

Different shares Exemptions to Tax distributed income

shareholders u/s 10(34A) u/s 115QA payable by a
company which buy-

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backs its own shares

Buy-back on unutilized Exemption available Tax payable by company

shares (on or after June u/s 115QA
1, 2013)

Buy-back of listed shares Exemption not available Tax on distributed

(on or after June 1, 2013 u/s 10(34A) income under section
but excluding the buy- 115QA, not applicable
back of shares where
public announcement
pertaining to buy-back is
made after july 5, 2019)

Buy-back of listed shares Exemption available Tax payable by company

(where public under section 115QA
announcement pertaining
to buy-back is made
after July, 5 2019)

42 10(35) (Amendment Finance Act 2020)

Income from units
Section 10(35) exempts income received in respect of the units of a mutual fund,
units from the Administrator of the specified undertaking and units from the
specified company. As a consequence of the removal of distribution tax under
section 115R (with effect from April 1, 2020), section 10(35) has been amended
to provide that the provisions of the said clause shall not apply to any income, in
respect of units, received on or after April 1, 2020.
43 10(35A) Income from Securitisation trust to an Investor:
Income by way of Distributed Income referred in Sec. 115TA received from a
Securitisation trust, by any person being an Investor of the said trust is exempt.
44 10(37) If an urban land is compulsory acquired by the government then capital gain shall
be exempted. (Refer capital gain)
45 10(37A) Capital Gain on transfer of land or building under the Andhra Pradesh
Capital City Land Pooling Scheme
1 Any “Capital Gains” in respect of transfer of a specified capital asset
arising to an
a An individual or

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b A Hindu undivided family,
2 Who was the owner of such specified capital asset as on the 2 nd day of
June, 2014
3 He transfers that specified capital asset under the Land Pooling Scheme
(herein referred to as “the scheme”) covered under the Andhra Pradesh
Capital City Land Pooling Scheme (Formulation and Implementation) Rules,
2015 made under the provisions of the Andhra Pradesh Capital Region
Development Authority Act, 2014 and the rules, regulations and Schemes
made under the said Act.
4 Explanation
For the purpose of this clause, “Specified Capital Asset” means,-
a The land or building or both owned by the assessee as on the 2nd
June, 2015 and which has been transferred under the scheme; or
b The Land Pooling Ownership certificate issued under the scheme to
the assessee in respect of land or building or both referred to in clause
(a); or
c The reconstituted plot or land, received by the assessee in lieu of
land or building or both referred to in clause (a) in accordance with
the scheme, if such plot or land, so received is transferred within 2
years from the end of the financial year in which the possession of
such plot or land was handed over to him;
46 10(38) Long-Term capital Gain on transfer of Securities:
1 Income should be from transfer of a Long-term Capital Asset being –
a A Equity share in a company, or
b A Unit of an equity oriented Fund, or
c A Unit of Business trust
Note Exemption shall also apply in respect of any Income arising from
transfer of units of a Business Trust which were acquired in
consideration of a transfer referred to in Sec. 47(xvii).
2 The sale transaction should be entered into on or after 1/10/2004.
3 Transaction should be chargeable to securities transaction tax under
Chapter VII. this condition is not applicable for a transaction undertaken on
a Recognised Stock Exchange (RSE) located in any International Financial
Services Centre (IFSC) and where the consideration for such transaction is
paid or payable in Foreign Currency.

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4 Provided also that nothing contained in this clause shall apply to any
income arising from the transfer of a long term capital asset, being an
equity share in a company, if the transaction of acquisition, other than the
acquisition notified by the Central Government in this behalf, of such
equity share is entered into on or after the 1 st October, 2004 and such
transaction is not chargeable to STT [Inserted by FA 2017 w-e-f PY 18 –
19].
5 Provisions applicable from the AY 19-20: Exemption u/s 10(38) is not
applicable from the AY 2019 – 20. Long term capital gain (which arises on
transfer of equity shares/ units of equity oriented mutual fund on or after
April, 1, 2018) is taxable within the parameters of section 112A. [Capital
Gain]
6 Equity Oriented Fund means a Fund
a Where the investible funds are invested by way of Equity Shares in
Domestic Companies to the extent of more than 65% of the total
Proceeds of such Fund, and
b Which has been set up under a Scheme of Mutual Fund specified u/s
10(23D).
47 10(39) Specified income, arising from any international sporting event held in India
1 Any income of the persons notified by the central government in the
official gazette, arising from the international sporting event, of the nature
and to the extent, notified by the central government, if such international
sporting event
a Is approved by the international body regulating the international
sport relating to such event;
b Has participation by more than 2 countries;
Is notified by the central government in the official gazette for the
purpose of this clause
48 10(40) Grant received by subsidiary company from its holding company
Any income of subsidiary company by way of grant otherwise received from an
Indian holding company, engaged in the business of generation or transmission or
distribution of power if receipt of such income is for settlement of dues in
connection with reconstruction or revival of an existing business of power
generation.
49 10(41) Transfer of a capital asset of a power generation, transmission or distribution

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undertaking.
Any income arising from transfer of a capital asset, being an asset of an
undertaking engaged in the business of generation or transmission or distribution
of power where such transfer is effected on or before 31/03/2007, to the Indian
company notified u/s 80-IA(4)(v)(a).
50 10(42) 1 Specified income of a body or authority, constituted or appointed under
international treaty or convention.
Any specified income arising to a body or authority which
a Has been established or constituted or appointed under a treaty or an
agreement entered into by the central government with two or more
countries or a convention signed by the central government
b Is established or constituted or appointed not for the purpose of
profit
c Is notified in the central government in the official gazette
Explanation: For the purpose of this clause, specified income means the
income, of the nature and to the extent, notified by the central
government.
51 10(43) 1 Amount received as a loan under reserve mortgage
Any amount received by an individual as a loan, either in lump sum or in
installment, in a transaction of reverse mortgage referred to in clause (xvi)
of section 47.
2 Reverse Mortgage (Amendment) Scheme, 2013
Meaning of Reverse Mortgage: The loan will be given up to, say, 60% of
the value of residential house property mortgaged.
The approved leading institution may disburse the loan to the reserve
mortgage (borrower) by any one or the following modes:
a Periodic payments, to be decided mutually between lender and
borrowed.
b Lump-sum payments, to the extent that such payment does not
exceed 50% of the total loan amount sanctioned.
c Payment in part or in full, to the annuity sourcing institutions (LIC
of India or any other insure registered with IRDA) for the purpose of
periodic payments by way of annuity to the borrowed
3 The borrowed can use the loan amount for renovation and extension of
residential property, family’s medical and emergency expenditure etc.,

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amongst others. However, he cannot use the amount for speculative or
trading purposes.
Period of Reverse Mortgage loan: -
The loan under reverse mortgage shall be granted for
a A period not exceeding 20 years, (if disbursed as given in [i], [ii])
OR
b Residual life of the borrowed. (if disbursed as given in [iii])
4 The bank will recover the loan along with the accumulated interest by
selling the house after the death of the borrowed. The excess amount will
be given to the legal heirs. However, before resorting to sale of the house,
preference will be given to the legal heirs to repay the loan and interest
and mortgaged property released.
52 10(45) Allowance or perquisite
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.
[omitted w.e.f 1-4-20 Amendment Finance act 20]
53 10(48) Sale of Crude oil:-
Any income received in Indian Currency by a Foreign Company on account of
sale of Crude Oil, or any other goods or rendering of services, as notified by
Central Government in this behalf, to any person is exempt, based on following
conditions
1 Such income is received in India by the Foreign Company, pursuant to an
agreement or agreement entered into by Central Government or approved
by Central Government
2 Having regard to the national interest, the Foreign Company and the
agreement or notified by the central Government. [Note: Some Notified
Companies are – M/s temad – Iran, National Iranian Oil Company.)
3 The foreign company is not engaged in any activity in India, other than the
receipt of such income.
54 10(48A) Storage of Crude Oil
Any income accruing or arising to a Foreign Company, on account of storage of
crude oil in a facility in India and sale of Crude Oil there from, to any person
resident in India, is exempt.

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Conditions
1 the storage and sale by the Foreign Company is pursuant to an
agreement or an arrangement entered into by the Central Govt or
approved by the central govt, and
2 Having regard to the national interest, the foreign company and
the agreement or arrangement are notified by the Central
Government in this behalf
55 10(48B) Sale of leftover stock of crude oil
Any income accruing or arising to a foreign company on account of sale of leftover
stock of crude oil, if any, from the facility in India after the expiry of the
agreement or the arrangement referred to in clause (48A) subject to such
conditions as may be notified by the Central Government in this behalf
The above provisions of section 10(48B) have been amended (With effect from
the AY 19-20) to provide that any income accruing or arising to such foreign
company on account of sale of leftover stock of crude oil, if any, from such facility
in India on the termination of the agreement/ arrangement [as referred to in
clause (48A)], shall also be exempt (subject to the conditions as may be
notified).
56 10(48C) Newly inserted finance act 20
Exemption in respect of certain income of Indian Strategic Petroleum Reserves
Ltd. (Section 10(48C))

Section 10(48C) has been inserted with effect from the assessment year 2020 –
2021. It provides exemption to any income accruing or arising to Indian Strategic
Petroleum Reserves Ltd. (ISPRL), being a wholly owned subsidiary of Oil Industry
Development Board, as a result of an arrangement for replenishment of crude oil
stored in its storage facility in pursuance of the directions of the Central
Government in this behalf. This exemption shall be subject to the condition that
the crude oil is replenished in the storage facility within 3 years from the end of
the financial year in which the crude oil was removed from the storage facility for
the first time.

57 10(50) Income arising from any specified service

Any Income arising from any specified service provided on or after the date on
which provisions of Chapter VIII of the Finance Act, 2016 comes into force and
chargeable to Equalisation Levy under that chapter,

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Explanation:
For the purpose of this clause, “Specified Service” means online advertisement, any
provision for digital advertising space or any other facility or service for the
purpose of online advertisement and includes any other service as may be notified
by the central Government in this behalf.

(Amendment Finance Act 2020)

The scope of this provision has been extended to provide exemption pertaining to
income arising from e – commerce supply of goods / services provided / facilitated
on or after April 1, 2021.

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INCOMES EXEMPT FROM TAX

MULTIPLE CHOICE QUESTIONS

1. The annual value in respect of any one Government in this behalf

palace, which is in the occupation of an ex – c. The foreign company is not engaged in any
ruler is exempt. Such exemption is provided activity, other than receipt of such income,
in which section of the Income Tax Act in India
a. Section 10(19A) d. All of the above
b. Section 10(20)
c. Section 10(21) 4. Any income by way of pension received by
d. Section 10(19) an individual who has been in the service of
the Central or State Government and has
2. Under section 10(10BC), any compensation been awarded “MahaVir Chakra” is exempted
received for loss / damage on account of any under section _______________
______________ eligible for exemption a. 10(18)
a. Disaster b. 10(17A)
b. Life c. 10(19)
c. Accident d. There is no such award thus pension is not
d. Business exempted

3. As per section 10(48), any income received 5. Which out of the following income is exempt
in India in Indian currency by a foreign from tax?
company on account of sale of crude oil or a. Sum received by a member from HUF
other notified goods or service to any person b. Dividend received from a foreign company
in India is exempt provided: c. Agricultural income from Bangladesh
a. Receipt of such income in India by the d. Salary income from a non-profitable
foreign company is pursuant to an agreement organization
or an arrangement entered into by the
Central Government or approved by the 6. Dividend received by a shareholder from an
Central Government Indian company is exempt. Interest or any
b. Having regard to the national interest, the other expenditure incurred for earning such
foreign company and the agreement or dividend income shall:
arrangement are notified by the Central a. Be allowed as deduction

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b. Not be allowed as deduction 10. Employer’s contribution to Statutory
c. Be allowed as deduction subject to certain provident Fund is exempt under section
conditions ______________
d. Be allowed only if AO is satisfied that it is a. 10(11)
only interest expenditure b. 10(12)
c. 10(13)
7. Section 10 of the Income Tax Act, 1961 d. None of the above
provides certain income which is exempt
from tax. Which income is exempted under 11. Interest from post office saving bank
section 10(26AAA) account is _________
a. Income of Sikkim’s – individual a. Fully exempt
b. Income of an agricultural produce market b. Exempt to the maximum extent of Rs. 3,500
committee c. Exempt to the maximum extent of Rs. 3,500
c. Income of the Coffee Board in case of an individual account, and Rs.
d. Subsidy received from Tea Board 7,000 in case of joint account

8. Any allowance or perquisite, as may be 12. Agricultural income is __________

notified by the Central Government in the a. Fully taxable
Official Gazette in this behalf, paid to the b. Fully exempt
Chairman or a retired Chairman or any other c. Although fully exempt but it is to be
member or retired member of the Union aggregated in case of certain assessees for
Public Service Commission is exempt under the purpose of determining the rate of tax
section ________________ on non – agricultural income
a. Omitted w.e.f 1-4-20
b. 10(45) 13. Income which accrues to a Sikkim’s
c. 10(46) individual is exempt__________

d. 10(47) a. In all case

b. To the extent such income is derived from

9. Which of the following income is not exempt any sources in the state of Sikkim

under section 10 c. To the extent such income is derived from

a. Share in total income of firm any sources in the state of Sikkim and

b. Income from agriculture in Lahore income by way of dividend or interest on

c. Bonus on life insurance securities

d. Income from mutual funds

14. Income of a foreign company received in
India in Indian currency on account of sale
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of crude oil or any other notified goods or
rendering notified services to any person in 19. A local authority has earned income from
India shall be ______________ the supply of water or electricity outside its
a. Exempt own jurisdictional area. Such income is:
b. Taxable a. Exempt
c. Exempt if certain conditions as mentioned in b. Taxable
section 10 (48) are satisfied
20. A local authority has earned income from
15. Any sum received by an individual as a the supply of commodities outside its own
member of HUF from the income of HUF jurisdictional area. Such income is:
shall be ____________ a. Exempt
a. Fully taxable b. Taxable
b. Fully exempt
c. Included in the total income of the member 21. An income under the head capital gain to a
for rate purpose local authority is:
a. Exempt
16. In case of a partner, the share of the profits b. Taxable
from the firm shall be:
a. Fully taxable 22. An income under the head House property to
b. Fully exempt a trade union is:
c. Included in the total income of the partner a. Exempt
and relief of income tax u/s 86 shall be b. Taxable
allowed.
23. Income of local authority from house
17. Scholarship received by a student to meet property, capital gain or from other sources
the cost of education is: is:
a. Casual income a. Exempt
b. Fully taxable b. Taxable
c. Fully exempt
24. Income of trade union from a house property
18. Scholarship received by a student was Rs. and from other sources is:
1,000 p.m. Spends Rs. 8,000 for meeting the a. Exempt
cost of education. The balance Rs. 4,000 is: b. Taxable
a. Taxable
b. A casual income 25. The daily allowance received by a member of
c. Exempt parliament is:
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a. Exempt
b. Taxable 31. Income arising from the transfer of units of
the Unit Trust of India or of mutual fund
26. The daily allowances received by an MLA is: covered under section 10 (23 D) shall:
a. Exempt a. Be exempt
b. Taxable b. Not be exempt
c. Included in total income for rate purpose
d. Exempt upto Rs. 2,000 pm. 32. Any sum received under a Life Insurance
Policy including bonus shall be exempt:
27. The constituency allowances received is: a. In all kinds of policies
a. Fully exempt in the hands of MLA’s only b. In all kinds of policies except when received
b. Fully exempt in the hands of both MLA’s under a Keyman Insurance policy
and MLC’s c. In all kinds of policies except when received
c. Exempt upto Rs. 2,000 pm. In the hands of under Keyman Insurance a policy covered
MLA’s and MLC’s under section 80DDA (3).
d. In all kinds of policies except when received
28. Dividend received by a company from a under Keyman insurance policy or such policy
company is: as is covered under section 80DD(3) or
a. Exempt policy issued, if the premium paid for any
b. Taxable year exceeds 20%, 10%, 15% as the case
any be, of actual capital sum assured, except
29. Tax paid by the employer on non – on death.
monetary perquisites provided to employee
shall be: 33. Any pension received by an individual or
a. Exempt family pension received by any member of
b. Taxable his family where such individual is in the
service of Central or State Government and
30. Existing entities u/s 10(23C)need to apply was awarded Parmvir Chakra, Mahavir Chakra
for fresh approval on or before ---- or Vir chakra or any other notified gallantry
a. 31.12.20 shall be:
b. Within 3 months a. Exempt
c. Within 3 yrs b. Taxable

34. Income from units u/s 10(35)

a. Taxable 35. DDT is _______________________
b. exempt from 01/04/20

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a. Applicable a. 60%
b. Not applicable b. 50%
c. 20%
36. In reverse mortgage maximum lumpsum
withdrawal allowed is _________.

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SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED UNITS IN SEZ

(SPECIAL ECONOMIC ZONE) (SEC. 10AA)
A) General

According to this section deduction of profit & gains derived from export of articles / things /
services shall be allowed from the total income of the assesses.

B) Who is eligible for deduction?

Deduction u/s. 10AA is available to all assesses. Provided such undertaking is engaged in the
export of article or things or providing any service.

C) Essential condition to claim deduction.

1 The unit in SEZ begins to mfg. or produces articles or things or provide services on or after
1/4/2005 but before 31/3/2020

2 It is not formed by splitting up or reconstruction of a business already in existence. But if

new undertaking is set up in an old building deduction is allowed.

Exception:

The condition will not apply where the business is re-established, reconstructed or revived by the
same assessee after the business of any undertaking carried out on by him in India is discontinued
due to extensive damage to, or destruction of any building, machinery, plant or furniture owned by
the assessee as a direct result of flood, typhoon, cyclone, earthquake, civil disturbance etc.

3 Such new undertaking should not be formed by machinery or plant previously used for any
purpose subject to following exception.

a Machinery or plant used outside India but not by the assesses is allowed Provided.

b Such machinery was not previously in India

c Such machinery or plant is imported into India

d No deduction on account of depreciation has been allowed to any assesses before the

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installation of the machinery or plant by the assesses

e Total value of plant or machinery transferred to new business does not exceed 20% of the
total value of the machinery or plant used in that business.

4 The assesses has exported goods or provided services out of India from the SEZ.

5 Books of account of the tax paper should be audited. The assessee should submit audit
report in Form No 56F along within the return of income.

6 Amount of deduction
Profits of the business x Export turnover of Undertaking
Total turnover of the business carried on by the undertaking.
“Export Turnover” means the consideration received in, or brought into India by the assessee in
convertible foreign exchange within 6 months from the end of the PY or such time as may be
extended by the RBI, but does not include freight, telecommunication charges or insurance
attributable to the delivery of the articles or things or computer software outside India or
expenses, if any, incurred in foreign exchange in providing the technical services outside India”.

7 Period for which deduction is available

1 For first 5 year - 100% of profit derived from the export business

2 Next 5 years - 50% of profit derived from the export business

3 Next 5 years - 50% of profit derived from the export business or amount transferred to
reserve whichever is less subjects to following conditions:

a An equivalent amount is debited to the profit & loss a/c. of P.Y. & credited to
SEZ reinvestment allowance reserve account/special reserve account.

Such reserve to be utilized for Acquiring new Plant & Machinery

b Such plant & machinery should to be put to use before the expiry of 3 years. From
the end of the year in which the special reserve a/c. was created

c Until the acquisition of new plant & machinery the special reserve a/c can be utilized
for business purpose other than payment of dividend and creating asset outside
India, remittance outside India as a profit.

8 Withdrawal of deduction

Sub-sec (1C): Where any amount credited to SEZRARA

a Has been mis utilized, the amount so utilized shall be deemed to be the profits in the year
in which it was so utilized, or

b Has not been utilized before the expiry of 3 years, the amount not so utilized, shall be

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deemed to be the profits in the year immediately following the period of 3 years.

9 Carry forward of losses

Loss referred to u/s 72 or 74, in so far as such loss relates to the business of the undertaking,
being the Unit shall be allowed to be carried forward or set off.

No double deduction

Where a deduction under this section is claimed and allowed in respect of profits of any of the
specified business, referred to in section 35AD, for any assessment year, no deduction shall be
allowed under the provisions of section 35AD in relation to such specified business for the same or
any other assessment year.

10 Explanation

For the removal of doubts, it is hereby declared that the amount of deduction under this section
shall be allowed from the total income of the assessee computed in accordance with the provision
of this Act, before giving effect to the provisions of this section and the deduction under this
section shall not exceed such total income of the assessee.

11 Consequences for merger and demerger – Where an undertaking is transferred to another

company under a scheme of amalgamation or demerger, the deduction u/s 10AA shall be allowable
in the hands of the amalgamated or the resulting company for the unexpired period. However, no
deduction shall be admissible under this section to the amalgamating company or the demerged
company for the previous year in which amalgamation or demerger takes place.

Illustration 1

Mr. Pranay is running two Industrial Undertakings, one in a SEZ (Unit A) and another in a DTA (Unit
B). The brief details for the year ended 31/3/2021 are as under: (Amount Rs. in lakhs)

Particulars Unit A Unit B

Domestic Turnover 10 100

Export Turnover 120 NIL

Gross Profit 20 10

Less: Expenses and Depreciation 07 06

Profits derived from the units 13 04

The Brought Forward Business Loss pertaining to Assessment year 2021-22 for Unit B is Rs. 3.2 Lakhs.
Briefly compute the Business Income of the Assessee.

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ASSESSMENT OF TRUST
 Charitable trust: PUBLIC CHARITABLE &
RELIGIOUS TRUSTS

WHAT IS A TRUST?
A trust is an obligation annexed to the ownership of property and arising out of confidence reposed in
and accepted by the owner or declared and accepted by him, for the benefit of another and the owner.

ESSENTIALS OF A TRUST

Author The person who reposes or declares the confidence

Trustee The person who accepts the confidence
Beneficiaries The person(s) for whose benefit confidence is accepted.
Trust property The subject matter of the trust.
Instrument of the Trust Deed.
trust

CHARITABLE PURPOSE: Sec 2(15)

It is defined to include

1 Relief of the poor

2 Education

3 Medical relief

4 Yoga Development

5 The advancement of any other object of general public utility (not a business)

6 Preservation of environment (including watersheds, forests and wildlife) and preservation of

monuments or places or objects of artistic or historic interest

 The word ‘general’ means pertaining to whole class.

 The word ‘Public’ means a body of people at large.
 The word ‘Utility’ means usefulness.

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Trust carrying General Public utility but charging fee

 Advancement of any other object of general public utility shall not be a charitable purpose,
 If it involves the carrying on of any activity in the nature of trade, commerce or business, or any
activity of rendering any service in relation to any trade, commerce or business,
 For a case or fee or any other consideration,
 Irrespective of the nature of use or application, or relation, of the income from such activity,
 Unless –
i) Such activity is undertaken in the course of actual carrying out of such advancement of any other
object of general public utility; and
ii) The aggregate receipt from such activity or activities during the previous year, do not exceed 20% of
the total receipt, of the trust or institution undertaking such activity or activities, of that previous
year.

At a glance view of charitable trust:

Trust engaged in the Charitable Condition
object of trust or not

Relief of the poor Yes None

Education development Yes None

Medical Relief Yes None

Preservation of environment Yes None

Preservation of monuments
or places or objects of Yes None
artistic or historic interest

Any other object of general Yes It should not carry on any activity in the nature of trade,
public utility commerce or business, or any activity of rendering any
service in relation to any trade, or business for a cess or
fee or any other consideration in excess of 20% of receipt

RELIGIOUS PURPOSE:

Religious purpose is not defined under the Act. The expression should be taken to include the
advancement, support or propagation of a religion and its tenets (principles or beliefs). It may be noted
that charitable trust may always be public, while a religious trust may be private or public.

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ESSENTIAL CONDITIONS: SEC. 11

1 The property should be held under a trust or other legal obligation.

2 The property should be held wholly for charitable or religious purposes.

As defined in sec 2(15) “Charitable Purpose” includes

3 In the case of a charitable trust created on or after 1/4/1962, no part of its income should ensure
directly for the benefit of any particular community or caste. (Exception are scheduled castes,
Scheduled tribes, women and children).

4 In the case of a charitable / religious trust created on or after 1/4/1962, no part of the income
should ensure or utilized directly or indirectly for the benefit of the settlor or other specified
persons.

5 85% of the income shall be applied for charitable or religious purpose or accumulated or set apart
should be invested or deposited in the forms or modes specified in sub-section (5).

6 The income is to be applied to charitable or religious purposes within India. Exception is

provided in certain circumstances u/s 11(1)(c).

1 Where trust is created on or after 1/4/1952, income can be applied for charitable purposes
outside India which tends to promote international welfare in which India is interested, or

2 Where trust is created before the 1/4./1952, the income can be applied for such
charitable purposes outside India as provided in the trust deed.

7 If the total income of a trust / institution (without excluding income exempt under section 11
and section 12) exceeds the maximum amount not chargeable to tax, the account of the trust /
institution is required to be audited. With effect from the assessment year 2020 – 2021, the
audit report in Form No. 10B shall be uploaded one month prior to the due date of submission of
return of income (if the due date of submission of return of income is October 31 of the
assessment year, audit report should be uploaded on or before September 30 of the assessment
year.

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8 The trust has to make an application for registration of the trust or institution in the prescribed
form and manner to the Commissioner and obtain registration u/s 12AA.

New Section inserted Amendment Finance act 20

Section 12AB has been inserted by the Finance Act, 2020 with effect from October 1, 2020. All
charitable institutions which are currently registered under section 12A / 12AA are required to
apply for a fresh registration under section 12AB. Likewise, all new entities which want
exemption under sections 11 and 12, are required to apply for registration under section 12AB. The
process of registration for the new and existing charitable institutions will be completely
electronic under which a unique registration number (URN) shall be issued to all new and
existing charitable institutions. Moreover, new institutions (which are yet to start their charitable
activities) will get provisional registration for 3 years. The table given below summarizes other
provisions of section 12AB:

Different Time limit for Time limit for For which date Validity of
entities uploading grant of / year registration
registration registration exemption will (section
application (Section be available 12AB(1))
(Section 12AB(3)) under section 11
12A(1)(ac)) and 12 (Second
proviso to
section
12A(2))

Existing trusts On or before Within 3 From the 5 years

(which are December 31, months from assessment year
registered under 2020 the end of the from which such
section 12A / month in which trust or
12AA on or registration institution was
before September application is earlier granted
30, 2020) uploaded registration.

New trusts At least 1 Within 1 month From the Provisional

(which are not month prior to from the end of assessment year registration for a
registerted under the the month in immediately period fo 3 years
section 12A / commencement which following the from the
12AA up to of the previous registration financial year in assessment year
September 30, year relevant to application is which from which
2020) or any the assessment uploaded. registration registration is

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other trust not year from which application is sought.
covered by this registration is uploaded.
table. sought.

Trust which is Alteast 6 Within 6 From the first 5 years (to be

provisionally months prior to months from of the granted after
registered under expiry of the end of the assessment satisfying about
section 12AB provisional month in which years for which the object of
registration or registration it was the trust and
within 6 months application is provisionally genuineness of
of uploaded. registered. its activities) (5
commencement year time –
of its activities, limit to be
whichever is counted from
earlier the first year of
provisional
registration)

Trust which is At least 6 Within 6 From the 5 years (to be

registered under months prior to months from assessment year granted after
section 12AB expiry of the end of the immediately satisfying about
registration month in which following the the object of
under section registration financial year in the trust and
12AB application is which genuineness of
received registration its activities)
application is
received.

Trust registration At least 6 Within 6 From the 5 years (to be

of which has months prior to months from assessment year granted after
become in – the the end of the immediately satisfying about
operative due to commencement month in which following the the object of
section 11(7) of the registration financial year in the trust and
assessment year application is which genuineness of
from which the received. registration its activities)
said registration application is
is sought to be received.
made operative.

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A trust which Within 30 days Within 6 From the 5 years (to be
has adopted from the date months the end assessment year granted after
modification of of the said of the month in immediately satisfying about
objects which do adoption or which following the the object of
not confirm to modification registration financial year in the trust and
conditions of application is which genuineness of
registration. received. registration its activities)
application is
received.

Cancellation of registration granted under section 12AB: Registration (other than provisional
registration) under section 12AB can be cancelled in the following 3 situations by the PCIT
or CIT.

1. If CIT or CIT is satisfied that the activities of the trust / institution are not genuine or are
not being carried out in accordance with the objects of the trust / institution.
2. Activities of the trust or the institution are being carried out in manner that exemption under
section 11 or 12 is not available (wholly or partly) due to operation of section 13(1).
3. If PCIT or CIT holds that the trust or institution has violated requirements of any other law
which is material for the purpose of achieving its objects, or there is a direction or decree (by
whatever name called) holding that such non – compliance has occurred, has either not been
disputed or has attained finality.

9 Voluntary contributions shall be deemed to be income derived from property held under trust
unless they are made with a specific direction that they shall from part of the corpus of the
trust.

10 Where any income is required to be applied or accumulated or set apart for application, then,
deduction or depreciation will not be allowed in respect of any asset which has been claimed as
application of income under this section in PY.

11 Amendment Finance act 20

Where a trust or an institution has been granted registration for purposes of availing exemption
under section 11, and the registration is in force for a previous year, then such trust or institution
cannot claim any exemption under any provision of section 10 (other than that relating to

(a) Exemption of agricultural income and exemption under section 10(23C) (applicable from the
assessment year 2015 – 16) and
(b) Exemption under section 10(46) (applicable from October 1, 2020)) for that previous year.

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Moreover, registration for the purpose of section 11 shall become inoperative from the date on
which the trust or institution is approved under section 10(23C) / (46) or October 1, 2020,
whichever is later. But in such a case, the trust / institution may apply to get its registration
operative under section 12AB and on doing so, the approval under section 10(23C) / (46) to such
trust or institution shall cease to have any effect from the date on which the said registration
becomes operative and thereafter, it shall not be entitled to exemption under section 10(23C) /
(46).

Illustration 1

X charitable trust operates from Kolkata. It derives income from properties held wholly for charitable
purposes. It has registration for the purpose of claiming exemption u/s 11 & 12 since 2009,

Solution

X charitable trust is required to upload a fresh registration application on or before Dec 32, 2020. Within
3 months from the end of the month in which registration application is uploaded, the Principal CIT/ CIT
will give registration for 5 years. Suppose, it uploads the application for registration on November 17,
2020, the principal CIT/ CIT will give the approval on or February 28, 2021. The principal CIT/ CIT will
not make any enquiry about the genuineness or activities of the trust or the compliance of such
requirements of any other law (for the time being in force) as are material for the purpose of achieving
objects of X Charitable Trust. If the application for fresh registration is not uploaded by December 31,
2020, the existing registration of X Charitable Trust will expire.

Illustration 2

Y charitable trust is in operation since 2014 (i.e., eith effect from September 6, 2014). But it does not
have registration for section 11 exemption until September 30, 2020. It wants to claim exemption u/s 11 &
12 from the AY 2022 – 23 and for his purpose it applies for provisional registration u/s 12AB on January
10, 2022.

Solution

In this case, provisional registration will be given on or before February 28, 2022 (i.e., within one month
from the end of the month in which registration application is uploaded). Provisional registration will be
valid for 3 years commencing from the AY 2022-23 (i.e., PY 2021-22, 2022-23 and 2023-24). Law
requires that it should apply for regular registration u/s 12AB within –
c. 6 months prior to the expiry of period of provisional registration (i.e., on or before September 30,
2023), or

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d. 6 months of commencement of its activities (i.e., on or before march 5, 2015),
Whichever is earlier.

Earlier date is march 5, 2015. However, this new provision comes into operation from October 1, 2020.
Even section 12AB has been inserted with effect from October 1, 2020. One fails to understand as to
how Y Charitable Trust, in this case, can apply for regular registration u/s 12AB on March 5, 2015.

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COMPUTATION OF TRUST INCOME (EXPLANATION NO 1 & 2):
FOR THE PY 20 – 21

(i) Income from properties held under trust 20,00,000

(ii) Voluntary contributions (other than corpus donations) 20,00,000

TOTAL INCOME OF THE TRUST 40,00,000

Less: 15% accumulated or set apart to be utilized for charitable or religious purposes in 6,00,000
India later on.

Balance 85% to be applied for charitable/ religious purpose during the PY 34,00,000

Less: Amount actually applied for the above purposes during the PY 8,00,000

(i) Option 1: (Income not realized in the PY) 6,00,000

Where the whole or any part of the income has not been received during the PY,
the trust has exercised the option to apply such income either during the PY in
which it is received or during the immediately following PY.

(ii) Option 2: (Any other reason) 4,00,000

Where the income could not be applied during the PY in which it was derived for
any other reason, the trust has exercised the option to applied the same in the
immediately following PY

(iii) Option 3: (Accumulation for specific purpose) 10,00,000

Trust or institution can exercise the option is writing before the due date for
furnishing the return of income, to accumulate or set apart either the whole or part
of its income for future application. (maximum period is < = 5 years)

Conditions for accumulation

(a) Such person furnishes a statement in the prescribed form and in the prescribed
manner to the Assessing Officer, stating the purpose for which the income is
being accumulated or set apart and the period for which the income is to be
accumulated or set apart, which shall be <= 5 years;
(b) The money so accumulated or set apart is invested or deposited in the forms or
modes specified in section 11(5);
(c) The statement referred to in clause (a) is furnished on or before the due date
specified u/s 139 for furnishing the return of income for the previous year:
Provided that in computing the period of 5 years referred to in clause (a), the
period during which the income could not be applied for the purpose for which it is so
accumulated or set apart, due to an order or injection of any court, shall be excluded.

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As per sec 139(1) no exemption will be allowed in the statement if ROI are not filed
before the due date of furnishing ROI u/s 139(1)

Balance, if any, is taxable in the hands of the trust or Institution 6,00,000

Unutilized amount of Deemed Application

What happens when such income in respect of which an option is exercised, is not applied for religious or
charitable purpose in India during the extended time period? [Section 11(1)]
Option 1 The unutilized amount shall be taxable as the income of the PY immediately following
the PY in which the amount is received.

If Rs. 100 lakhs is received in PY 20-21, it has to be utilized in PY 20-21 or 21-22,

otherwise the utilized amount shall become taxable in PY 21-22.

Option 2 The unutilized amount shall be taxable as the income of the PY immediately following
the PY in which the option was exercised. Rs. 50 lakhs shall be used in the PY 21-22,
otherwise the unutilized amount shall become taxable in the PY 21-22.

Option 3 The unutilized amount shall be chargeable as income of the FY immediately following
the expiry of accumulation period. However, if the non-utilization is due to some
unavoidable circumstances then the AO may, on application allow such income to be
applied for such other charitable/ religious purposes in India as are in conformity with
the objects of the trust/ institution.

Provided that the Assessing Officer shall not allow application of such income by way
of payment or credit to other charitable trusts.

However in case the trust or institution is dissolved, the Assessing Officer may allow
application of such income by way of payment or credit to other charitable trusts in
the year in which such trust or institution was dissolved.

APPLICATION OF INCOME

What is considered as application of income: The following important points should be noted for
application of income:

Whenever any loan, taken to fulfil one of the objects of the trust, is repaid then it shall be
1 taken as application of income.

In the case of society or charitable trust, with the object of providing free or concessional
education to students, advances of any loan to the students for higher studies, it amounts to

2 application of income. On return of such loan, such amount will be taken as income of the
trust.

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3 Application of the amount can be for revenue or capital purpose.

Any tax paid out of the current year’s income shall be taken as application for charitable
4 purpose.

Donation given by the trust is an application of income. However it should not be given with a
5 specific direction that is shall form part of corpus of the other trust.

Amendment:

The Scope of above provision has been extended with effect from the assessment year 2020 –
2021. After this amendment, exemption under section 11 will not be available pertaining to corpus
donation if the following conditions are satisfied:

a. Corpus donation is given by an entity covered by section 12AA;

b. Corpus donation is given voluntarily with a specific direction that it shall form part of the
corpus of the recipient, and
c. Corpus donation is given to an entity covered by section 10(23C)(iv) / (v) / (vi) / (via) or
to a trust registered under section 12AA.

Note:-For calculating “application” of income if payment exceeding Rs.10,000 is made in cash or

by bearer cheque, such payment will be disallowed from the AY 19 – 20. Likewise, if tax is
deductible but not deducted and payment is made to a resident, 30% of such payment will be
6disallowed while calculating “application” of income for the AY 19 – 20 (or any subsequent year).

TRANSFER OF CAPITAL ASSETS

Exemption of Capital Gain arising on transfer of Capital Asset:

Where a capital asset, held wholly for charitable or religious purposes, is transferred

Amount invested for acquiring another capital Amount of exemption

asset to be so held

Whole of the net sale consideration Whole capital gain

Part of the net sale consideration Amount invested in new asset – cost of the
transferred asset

Ex: if an asset costing 2,00,000 is transferred for 8,00,000: Capital Gain is Rs. 6,00,000.

Now if new asset is acquired at cost of Rs. 8,00,000 or more, the whole capital gain shall be exempt.

However if new asset is acquired at cost of Rs. 6,40,000/- only then exemption will be Rs. 4,40,000/-
(i.e. Rs. 6,40,000 – Rs. 2,00,000).

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FORFEITURE OF EXEMPTION (SEC 13)

No exemption under section 11 shall be provided to any income of a religious or charitable trust in
the following ceases:

If the benefit of income or part of the income arises or is used or applied directly or

1 indirectly for the benefit of any person referred to in Section 13(3). Such person is referred to
as ‘interested persons’. [In this case the registration u/s 12AA can also be cancelled by the
commissioner after giving opportunity of being heard to the trustee].

2 If the funds of the trust are invested/ deposited in any manner otherwise that as specified
u/s 11(5).

3 Similarly, any anonymous donation referred to in section 115BBC shall not be eligible for

exemption u/s 11.

PERSONS REFERRED TO IN SECTION 13(3)

a The author of the trust or the founder of the institution;

b Any person who has made a substantial contribution to the trust or institution that is to say, any
person whose total contribution at the end of the relevant previous year exceeds Rs. 50,000/-;

c Where such author, founder or person is a Hindu Undivided Family a member of the family;

d Any trustee of the trust or manager (by whatever name called) of the institution.

e Any relative of any such author, founder person, member, trustee or manager aforesaid;

f Any concern in which any of the persons referred to in clauses (a), (b), (c), (d) and (e) has a
substantial interest.

Managing of relative: relative, in relation to an individual, means –

(a) Spouse of the individual;

(b) Brother or sister of the individual;
(c) Brother or sister of the spouse of the individual;
(d) Any lineal ascendant or descendent of the individual;
(e) Any lineal ascendant or descendent of spouse of the individual;
(f) Spouse of a person referred to in sub – clause (ii), (iii), (iv), and (v);
Any lineal descendant of a brother or sister of either the individual or spouse of the individual.

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FORMS OR MODES OF INVESTMENT [SEC. 11(5)]

1 Investment in Government savings certificates•;

2 Deposit in any Post Office Savings Bank Account;

3 Deposit in any account with any scheduled bank or a co-operative society engaged in carrying
on the business of banking (including a co-operative land mortgage bank or a co-operative
land development bank);
4 Investment in any Central Government or State Government securities;

5 Investment in units of the Unit Trust of India ;

6 Investment in debentures" of any corporate body, the principal whereof and the interest
whereon are guaranteed by the Central or a State Government ;
7 Immovable property;

8 Deposits with or investment in any bonds issued by any financial corporation engaged in
providing long-term funds for industrial development in India, if the corporation is eligible fo r
deduction under section 36(1)(viii) ;

9 Deposits with or investment in any bonds issued by any public company carrying on the
business of providing long-term finance for construction or purchase of house in India for
residential purposes, if the company is eligible for deduction under section 36(1)(viii);
10 Deposits with Industrial Development Bank of India ;

11 Any other prescribed form or mode of investment"; and

12 Deposit with or investment in any bonds issued by a public company formed and registered in
the main object of carrying on the business of providing long-term finance for urban
infrastructure in India

ANONYMOUS DONATION [SEC. 13(7)]

Any anonymous donation is not eligible for deduction under sections 11 and 12.

1. what is anonymous The expression "anonymous donation" has been defined as follows
donation [sec. - 1 It is a voluntary contribution referred to in section 2(24)(iia).

2 The person receiving such contribution does not maintain a record

of

a The identity indicating the name and address of the person

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making such contribution; and

b Such other records as may be prescribed.

2. special rate of tax "Anonymous donation" is taxable at the rate of 30 per cent•. However, this
[sec. 7 - provision is subject to the following propositions —

3. institutions affected The above provisions are in the case of following -

by the above a Trust or institution referred to in section 1 0;
provisions [sec.
b Any university or other educational institution referred to in
115bbc-
section 10(23C)(iiiad) and (vi);
c Any hospital or other institution referred to in section
10(23C)(iiiae) and (via);
d Any fund or institution referred to in section 10(23C)(iv); and

e Any trust or institution referred to in section IO(23C)(v).

4. donations not The following anonymous donations shall not be covered by the
affected by the above provisions of section 1 15BBC
provisions [sec. 1 Anonymous donations received by any trust or institution created
15bbc(2)] or established wholly for religious purposes; and
2 anonymous donations (not being donations received with a
specific direction that such donation is for any university/other
educational institution/ hospital/other medical institution run by
the recipient trust/institution) received by any trust or
institution created or established for both religious as well as
charitable purposes

5. conclusions - The following conclusions can be drawn from the aforesaid discussion
—

Institution receiving Tar treatment

anonymous donations

Case 1- Wholly religious Section 115BBC is not applicable

entities

Case 2- Partly religious If anonymous donation is made to an

and partly charitable educational or medical institution by such
entities an entity, such anonymous donation is
taxable at the rate of 30 per cent. Any
other anonymous donation is not subject

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to tax under section 115BBC

Case 3- Wholly charitable All anonymous donations are taxed at the

entities rate of 30 per cent [see Notes] under
section 115BBC

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CHARITABLE TRUST

MULTIPLE CHOICE QUESTIONS

1) “charitable purpose” includes: c) Rs. 20,00,000

a) Relief of the poor d) Rs. 25,00,000
b) Education
c) Medical relief 4) A public charitable trust registered under
d) All of these section 12A of Income-Tax Act, for the
previous year ending 31/03/2020, derived
2) The advancement of any other object of gross income of Rs. 16 lakhs, which consist
general public utility shall be regarded as of the following:
charitable purpose even if it involves carrying
The trust applied a sum of Rs. 11.60 lakhs
on of trade/ commerce/ business for a cess
towards charitable purposes during the year.
or fee or any other consideration, if the
Determine the taxable income of the assessment
gross recipients thereof does not exceed
year 2021 – 22
_______________ of total receipts of
a) Rs. 2,00,000
such charitable institutions.
b) NIL
a) 15%
c) Rs. 4,40,000
b) 20%
d) Rs. 6,00,000
c) Rs. 20 lakhs
d) Rs. 25 lakhs
5) Shamji charitable trust had sold a capital
asset costing Rs. 70,000 on 13th June, 2020
3) Where the total income of the trust or
for Rs. 1,50,000. It purchased new asset on
institution, without giving effect to the
1st July 2020 for Rs. 1,20,000. The amount
provisions of sections 11 and 12, exceeds in
taxable as capital gains for Shamji
any previous year Rs. ____________, the
Charitable Trust in AY 2021 – 22 is –
accounts of the trust or institution must be
a) Rs. 80,000
audited by a Chartered Accountant and the
b) NIL, because of charitable trust
report of such audit in the prescribed from
c) Rs. 30,000
duly signed and verify by such accountant
d) Rs. 40,000
containing prescribed particulars, should be
furnished along with the return of income.
a) Rs. 2,50,000 6) A charitable trust acquired two air-
b) Rs. 10,00,000 conditioners for Rs. 1,40,000 on 10th June,

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2019. It claimed the acquisition as
application of income. The amount it can 8) In case of any registered trust or institution
claim by way of depreciation for the said for which registration is effective in the
air-conditioners for the AY 2021 – 22 is previous year, they cannot claim any
a) Rs. 21,000 exemption under any provision of section 10
b) Rs. 1,40,000 [other than that relating to exemption of
c) Rs. 35,000 ____________].
d) NIL a) Agricultural income
b) Dividend income from shares of Indian
7) A public charitable trust registered section Company
12A of Income-Tax Act, for the previous year c) Dividend income from units of mutual fund
ending 31/03/2021. Derived the following: d) LTCG on sale of equity shares listed in
recognised stock exchange.
The trust applied a sum of Rs. 16 lakhs towards
charitable purposes during the year. Determine
9) Anonymous donations received by a
the taxable income of the trust of the
charitable trust is chargeable to tax at the
assessment year 2021 – 22
rate of –
a) Rs. 1,00,000
a) 30%
b) Rs. 14,00,000
b) 15%
c) NIL
c) 20%
d) Rs. 4,00,000
d) 10%

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POLYTICAL PARTY

The term ‘Political Party’ is an association or body of Individual

citizens of India registered under the “Representation of the
People Act 1961”.

Returns of Income: Political Parties are under obligation to file

their Return of Income u/s 139(4B).

CONDITIONS TO CLAIM EXEMPTION BY A POLITICAL PARTY

A The political party keeps and maintains such books of accounts and other documents, as it
would enable the Assessing Officer to property deduce its income there from.

B The political party keeps and maintains a record of each voluntary contribution in excess of Rs.
20,000 and of the names and address of persons who have made such contributions/

C The accounts of the political party are audited by a chartered Accountant

D No donation > Rs. 2,000/- is received by such political party otherwise than by an account
payee cheque drawn on a bank an account payee bank draft or use of electronic clearing system
through a bank account or through electoral bond.

E In order to promote to digital transactions, the receipt through other notified electronics modes,
(i.e. e-wallets, etc.) have been proposed to be included in the list of acceptable mode of
payment.

INCOME OF POLITICAL PARTY: SEC. 13A

Incomes exempt from tax:

 Income from house property
 Capital Gains
 Income from Other Sources
 Income by way of Voluntary Contributions.

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INCOME OF ELECTORAL TRUST SEC. 13B
Entire income of an electoral trust is exempt if:

The trust distributes to political parties at least 95% of aggregate donations received by it during the
said previous year along with brought forward surplus. It follows the rules as may be prescribed by the
Central Government.

MY NOTES

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