EXEMPTIONS U/S 10 OF
INCOME TAX ACT 1961
By :-
Mohammad Iqbal Dar
Assistant Professor Commerce
Government Degree College Kulgam.
2 DISTINGUISH BETWEEN DEDUCTIONS
AND EXEMPTIONS
• Income Tax exemptions are provided on particular sources
of income and not on the total income. It can also mean
that you do not have to pay any tax for income coming
from that source.
• In contrast, income tax deductions can be claimed on the
gross total income. Certain specified investments and
expenditure are considered to claim deductions.
3 U/S : 10(1) AGRICULTURAL INCOME
• Agriculture Income [Section 10(1)]
• As per section 10(1), agricultural income earned by the taxpayer in India is
exempt from tax. Agricultural income is defined under section 2(1A) of the
Income-tax Act.As per section 2(1A), agricultural income generally means:
• Any rent or revenue derived from land which is situated in India and is used for
agricultural purposes.
• Any income derived from such land by agriculture operations including
processing of agricultural produce so as to render it fit for the market or sale of
such produce.
• Any income attributable to a farm house subject to satisfaction of certain
conditions specified in this regard in section 2(1A). Any income derived from
saplings or seedlings grown in a nursery shall be deemed to be agricultural
income.
ANY SUM RECEIVED BY A CO-
4 PARCENER FROM HINDU UNDIVIDED
FAMILY (H.U.F.) [SECTION 10(2)]
• As per section 10(2), amount received out of family income,
or in case of impartible estate, amount received out of
income of family estate by any member of such HUF is
exempt from tax.
5 SHARE OF INCOME FROM THE FIRM
[SECTION 10(2A)]
• As per section 10(2A), share of profit received by a partner
from a firm is exempt from tax in the hands of the partner.
Further, share of profit received by a partner of LLP from
the LLP will be exempt from tax in the hands of such
partner. This exemption is limited only to share of profit
and does not apply to interest on capital and remuneration
received by the partner from the firm/LLP.
LEAVE TRAVEL CONCESSION OR
ASSISTANCE (LTC/LTA) TO AN INDIAN
6 CITIZEN EMPLOYEE [SECTION 10(5)]
• The employee is entitled to exemption under section 10(5) in respect of the value of travel
concession or assistance received by or due to him from his employer or former employer for
himself and his family, in connection with his proceeding—
• on leave to any place in India.
• to any place in India after retirement from service or after the termination of his service.
• The exemption shall be allowed subject to the following:
• where journey is performed by air — Maximum exemption shall be an amount not exceeding the
air economy fare of the National Carrier by the shortest route to the place of destination;
• where places of origin of journey and destination are connected by rail and the journey is
performed by any mode of transport other than by air — Maximum exemption shall be an amount
not exceeding the air-conditioned first class rail fare by the shortest route to the place of
destination; and
• where the places of origin of journey and destination or part thereof are not connected by rail and
the journey is performed between such places
PERQUISITES AND ALLOWANCES PAID
BY GOVERNMENT TO ITS EMPLOYEES
7
SERVING OUTSIDE INDIA [SECTION
10(7)]
• Any allowances or perquisites paid or allowed, as such,
outside India by the Government to a citizen of India, for
rendering services outside India, are exempt.
SPECIAL ALLOWANCES EXEMPT U/S 10(14)
TYPE OF ALLOWANCES AMT. OF EXEMPTION
8
TRANSPORT ALLOWANCE (NOT APPLICABLE FROM
AY 19-20) MAX.1600 P.M.
NORMALLY MAX.3200 P.M.
PHYSICALLY HANDICAPPED
CHILDREN EDUCATION ALLOWANCES MAX. 100 P.M.PER CHILD FOR
MAX. 2 CHLDREN
CHILDREN HOSTEL ALLOWANCE MAX.300 P.M. PER CHIILD
FOR MAX. 2 CHILDREN
TRAVELLING ON “TOUR” OR “TRANSFER” ALLOWANCE AMT. EXEMPT= AMT. SPENT
COVEYANCE / TRAVELLING ALLOWANCE ---------------DO--------------
UNIFORM ALLOWANCE ----------------DO-------------
DAILY/HELPER/ RESEARCH ALLOWANCE -----------------DO------------
HOUSE RENT ALLOWANCE (HRA) U/S
9 10(13A)
• AMOUNT OF EXEMPTION:
1)50%* / 40% OF (BASIC +DA+COTA)
*MUMBAI/DELHI/CHENNAI/KOLKATTA
2)ACTUAL AMT. RECEIVED
3) RENT PAID-10% (BASIC+DA+COTA)
WHICHEVER IS LOWER
10 INTEREST INCOMES [SECTION 10(15)]
• Interest, premium on redemption, or other payment on notified securities, bonds,
certificates, and deposits, etc. (subject to notified conditions and limits)
• Interest on notified Capital Investment Bonds notified prior to 1-6-2002
• Interest on notified Relief Bonds
• Interest received from any public sector company in respect of notified bonds or
debentures and subject to certain conditions
• Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or
deposit certificates issued under the Gold Monetisation Scheme, 2015
• Interest on notified bonds issued by a local authority/State Pooled Finance Entity
11 SCHOLARSHIP [SECTION 10(16)]
• The full amount of scholarship granted to meet the
cost of education is exempted.
• ‘Cost of education’ includes not only the tuition fees
but all other expenses which are incidental to
acquiring education. Scholarship may have been given
by Govt., University, Board, Trust, etc. The exemption
is irrespective of actual expenditure incurred by the
recipient to meet the cost of education.
STATUTORY PROVIDENT FUND
12
EMPLOYERS
CONTRIBUTION
(FULLY EXEMPT)
EMPLOYEE
SPF
INTEREST
CONTRIBUTION
(FULLY EXEMPT)
(IGNORE)
LUMPSUM AMT.(FULLY
EXEMPT U/S 10(11)
FOR
EMPLOYEE
13 RECOGNISED PROVIDENT
FUND
EMPLOYERS
CONTRIBUTION
(EXEMPT UP TO
12% OF
(B+DA+COTA)
EMPLOYEE INTEEST
RPF
CON. EXEMPT UP
(IGNORE) TO 9.5%
LUMPSUM AMT.
FULLY EXEMPT
U/S 10(12)
14 UNRCOGNISED PROVIDENT
FUND
EMPLOYER
CONTRIBUTION (FULLY
EXEMPT)
EMPLOYEE CONTRIBUTION INTEREST
(IGNORE) (FULLY EXEMPT)
UPF
UPF… WHEN EMPLOYEE RECEIVES
15 LUMPSUM AMT. AT THE TIME OF
RETIREMENT/DEATH
INTEREST ON EMPLOYEE
EMPLOYEE CONTRIBUTION
CONTRIBUTION
(IGNORE)
(TAXABLE AS IFOS)
EMPLOYEE
LUMPSUM
AMOUNT
INTEREST ON EMOLOYERS
EMPLOYERS CONTRIBUTION
CONTRIBUTION
(TAXABLE AS IFS)
(TAXABLE AS IFS)
I.E. SALARIES
I.E. SALARIES
GRATUITY U/S 10(10)
16
GOVT. EMPLOYEE POGA EMPLOYEE OTHER EMPLOYEE
• 15/26 X SALARY P.M.* X NO. • ½ X SALARY P.M.* XNO. OF
OF YRS. YEARS
• FULLY EXEMPT • ACTUAL AMT RECEIVED • ACTUAL AMT RECEIVED
• MAX. RS.20,00,000 • MAX. RS.20,00,000
• WHICHEVER IS LOWER • WHICHEVER IS LOWER
• R/O ALLOWED ABOVE 6 • R/O NOT ALLOWED
MTHS
• 24 YRS & 9 MTHS= 24 YRS.
• 24 YRS & 9 MTHS= 25 YRS.
• *SALARY= AVG BASIC
• 24 YRS & 6 MTHS =24 YRS. P.M.+AVG. D.A. P.M.+AVG.
• POGA= PAYMENT OF COTA P.M.(AVG. OF
GRATUITY ACT 1972 PRECEDING 10 MONTHS)
• SALARY= BASIC P.M.+DA
P.M
PENSION U/S 10(10A)
17
GOVT.
EMPLOYEE
(FULLY EXEMPT)
COMMUTED OTHER
LUMPSUM EMPLOYEE
AMT.EXEMPT U/S (EXEMPT UP TO
10(10A) 50% IF GRATUITY
NOT RECD.)
(EXEMPT UP TO
33.33% IF
PENSION GRATUITY IS
RECD.)
FULLY TAXABLE
UNCOMMUTED
MONTHLY BASIS FOR ALL
EMPLOYEES
LEAVE SALARY U/S 10(10AA)
18
GOVT. EMPLOYEE
(FULLY EXEMPT)
ENCASHED ON RETIREMENT OTHER EMPLOYEE
(EXEMPT U/S 10(10AA) 1)LEAVE CREDIT
2)10 MTHS X AVG. SAL.P.M.
LEAVE SALARY 3)ACTUAL AMT.RECD
4) RS.3,00,000
(AVG. SAL. OF LAST 10 WHICHEVER IS LOWER
MONTHS BEFORE
RETIREMENT
(I.E. AVG BASIC P.M.+AVG
D.A.P.M.+ AVG.COTA P.M.)
ENCASHED DURING THE FULLY TAXABLE FOR ALL
SERVICE EMPLOYEES
19 VOLUNTARY RETIREMENT
COMPENSATION -U/S 10(10C)
• AMOUNT OF EXEMPTION:
• 1) SALARY P.M. X 3 MONTHS X NO.OF YRS. OF SERVICE COMPLETED
• 2) SALARY P.M. X 1 MONTH X NO.OF MONTHS SERVICE REMAINING
• 3) ACTUAL AMT. RECEIVED
• 4) RS. 5,00,000
• WHICHEVER IS LOWER
• SALARY= LATEST BASIC P.M. +LATEST D.A. P.M.+ LATEST COTA P.M.
RETRENCHMENT COMPENSATION
U/S/10(10B)
20
• AMOUNT OF EXEMPTION:
• 1)AMT. CALCULATED AS PER INDUSTRIAL-
DISPUTE ACT (GIVEN)
• 2)ACTUAL AMT. RECD.
• 3) RS. 5,00,000
• WHICHEVER IS LOWER
ANY SUM RECEIVED UNDER A LIFE
21 INSURANCE POLICY [SECTION
10(10D)]
• Any sum received under a life insurance policy, including the
sum allocated by way of bonus on such policy, is wholly
exempt from tax.
22 AWARDS INSTITUTED BY
GOVERNMENT [SECTION 10(17A)]
• Any payment received in pursuance of following (whether paid
in cash or in kind) is exempt from tax:
• Any award instituted in the public interest by the Central
Government or State Government or by any other body
approved by the Central Government in this behalf.
• Any reward by the Central Government or any State
Government for such purpose as may be approved by the
Central Government in this behalf in the public interest.
23
• Pension received by certain winners of gallantry awards
[Section 10(18)]
• Family pension received by family members of armed forces
including para military forces [Section 10(19)]
24 INCOME OF MUTUAL FUND [SECTION
10(23D)]
• Any income of following mutual funds (subject to
provisions of sections 115R to 115T) is exempt from
tax:
• A mutual fund registered under the Securities and
Exchange Board of India Act or regulation made
thereunder.
• A mutual fund set-up by a public sector bank, or a public
financial institution or authorised by RBI (subject to
conditions notified by the Central Government).
25 INCOME OF CHILD CLUBBED U/S 64
(IA) [SECTION 10(32)]
• In case income of a minor child is clubbed with the income
of his parent, the parent can claim exemption upto actual
income of child clubbed or 1,500 whichever is less in
respect of each minor child whose income is included.
26
• Income by way of dividend from Indian company [Section 10(34)]
• Exemption of income from Units [Section 10(35)]
Like in case of dividend, section 10(35) provides that any income
received in respect of—
units from the Administrator of the specified undertaking, or
the specified company, or
a Mutual Fund specified under clause (23D)
shall be Exempt.
