Income exempt from Income Tax

Under Sec10 of income tax act the following incomes are exempt from tax

1. Agricultural Income [Sec 10(1)]

                Income from agricultural land situated within India is exempted from tax.

2. Share income of HUF [Sec 10(2)]

                Any sum received by an individual as a member of a Hindu Undivided Family either out of income of the family or out of income of estate belonging to family is exempt from tax.

3. Share of profit from partnership firm [Sec10 (2A)]

                Share of profit received by partners from a firm in which they are partners is not taxable in the hands of partners.

4. Gratuity [Sec 10(10)]

                Gratuity received by an employee from employer is exempted from tax subject to the following conditions

a)      For Govt employee/ semi govt. employee – amount of gratuity received is fully exempt.

b)     For employees covered under Payment of Gratuity Act 1972

  1. 15 days average wages for every one completed year of service or part thereof in excess of 6 months or
  2. actual amount received or
  3. Rs.3, 50,000.

c)      For other employees who have more than 5 years service.

  1. ½ months salary for every completed year of service
  2. actual amount received
  3. Rs.3, 50,000.

5. Pension and Leave salary [Sec 10(10A)]

6. Leave encashment

7. HRA

8. Commuted pension

9. Income of a mutual fund

10. Dividend Income from a domestic company

11. Income of religious institutions

                Pension and leave salary earned by the employee is exempted from tax.

6. Retrenchment compensation [Sec 10(10B)]

                Compensation received by workmen at the time of retrenchment is exempt from tax to the extent of the lower of the following

a)      an amount calculated in accordance with the provisions of Sec 25F(b) of the Industrial Disputes Act 1947

b)     maximum notified by the govt. (Rs.5,00,000)

c)      actual amount received

7. Interest on the following is exempt from tax

  1. 12 year National savings Annuity certificate
  2. Post office cash certificate (5 years)
  3. National Plan certificate( 10years)
  4. National Plan savings certificate
  5. Post office national savings certificate
  6.  Post office savings bank accounts

8. Education Scholarship [Sec 10(16)]

                Scholarship granted to meet the cost of education is exempt from tax.

9. Awards [Sec 10(17A)]

                Any award instituted by central or state govt. or by any body and approved by the govt., whether paid in cash or in kind are exempt from tax.

10. Pension to Gallantry award winners [Sec10 (18)]

                Pension and family pension to the members of defense forces who have been awarded the Param Vir Chakra, Maha Vir Chakra and Vir Chakra is exempt.

11. Family pension

                Family pension received by family members of armed forces, when the member of armed force dies during service.

12. Formers rulers of Indian states [Sec 10(19A)]

                Annual value of any one palace in the occupation of a former ruler is exempt from tax.

13. Income of pension fund [Sec 23(AAB)]

                Any income of a fund set up by the LIC of India under a pension scheme to which contribution is made by any person for receiving pension from such fund, and which is approved by the controller of insurance is exempted from tax.

14. Income of a trade unions [Sec 10(23D)

                Any income chargeable under the heads income from house property and income from other sources of a trade union is exempt from tax.

15. Income of Minor [Sec 10(32)]

                If income of a minor child is included in the income of a parent u/s 64(1A) such individual is entitled to exemption of Rs.1500 in respect of each minor child or such income whichever is less.

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