Exemption from income tax Religious/charitable trust

Income of Charitable Institution or Fund [Section 10(23C)(iv)]

 Any income of a charitable institution or fund which is approved by the prescribed authority having regard to its objects and its importance throughout India or throughout any State or States is exempt from tax.

CBDT has authorized Commissioners of Income-tax (Exemptions) via Notification No. 75/2014 dated 1-12-2014 for granting approval under this section.

Income of religious/charitable trust [Section 10(23C)(v)]

 Income of any trust (including any other legal obligation) or institution formed wholly for public religious purposes or wholly for public religious and charitable purposes, which is approved by the prescribed authority having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof, is exempt from tax.

CBDT has authorized Commissioners of Income-tax (Exemptions) via Notification No. 75/2014 dated 1-12-2014 for granting approval under this section.

Conditions for claiming exemption under section 10(23C)(iv)/(v)/(vi)/(via) 

In order to claim exemption under section 10(23C)(iv)/(v)/(vi)/(via), the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, had to comply with the following conditions:

 1. An application in Form No. 56 (for claiming exemption under section 10(23C)(iv) and (v) or continuance thereof) and in Form No. 56D (for claiming exemption under section 10(23C)(vi) and (via) or continuance thereof) has to filed with prescribed authority, i.e., Commissioners of Income-tax (Exemptions).

2. It should furnish such documents (including audited annual accounts) or information, which the prescribed authority, i.e., Commissioners of Income-tax (Exemptions) may consider necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be. With effect from 1/09/2019, the CIT (Exemption) may also call for such documents or information from the institution or trust as he thinks necessary to satisfy himself that the institution or trust has complied with the requirements of any other law for the time being in force as are material for the purpose of achieving its objects.

3. It should apply its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five year.

4. Funds should not be invested or deposited for any period during the previous year otherwise than in any one or more of the forms/modes specified in section 11(5). However, this condition is not applicable in respect of the following:-

(i) any assets which form part of the corpus of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1973;

(ii) Equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such equity shares form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998
(iii) Debentures of a company acquired by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution before the 1st day of March, 1983;

(iv) any accretion to the shares, forming part of the corpus of the fund mentioned in point no. (i) and (ii), by way of bonus shares allotted to the fund, trust or institution or any university or other educational institution or any hospital or other medical institution;

(v) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,

 Note: 
1. Exemption shall not be denied in relation to voluntary contribution [other than voluntary contribution in cash or voluntary contribution of the nature referred to in (i), (ii), (iii), (iv) or (v) supra]subject to the condition that such voluntary contribution is not held by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired. [As amended by Finance (No. 2) Act, 2019]

2. Exemption is not available in relation to any income of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business

5. For claiming exemption under section 10(23C)(iv) and (v), the fund, trust or institution, as the case may be, should disinvest by March 30, 1993, all the investment made before April 1, 1989, otherwise than in any one or more of the forms or modes specified in section 11(5).

6. For claiming exemption under section 10(23C)(vi) and (via), the university or other educational institution or any hospital or other medical institution, as the case may be, should disinvest by March 30, 2001, all the investment made before June 1, 1998, otherwise than in any one or more of the forms or modes specified in section 11(5).

7. If taxable income [before giving exemption under section 10(23C)] exceeds the exemption limit, the institution should get books of account audited in Form No. 10BB and audit report should be submitted along with return of income.

8. Where any fund, trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, has been approved or notified for claiming exemption under section 10(23C)(iv)/(v)/(vi)/(via) then it would not be entitled to claim any benefit of exemption under other provisions of section 10 (except the exemption in respect of agricultural income.

Note: 
1. For the purpose of claiming exemption under section 10(23C), where any income is required to be applied or accumulated, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this clause in the same or any other previous year.

2. Any donation given by a trust/institution [registered under section 12AA or referred to in section 10(23C)(iv)/(v)/(vi)/(via)] to any other trust [which is registered under section 12AA or referred to in section 10(23C)(iv)/(v)/(vi)/(via)] as contribution with specific direction that they shall form part of the corpus of the recipient trust/institution, shall not be treated as application of income.

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Tax Free Income under section-10 of Income tax

Amount paid on life insurance policy [Section 10(10D)]

As per section 10(10D), any amount received under a life insurance policy, including bonus is exempt from tax. Following points should be noted in this regard:

·  Exemption is available only in respect of amount received from life insurance policy.

·  Exemption under section 10(10D) is unconditionally available in respect of sum received for a policy which is issued on or before March 31, 2003. However, in respect of policies issued on or after April 1st, 2003, the exemption is available only if the amount of premium paid on such policy in any financial year does not exceed 20% (10% in respect of policy taken on or after 1st April, 2012) of the actual capital sum assured. With effect from 1-4-2013, in respect of policy taken in the name of a person suffering from diseases specified under section 80DDB or in the name of a person suffering from disability specified under section 80U, the limit will be increased to 15% of capital sum assured.  

·  Value of premium agreed to be returned or of any benefit by way of bonus (or otherwise), over and above the sum actually assured, which is received under the policy by any person, shall not be taken into account while calculating the actual capital sum assured.

·   Amount received on death of the person will continue to be exempt without any condition.

Note: No exemption would be available in case of any sum received under section 80DD(3) or under Keyman insurance policy.

Exemption in respect of amount received from public provident fund/statutory provident fund/ recognised provident fund/ un-recognised provident fund [Section 10(11)/(12)]

 The tax treatment of various items in case of different provident funds is as follows:

Statutory Provident Fund Employer’s

Employer’s Contribution	Employer’s contribution to such fund is not treated as income of the employee.
Interest	Interest credited to such fund is exempt in the hands of the employee.
Amount received at the time of termination	Lump sum amount received from such fund, at the time of termination of service is exempt in the hands of employees.

Recognised Provident Fund

Employer’s Contribution	Employer’s contribution to such fund, up to 12% of salary is not treated as income of the employee (see Note 1).
Interest	Interest credited to such fund up to 9.5% per annum is exempt in the hands of the employee, interest in excess of 9.5% is charged to tax in the hands of the employee.
Amount received at the time of termination	If certain conditions are satisfied, then lump sum amount received from such fund, at the time of termination of service, is exempt in the hands ofemployees. (see Note 2)

Un-recognised Provident Fund

Employer’s Contribution	Employer’s contribution to such fund is not treated as income of the employee.
Interest	Interest credited to such fund is exempt in the hands of the employees.
Amount received at the time of termination	(See note 3)

Public Provident Fund

Employer’s Contribution	Employers do not contribute to such fund.
Interest	Employers do not contribute to such fund.
Amount received at the time of termination	Lump sum amount received from such fund at the time of termination of service is exempt from tax.

Notes:

 1. Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.

2. Accumulated balance paid from a recognised provident fund will be exempt from tax in following cases:

(a) If the employee has rendered a continuous service of 5 years or more. If the accumulated balance includes amount transferred from other recognised provident fund maintained by previous employer, then the period for which the employee rendered service to such previous employer shall also be included in computing the aforesaid period of 5 years.

(b) If the service of employee is terminated before the period of 5 years, due to his ill health or discontinuation of business of the employer or other reason beyond his control.

(c) If on retirement, the employee takes employment with any other employer and the balance due and payable to him is transferred to his individual account in any recognised fund maintained by such other employer, then the amount so transferred will not be charged to tax.

 Except above situations, payment from a recognised provident fund will be charged to tax considering such fund as un-recognised from the beginning (See note 3 given below for tax treatment of un-recognised provident fund).

3. Treatment of payment (at the time of termination) from un-recognised provident fund:

Payment on termination will include 4 things, viz., employee's contribution and interest thereto and employer’s contribution and interest thereto, the tax treatment of such payment is as follows:

  · Employee's contribution is not chargeable to tax; interest on employee contribution is taxed under the head “Income from other sources”.

·  Employer's contribution and interest thereon are taxed as salary income, however, an employee can claim relief under section 89 in respect of such payment.

Payment from account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 [Section 10(11A)]

As per section 10(11A), any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873 is exempt from tax. In other words, interest and withdrawals from such account will be exempt from tax under section 10(11A).

Payment from the National Pension System Trust to an employee [Section 10(12A)]

Any payment from the National Pension System Trust to an assessee on closure of account or his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed 40 % of the total amount payable to him at the time of closure or his opting out of the scheme, is exempt from tax.

With effect from April 01, 2020, 60 % of the amount payable shall be exempt from tax.

 Partial withdrawal from NPS [Section 10(12B)]

 To provide relief to an employee withdrawing partial amount from National Pension System (NPS) Trust. A new clause (12B) is inserted under section 10 with effect from assessment year 2018-19 to provide that the withdrawal from NPS will not be chargeable to tax if the following conditions are satisfied:-

1. Amount of withdrawal should not exceed 25% of total contribution made by an employee in NPS.

2. Partial withdrawal should be made in accordance with the terms and conditions specified under the Pension Fund Regulatory and Development Authority Act, 2013 and the regulations made thereunder.

Payment from approved superannuation fund in specified circumstances and subject to certain limits [Section 10(13)]

Approved superannuation fund means superannuation fund which is approved by the Commissioner of Income-tax. Tax treatment of such fund is as follows:  

· Employer’s contribution is exempt from tax, however, from assessment year 2010-11 employer’s contribution in excess of Rs. 1,50,000 per annum is charged to tax as perquisite. Employee’s contribution qualifies for deduction under section 80C and interest on accumulated balance is not liable to tax.

·  Payments made from the fund are exempt from tax under section 10(13) in following cases:  

1. Payment on death of beneficiary; or  

2. Payment to employee in lieu of, or in commutation of an annuity on his retirement at or after the specified age or on his becoming incapable prior to such retirement; or  

3. Payment by way of refund of contributions on the death of a beneficiary; or

 4.Payment to employee by way of refund of his contributions on leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement; or  

5. Payment to employee by way of transfer to his account under a pension scheme referred to in section 80CCD.

 House rent allowance [Section 10(13A)]

As per section 10(13A), read with rule 2A, the exemption in respect of HRA will be lower of the following amounts:

(1) 50% of salary, when residential house is situated at Mumbai, Kolkata, Delhi or Chennai and 40% of salary where residential house is situated at any other place.

(2) HRA actually received by the employee in respect of the period during which rental accommodation is occupied by the employee during the previous year.

(3) Rent paid in excess of 10% of salary.

Salary will include basic salary, dearness allowance forming part of salary while computing all retirement benefits and commission based on fixed percentage of turnover achieved by the employee. Apart from this, salary for this purpose does not include any other allowances/perquisites.

Salary for this purpose shall be computed on due basis in respect of period during which the accommodation is occupied by the employee in the previous year. Hence, any payments not pertaining to the previous year or not pertaining to the period of occupation of the accommodation shall be excluded.

Lease rent of an aircraft [Section 10(15A)]

 Lease rent of an aircraft or an aircraft engine paid to a foreign Government or to a foreign enterprise by an Indian company, engaged in the business of operation of aircraft is not taxable in the hands of such foreign Government or non-resident concern, if such payment is in pursuance of an agreement (approved by the Central Government) made before April 1, 1997 or after March 31, 1999 but before April 1, 2007. If such agreement is entered into during April 1, 1997 and March 31, 1999 or after March 31, 2007, then exemption under section 10(15A) is not available. However, in such a case, if tax on such payments is borne by the payer, then tax so borne by the payer is exempt in the hands of payee under section 10(6BB), provided agreement is approved by the Central Government.

Educational scholarship [Section 10(16)]

Any amount received as educational scholarship (i.e., scholarship to meet the cost of education is exempt from tax in the hands of recipient).

Daily allowance to a Member of Parliament [Section 10(17)]

 Following allowances are exempt from tax in the hands of a Member of Parliament and a Member of State Legislature—

• Daily allowance received by a Member of Parliament or by a Member of State Legislature or by member of any committee thereof.

• Any other allowance received by a Member of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986.

• Any Constituency allowance received by a Member of State Legislature.

Awards [Section 10(17A)]

 Any payment received in pursuance of following (whether paid in cash or in kind) is exempt from tax:

 · Any award instituted in the public interest by the Central Government or State Government or by any other body approved by the Central Government in this behalf.  

· Any reward by the Central Government or any State Government for such purpose as may be approved by the Central Government in this behalf in the public interest.

Pension to gallantry award winner [Section 10(18)]

Pension received by an individual who was employee of the Central Government or State Government and who has been awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or any other notified gallantry award is exempt from tax.

 Family pension received by any member of such individual is also exempt.

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Tax Free Income under section-10 of Income tax

Allowance/perquisites to Government employee outside India [Section 10(7)]

 As per section 10(7), any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India is exempt from tax.

Income of foreign Government employee under co-operative technical assistance programmer [Section 10(8)]

 As per section 10(8), remuneration received directly or indirectly by an individual, from the foreign Government in connection with a co-operative technical assistance programmer and projects in accordance with an agreement entered into by the Central Government and such foreign Government, is exempt from tax. Further, exemption is available in respect of any other income of such an individual which accrues or arises outside India and is not deemed to accrue or arise in India, provided such individual is required to pay income-tax/ social security tax to the foreign Government.

 Remuneration or fees received by a non-resident consultant/its foreign employees [Section 10(8A), (8B)]

 Under section 10(8A), (a) remuneration or fees received by a consultant* directly or indirectly out of the funds made available to an international organisation, under a technical assistance agreement between such organisation and the Government of a foreign State and (b) any other income which accrues or arises to him outside India and is not deemed to accrue or arise in India, in respect of which such consultant is required to pay income-tax/social security tax to the foreign Government of the country of his origin, is exempt from tax.

*Consultant means any individual who is either not a citizen of India, or being a citizen of India, is not ordinarily resident in India or any other person who is a non-resident and is engaged by the international organization for rendering technical services in India in accordance with an agreement entered into by the Central Government and the said international organization and the agreement relating to engagement of consultant is approved by the prescribed authority.

 Section 10(8B) grants similar exemption to the employee of the above discussed consultant, if such employee is either not a citizen of India or being a citizen of India, is not ordinarily resident in India and the contract of his service is approved by prescribed authority before the commencement of his service.

 Income of a family member of an employee serving under co-operative technical assistance programme [Section 10(9)]

 As per section 10(9), the income of any member of the family of any such individual as is referred to in section 10(8)/(8A)/(8B) accompanying him to India, which accrues or arises outside India and is not deemed to accrue or arise in India, in respect of which such member is required to pay any income or social security tax to the Government of that foreign State or country of origin of such member, as the case may be, is exempt from tax.

Death-cum-retirement gratuity received by Government servants [Section 10(10)(i)]

Section 10(10)(i) grants exemption to gratuity received by Government employee (i.e., Central Government or State Government or local authority).

Gratuity received by a non-Government employee covered by Payment of Gratuity Act, 1972 [Section 10(10)(ii)]

As per section 10(10)(ii), exemption in respect of gratuity in case of employees covered by the Payment of Gratuity Act, 1972 will be lower of following :  

15 days’ salary × years of service.

Maximum amount specified, i.e., Rs. 20,00,000*.

 Gratuity actually received.

* Limit increased from Rs. 10 lakhs to Rs. 20 lakhs vide Notification No. 1420(E), dated 29-3- 2018. Note:

1) Instead of 15 days’ salary, only 7 days salary will be taken into consideration in case of employees of seasonal establishment.

2) 15 days’ salary = Salary last drawn × 15/26

3) Salary for this purpose will include basic salary and dearness allowance only. Items other than basic salary and dearness allowance are not to be considered.

4) In case of piece rated employee, 15 days’ salary will be computed on the basis of average of total wages (excluding overtime wages) received for a period of three months immediately preceding the termination of his service.

5) Part of the year, in excess of 6 months, shall be taken as one full year.

Gratuity received by a non-Government employee not covered by Payment of Gratuity Act, 1972 [Section 10(10)(iii)]

As per section 10(10)(iii), exemption in respect of gratuity in case of employees not covered by the Payment of Gratuity Act, 1972 will be lower of following :  

Half month’s salary for each completed year of service, i.e.,

· [Average monthly salary × ½] × Completed years of service.

  Rs. 10,00,000.

Gratuity actually received.

Note:

1) Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month of retirement.

 2) Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.

3) While computing years of service, any fraction of a year is to be ignored.

Pension [Section 10(10A)]:

As per section 10(10A), any commuted pension, i.e., accumulated pension in lieu of monthly pension received by a Government employee is fully exempt from tax. Exemption is available only in respect of commuted pension and not in respect of un-commuted, i.e., monthly pension. Exemption in respect of commuted pension in case of a non-Government employee will be as follows:

·  If the employee receives gratuity, one third of full value of commuted pension will be exempt from tax under section 10(10A).

·If the employee does not receive gratuity, one half of full value of commuted pension will be exempt from tax under section 10(10A).

Leave salary [Section 10(10AA)]

As per section 10(10AA), leave encasement by a Government employee at the time of retirement (whether on superannuation or otherwise) is exempt from tax. In the hands of non-Government employee exemption will be least of the following:

 1. Period of earned leave standing to the credit in the employee’s account at the time of retirement (*) × Average monthly salary ($).

 2. Average monthly salary ($) × 10 (i.e., 10 months’ average salary).

3. Maximum amount as specified by the Government, i.e., Rs. 3,00,000.

4. Leave encasement actually received at the time of retirement.

(*)Leave credit to the account of the employee at the time of retirement should be restricted to 30 days per year of service if leave entitlement as per service rules exceeds 30 days per year of actual service.

($) Salary for the above purpose means average salary drawn in the past ten months immediately preceding the retirement (i.e., preceding the day of retirement) and will include basic salary, dearness allowance (if considered for computing all the retirement benefits) and commission based on fixed percentage of turnover achieved by the employee.

Apart from the above items, salary for this purpose does not include any other allowances or perquisites.

Retrenchment compensation [Section 10(10B)]

As per section 10(10B), compensation received at the time of retrenchment is exempt from tax to the extent of lower of the following:

(a) An amount calculated in accordance with the provisions of section 25F(b) of the Industrial Dispute Act, 1947; or

(b) Maximum amount specified by the Central Government (Rs. 5,00,000);

(c) Actual amount received.

 Under the Industrial Dispute Act, a workman is entitled to retrenchment compensation, equal to 15 days’ average pay for each completed year of continuous service or any part in excess of six months.

Compensation in excess of aforesaid limits is taxable as salary. However, the aforesaid limit is not applicable in cases where compensation is paid under any scheme approved by the Central Government.

Compensation on account of any disaster [Section 10(10BC)]

 Any amount received from the Central Government or State Government or a Local Authority by an individual or his legal heirs as compensation on account of any disaster is exempt from tax. However, no deduction is available in respect of the amount received or receivable to the extent such individual or his legal heirs has been allowed a deduction under the Act on account of loss or damage caused due to such disaster. Disaster here means any disaster due to any natural or man-made causes or by accident/negligence which results in substantial loss of human life or damage to property or environment and the magnitude of such disaster is beyond coping capacity of community of the affected area.

Payment at the time of voluntary retirement [Section 10(10C)]

As per section 10(10C), any compensation received at the time of voluntary retirement or termination of service is exempt from tax, if the following conditions are satisfied:  

·Compensation is received at the time of voluntary retirement or termination (or in the case of an employee of public sector Company, at the time of voluntary separation).

· Compensation is received by an employee of following undertakings

a) public sector company ; or

 b) any other company ; or

c) an authority established under a Central, State or Provincial Act ; or

d) a local authority ; or

e) a co-operative society ; or

f) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or

 g) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961) ; or

 h) any State Government; or

i) the Central Government; or

 j) Notified institutes having importance throughout India or in any State or States,

 k) Notified institute of management  

·Compensation is received in accordance with the scheme of voluntary retirement/separation, which is framed in accordance with guidelines prescribed under Rule 2BA of Income-tax Rules, 1962*.  

·Maximum amount of exemption is Rs. 5,00,000.

·  Where exemption is allowed to an employee under section 10(10C) for any assessment  year, no exemption under this section shall be allowed to him for any other assessment year.  

·With effect from assessment year 2010-11, section 10(10C) has been amended to provide that where any relief has been allowed to an assessee under section 89 for any assessment [As amended by Finance (No. 2) Act, 2019] year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under section 10(10C) shall be allowed to him in relation to such or any other assessment year.

*Guidelines prescribed under Rule 2BA of Income-tax Rules. 1962

Voluntary retirement scheme should be framed in accordance with the following guidelines:

i.                     it should apply to an employee who has completed 10 years of service or completed 40 years of age. This requirement would not be in case of amount received by an employee of a public sector company under the scheme of voluntary separation framed by such public sector company.

ii.                    it should apply to all employees (by whatever name called) including workers and executives of a company or of an authority or of a co-operative society, as the case may be, excepting directors of a company or of a co-operative society;]

iii.                  The scheme of voluntary retirement or voluntary separation should be drawn to result in overall reduction in the existing strength of the employees;

iv.                 The vacancy caused by the voluntary retirement or voluntary separation is not to be filled up;

v.                   The retiring employee of a company shall not be employed in another company or concern belonging to the same management

vi.                 The amount receivable on account of voluntary retirement or voluntary separation of the employee does not exceed the amount equivalent to –

-3 months salary* for each completed year of service or

- salary at the time of retirement multiplied by the balance months of service left before the date of his retirement

*Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.

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Tax Free Income Under Section-10 Of Income Tax

Agricultural Income [Section 10(1)]

 As per section 10(1), agricultural income earned by the taxpayer in India is exempt from tax. Agricultural income is defined under section 2(1A) of the Income-tax Act. As per section 2(1A), agricultural income generally means:

(a) Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.

(b) Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.

(c) Any income attributable to a farm house subject to satisfaction of certain conditions specified in this regard in section 2(1A).

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

Amount received by a member of the HUF from the income of the HUF, or in case of impartible estate out of income of family estate [Section 10(2)]

 As per section 10(2), amount received out of family income, or in case of impartible estate, amount received out of income of family estate by any member of such HUF is exempt from tax.

Share of profit received by a partner from the firm [Section 10(2A)]

As per section 10(2A), share of profit received by a partner from a firm is exempt from tax in the hands of the partner. Further, share of profit received by a partner of LLP from the LLP will be exempt from tax in the hands of such partner. This exemption is limited only to share of profit and does not apply to interest on capital and remuneration received by the partner from the firm/LLP.

Certain interest to non-residents [Section 10(4)]

 As per section 10(4)(i), in the case of a non-resident any income by way of interest on certain notified securities or bonds (including income by way of premium on the redemption of such bonds) is exempt from tax.

 As per section 10(4)(ii), in the case of an individual, any income by way of interest on money standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Management Act, 1999, and the rules made thereunder is exempt from tax.

Exemption under section 10(4)(ii) is available only if such individual is a person resident outside India as defined in clause (w) of section 2 of the Foreign Exchange Management Act, 1999 or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account.

Interest on notified savings certificates [Section 10(4B)]

As per section 10(4B), in the case of an individual, being a citizen of India or a person of Indian origin, who is a non-resident, any income by way of interest on notified savings certificates (subscribed in convertible foreign exchange) issued before the 1st day of June, 2002 by the Central Government is exempt from tax.

Interest on Rupee Denominated bonds [(Section 10(4C)]

Any interest received or receivable by a non-resident or foreign company in respect of Rupee Denominated Bond (as referred to in Section 194LC) issued outside India during the period 17- 09-2018 to 31-03-2019 by an Indian company/business trust shall be exempt from tax.

Income from transfer of GDRs, Rupee Denominated Bonds or Derivatives by Category-III AIFs [(Section 10(4D)]

Capital gain arising on transfer of a capital asset, being bonds, GDRs, rupee denominated bonds or derivatives, as referred to in Section 47(viiab) by Category-III Alternative Investment Fund (AIF) shall be exempt from income-tax to the extent such gains arise in respect of units in the AIF held by a non-resident . The exemption is allowed subject to following conditions:-

 a) The AIF should be approved by SEBI and located in any IFSC.

b) All the units of such AIF should be held by non-residents except sponsor or manager.

c) The transaction should be carried out on a recognised stock exchange located in any International Financial Services Centre (IFSC).

d) The consideration for such transfer should be paid or payable in convertible foreign exchange.

Leave travel concession [Section 10(5)]

An employee can claim exemption under section 10(5) in respect of Leave Travel Concession. Exemption under section 10(5) is available to all employees (i.e. Indian as well as foreign citizens).

Exemption is available in respect of value of any travel concession or assistance received or due to the employee from his employer (including former employer) for himself and his family members in connection with his proceeding on leave to any place in India. Other provisions to be kept in mind in this regard are as follows:

Where journey is performed by air: Amount of exemption will be lower of amount of economy class air fare of the National Carrier by the shortest route or actual amount spent.

Where journey is performed by rail: Amount of exemption will be lower of amount of airconditioned first class rail fare by the shortest route or actual amount spent. The same rule will apply where journey is performed by any other mode and the place of origin of journey and destination are connected by rail.

Where the place of origin and destination are not connected by rail and journey is performed by any mode of transport other than by air:

The exemption will be as follows: (a) If recognised public transport exists: Exemption will be lower of first class or deluxe class fare by the shortest route or actual amount spent.

(b) If no recognised public transport exists: Exemption will be lower of amount of airconditioned first class rail fare by the shortest route (considering as if journey is performed by rail) or actual amount spent. [As amended by Finance (No. 2) Act, 2019]

Block: Exemption is available for 2 journeys in a block of 4 years. The block applicable for current period is calendar year 2014-17. The previous block was of calendar year 2010-2013.

Carry over: If an employee has not availed of travel concession or assistance in respect of one or two permitted journeys in a particular block of 4 years, then he is entitled to carry over one journey to the next block. In this situation, exemption will be available for 3 journeys in the next block. However, to avail of this benefit, exemption in respect of journey should be utilised in the first calendar year of the next block. In other words, in case of carry over, exemption is available in respect of 3 journeys in a block, provided exemption in respect of at least 1 journey is claimed in the first year of the next block.

 Exemption is in respect of actual expenditure on fare, hence, if no journey is performed, then no exemption is available.

Family: Family will include spouse and children of the individual, whether dependent or not and parents, brothers, sisters of the individual or any of them who are wholly or mainly dependent on him.

Exemption is restricted to only 2 surviving children born after October 1, 1998 (multiple births after first single child will be considered as one child only), however, such restriction is not applicable to children born before October 1, 1998.

Remuneration received by specified diplomats and their staff [Section 10(6)(ii)]

 As per section 10(6)(ii), in case of an individual who is not a citizen of India, remuneration received by him as an official (by whatever name called) of an embassy, high Commission, legation, Commission, consulate or trade representative of a foreign State, or member of the staff of any of that official is exempt from tax, if corresponding Indian official in that foreign country enjoys a similar exemption.

Salary of a foreign employee and non-resident member of crew [Section 10(6)(vi), (viii)] As per section 10(6)(vi), the remuneration received by a foreign national as an employee of a foreign enterprise for services rendered by him during his stay in India is exempt from tax, provided the following conditions are fulfilled—

(a) the foreign enterprise is not engaged in any trade or business in India ;

 (b) his stay in India does not exceed in the aggregate a period of 90 days in such year ; and

 (c) such remuneration is not liable to be deducted from the income of the employer.

As per section 10(6)(viii), any salaries received by or due to a non-resident foreign national for services rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate a period of 90 days in the year is exempt from tax.

Remuneration of a foreign trainee [Section 10(6)(xi)]

As per section 10(6)(xi), the remuneration received by a foreign trainee as an employee of foreign Government during his stay in India in connection with his training in any establishment or office of, or in any undertaking owned by,—

i.                     the Government ; or

ii.                    any company owned by the Central Government, or any State Government [As amended by Finance (No. 2) Act, 2019]

iii.                   any company which is a subsidiary of a company referred to in item (ii) ; or

iv.                  any corporation established by or under a Central, State or Provincial Act ; or

v.                    any co-operative society wholly financed by the Central Government, or any State Government

Tax paid on behalf of foreign company deriving income by way of royalty or fees for technical services [Section 10(6A)]

Tax paid by Central Government, State Government or an Indian concern on behalf of a foreign company deriving income by way of royalty or fees for technical services in pursuance of an agreement made after March 31, 1976 but before June 1, 2002 will be exempt from tax in the hands of such foreign company provided such agreement is in accordance with the industrial policy of the Indian Government or it is approved by the Central Government.

Tax paid on behalf of foreign company or non-resident in respect of other income [Section 10(6B)]

Tax paid by Central Government, State Government or an Indian concern on behalf of a foreign company or non-resident in respect of any income (not being salary, royalty or fees for technical services) will be exempt from tax in the hands of such foreign company or non-resident if such income is received in pursuance of an agreement entered into before June 1, 2002 by the Central Government with the Government of a foreign State or international organisation or any other related agreement approved by the Central Government.

Tax paid on behalf of foreign Government or foreign enterprise deriving income by way of lease of aircraft or aircraft engine [Section 10(6BB)]

Tax paid by an Indian company, engaged in the business of operation of aircraft, on behalf of foreign Government or foreign enterprise deriving income by way of lease of aircraft or aircraft engine will be exempt from tax in the hands of such foreign Government or foreign enterprise if such lease rental is received under an agreement which is approved by Central Government and entered during the period between 31-3-1997 to 1-4-1999, or after 31-3-2007.

Technical fees received by a notified foreign company [Section 10(6C)]

Section 10(6C) grants exemption from tax in respect of income arising to notified foreign company by way of royalty or fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India.

Royalty/Fees received by non-resident from National Technical Research Organisation [Section 10(6D)]

As per section 10(6D), income arising to non-resident by way of royalty or fees for technical services from services rendered to National Technical Research Organization (‘NTRO’) will be exempt from tax in India.

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