Incomes which do not form

part of Total Income

PREPARED BY :
MANDEEP KAUR
 Exemptions Under Section 10

Section 10 of the Income Tax Act, 1961 includes those incomes

which do not form part of the total income while calculating
the tax for an individual.
Thus, these incomes are excluded from the calculation, and
they are known as exempted incomes. The main objective of
Section 10 is to reduce the tax burden of the salaried individual
by ways of providing exemptions.
 Incomes which do not form part of Total
Income

The following incomes do not form part of total income:

(A)Incomes not to be included in total income of any person [Section 10]
(B) Income of newly established units in Special Economic Zones [Section 10 AA]
(C)Income from Property held for charitable or religious purposes [Section 11-13]
(D)Income of Political Parties [Section 13 A]
(E) Income of an Electoral Trust [Section 13 B]
Section-wise
Study
 Incomes not to be included in total income of
any person [Section 10]

Sections Particulars Exemption Limit

Section 10(1) Agricultural Income (from agricultural land, farm house, or Fully exempt from tax
sapling seedling grown in nursery) for self employed.

Section 10(2) Income received from HUF (Hindu-undivided family) by a tax Fully exempt from tax
payer in his capacity as a member of HUF.

Section 10 (2A) Share of Profit of a Partner from a Firm. Fully exempt from tax

Section 10 (4) Interest on Non-Resident (External) Account. Exempt

Section 10 (5) Travel Concession received by an individual from his employer. Exempt

Section10(6) Remuneration to Indian Citizens who are working outside India Exempt
 Sections Particulars Exemption Limit
Sec10(7) Government pays the allowances and perquisites to the employees Exempt
working outside India

Sec10 (10) Death cum Retirement Gratuity received by an employee Exempt

Sec10(10C) Compensation received at the time of voluntary retirement for Exempt from tax up to a
salaried employees certain limit of
compensation amount Rs.
5,00,000

Sec10(10CC) Tax on non-monetary perquisites paid by employer Exempt in the hands of

employee, Paid by employer
himself.

Sec 10(10D) Amount received under life insurance policy including policy bonus Fully exempt from tax
Sections Particulars Exemption Limit
Sec 10(11) & (12) Amount withdrawn from Provident fund by salaried employees. Fully exempt from tax

Sec 10(11A) Interest and withdrawls from Sukanya Samriddhi Account (Inserted Exempt
w.e.f A.Y 2016-17).
Sec 10(10BC) Compensation received for natural disaster, from Central Government. Fully exempt from tax

Section 10 (12A) Amount received by an employee on closure of his account or on his 60% exempt
opting out of the National Pension Scheme (NPS).
Section 10(12B) Partial withdrawl from NPS by an employee (Withdrawal should not Exempt
exceed the 25% of employee contribution) – w.e.f AY 2018-19.

Section 10 (13)* Payment received from an approved superannuation fund*.  Exempt

Sec 10(13A) House rent allowance (HRA) to salaried employees (rent paid by the Fully exempt from tax and
employees to stay in a rented house) 50% of salary amount if
residential house is in metro
cities otherwise 40% in non-
metro.
 Section 10 (13) - Payment received from an approved
superannuation fund*. 

Any payment from an approved superannuation fund, made under following circumstances, shall be exempt-
1. The payment has been made on the death of the beneficiary; or
2. The payment has been made, by way of refund of the contributions, on the death of the beneficiary; or
3. The payment has been made, by way of transfer, to the account of the employee under the pension scheme
referred under section 80CCD and notified by the Central Government; or
4. The payment has been made to an employee in lieu of / in commutation of an annuity either on his
retirement, at or after a specified age or on him becoming incapable prior to his retirement; or
5. The payment has been made, by way of refund of contribution, to an employee on leaving the service (in
connection with which the fund is established) at or after a specified age or on the employee becoming
incapable prior to his retirement.

* superannuation is an organizational pension program designed by the company for the benefit of its employees.
 Sec Particulars Exemption Limit
Sec a. Children education allowance (salaried employees can claim a pre defined allowance for two children) - Up to Rs. 100 per month per child up to a
10(14) maximum of 2 children is exempt.
b. Hostel Expenditure Allowance
- Up to Rs. 300 per month per child up to a
maximum of 2 children is exempt.
c. Transport Allowance granted to an employee to meet expenditure for the purpose of commuting between place of
residence and place of duty - Rs. 3,200 per month granted to an employee,
who is blind or deaf and dumb or
orthopedically handicapped with disability of
lower extremities.
d. Transport Allowance to an employee working in any transport business to meet his personal expenditure during
his duty performed in the course of running of such transport from one place to another place provided employee is - Amount of exemption shall be lower of following:
not in receipt of daily allowance. a) 70% of such allowance; or
b) Rs. 10,000 per month.
e. Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office
- Exempt to the extent of expenditure incurred.
f. Any Allowance granted to meet the cost of travel on tour or on transfer.
- Exempt to the extent of expenditure incurred.

- Exempt to the extent of expenditure incurred.

g. Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his
normal place of duty.
- Exempt to the extent of expenditure incurred.
h. Helper/Assistant Allowance granted to meet the expenses incurred on helper who is engaged for the performance
- Exempt to the extent of expenditure incurred.
of duties of an office.
- Exempt to the extent of expenditure incurred.
i. Research Allowance granted for encouraging the academic research and other professional pursuits

j. Uniform Allowance granted to meet the expenses incurred on purchase / maintenance of uniform for wear during
the performance of duties of an office.
 Understanding provisions of section 10(14)
(i) read with rule 2BB(1)-

Section 10(14)(i) provide exemption towards prescribed special allowance or benefits, granted to the employees, to meet
expenses (wholly, exclusively, and necessarily) towards the performance of the official duty. The exemption is available only
and only if the expenses are actually incurred by the employees.
Rule 2BB(1) lists down the prescribed allowances as-
1. Allowance granted to meet the cost of travel on tour or transfer.
2. Daily allowance granted to meet the ordinary daily charges incurred by an employee on account of absence from his normal
place of duty.
3. Conveyance allowance granted to meet the expenses incurred on conveyance in the performance of duties of an office.
However, free conveyance should not be provided by the employer.
4. Helper allowance granted to meet the expenses incurred on helper who is engaged for the performance of duties of an office.
5. Research allowance granted for encouraging the research, academic and training pursuits in educational and research
institutions.
6. Uniform allowance granted to meet the expenses incurred on purchase / maintenance of uniform for wear during the
performance of duties of an office.
 Understanding provisions of section 10(14)
(ii) read with rule 2BB(2)-

Provisions of section 10(14)(ii) provide exemption towards the prescribed allowance granted to an employee to
meet his personal expenses at either of the below place-
 at the place where the duties of his office are ordinarily performed by him; or
 at the place where he ordinarily resides.
The amount of exemption is lower of the following-
 Amount received as allowance; or
 Limit, as prescribed under rule 2BB(2).

Rule 2BB(2) lists down the prescribed allowances as-

 Contd.,

Rule 2BB(2) lists down the prescribed allowances as-

1. Special compensatory allowance for hilly areas or climate allowance or high altitude allowance to salaried employees -
Exemption up to Rs. 7,000 per month
2. Border area allowance or remote area or any disturbed area allowance to salaried employees - Exemption up to Rs.1,300 per
month
3. Tribal area allowance in: Madhya Pradesh, Tamilnadu, Assam, UP, Karnataka, West Bengal, Bihar, Orissa and Tripura to
salaried employees - Exemption up to Rs. 200 per month
4. Allowance to an employee working in a transport system to meet personal expenses while on duty- 70% of such allowance
(maximum up to INR 10,000 per month).
5. Children Education allowance- INR 100 per month per child (up to a maximum of 2 children).
6. Allowance for employee’s child hostel expenses- INR 300 per month per child (maximum up to two children).
7. Compensatory field area allowance-
INR 2600 per month for the prescribed area of Arunachal Pradesh, Sikkim, Himachal Pradesh, Uttar Pradesh, and Jammu and
Kashmir and throughout Manipur and Nagaland.
 Contd.,

8. Modified Field Area Allowance- INR 1000 per month for the prescribed area of Punjab, Rajasthan, Haryana, Himachal Pradesh,
Arunachal Pradesh, Assam, Sikkim, West Bengal, Uttar Pradesh, Jammu and Kashmir, and throughout Mizoram and Tripura.
9. Counter-insurgency allowance to members of armed forces- INR 3,900 per month.
10. Transport allowance granted to a disabled employee to meet his travel expense from his place of residence to place of duty- INR
3,200 per month.
11. Underground allowance to employees working in underground mines- INR 800 per month.
12. High altitude / uncongenial climate allowance granted to armed force members operating in high altitude areas-
 INR 1,060 per month for an altitude of 9000 – 15000 feet.
 INR 1,600 per month for an altitude above 15000 feet.
13. Highly active field area allowance granted to armed force members- INR 4,200 per month.
14. Island allowance granted to armed force members-
INR 3,250 per month for areas of Andaman & Nicobar and Lakshadweep.
 Sections Particulars Exemption Limit
Sec 10(15) Income from tax free securities to all assesses (Income received as interest from Fully exempt from
securities, bonds, deposits notified by government) tax
Sec 10(16) Scholarships granted to meet the cost of Education Exempt
Sec 10(23D) Income from mutual fund (Any income earned from mutual funds registered Fully exempt from
under SEBI or set-up by any PSU or authorized by RBI) tax
Sec 10(34) Income from dividends (Tax paid by the company over the profits is considered Fully exempt from
as the final payment of tax no further credit to be claimed as dividends) tax

Sec 10(38) Long term capital gains on transfer of shares and securities Fully exempt from
tax
Sec 10(43) Reverse Mortgage (Any amount received by the individual as loan in lump-sum Fully exempt from
or in installments in transaction of reverse mortgage) tax
 Sections Particulars Exemption Limit
Sec 10(44) New Pension System exemption (Any income received by any person Fully exempt from tax
on the behalf of New pension system)
Sec 10(49) Income of National financial holdings company Fully exempt from tax
 Income of newly established units in Special
Economic Zones [Section 10 AA]

1. Assessees who are eligible for Deduction under Section 10AA:

Deduction under this section is available to all categories of assessees being entrepreneurs viz., individuals, firms,
companies, etc. who derive any profits or gains from an undertaking being a unit engaged in the export of articles or
things or providing any service.
2. Essential conditions to claim Deduction under Section 10AA:
The deduction shall apply to an undertaking which fulfils the following conditions:
 It has begun or begins to manufacture or produce articles or things or provide any service during the previous
year relevant to any assessment year commencing on or after 1.4.2006 but before 1.4.2021 in any Special
Economic Zone.
 It should not be formed by the splitting up or reconstruction of a business already in existence. However,
deduction is provided if the unit is formed as a result of the reestablishment, reconstruction or revival by the
assessee of the business of the undertaking as is referred to and satisfying the conditions in section 33B.
 Contd.,

3. It should also not be formed by the transfer of machinery or plant, previously used for any purpose, to a new
business. However, the following are the two exceptions to this condition:
A. Machinery or plant which was used outside India by any person other than the assessee shall not be regarded as
machinery or plant previously used for any purpose, if the following conditions are fulfilled:
 The machinery or plant should not be previously used in India.
 The machinery or plant should be imported into India from a foreign country.
 No deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under
the provisions of this Act to any person previously.
B. Deduction under section 10AA will, be available if the total value of the second hand machinery or plant transferred
to the new undertaking does not exceed 20 per cent of the total value of the machinery or plant used in the industrial
unit.
4. The assessee should furnish in the prescribed form [Form No. 56F], alongwith the return of income, the report of a
chartered accountant certifying that the deduction has been correctly claimed in accordance with the provisions of this
section.
 Contd.,

5. Period for which Deduction is available under Section 10AA

The deduction under this section shall be allowed as under for a total period of 15 relevant assessment years.

1 For the first 5 consecutive assessment years beginning with the 100% of the profits and gains derived from the export of such articles or
assessment year relevant to the previous year in which the unit begins to things or from services
manufacture such articles or things or provide services

2 Next 5 consecutive assessment years 50% of such profits or gains

3 Next 5 consecutive assessment years So much of the amount not exceeding 50% of the profits as is debited to
profit and loss account of the previous year in respect of which the
deduction is to be allowed and credited to Special Economic Zone
Reinvestment Reserve Account to be created and utilised for the purpose of
the business of the assessee
 Remaining Sections

Sections Particulars Exemption Limit

Section 11 Income from Property held for charitable or Exempt
religious purposes
Section 12 A Registration of Trust For Claiming exemption, the
trust must be registered under
the Income Tax Act.
Section 13* Sections 11 and 12 not to apply in certain * Covered in next Slide
conditions

Section 13 A Income of Political Parties Exempt

Section 13 A Income of Electoral Trust Exempt

 Section 13* - Sections 11 and 12 not to
apply in certain conditions

The following incomes of charitable or religious trust/institutions shall not be

eligible for exemptions under section 11 and 12 :
 any part of the income from the property held under a trust for private religious
purposes which does not ensure for the benefit of the public;
 Income of a trust- for charitable purposes or a charitable institution created or
established after the commencement of this Act, any income thereof if the trust or
institution is created or established for the benefit of any particular religious
community or caste;
 Anonymous Donations
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