Exempt Income

Income that is non-taxable is called as exempt income. Under Section 10, there are different sub-sections that define what kind of income is exempt from tax. This can range from agricultural to house rent allowance.

Any income that an individual acquires or earns during the course of a financial year that is deemed to be non taxable is referred to as ‘Exempt Income’. As per the Income Tax Act, there are specific kinds of income that are exempt from tax as long as these types of income fulfil the guidelines and provisions outlined in the Act. Exempt income comes in many forms such as the interest received through agricultural means, interest received through PPF, long term capital gains earned through shares and stocks, and much more. However, there is still some debate on what exactly constitutes ‘exempt income’, and if such income is required to be declared by the taxpayer when filing his or her income tax returns.

Income Exempt From Tax As Per Section 10

Most income that is exempted from tax is listed under Section 10 of the Income Tax Act. This section contains a list of income that is deemed or considered to be free from taxation.

Exempted income specified under Section 10 is as follows:

Section 10(1) Income earned through agricultural means
Section 10(2) Any amount received by an individual through a coparcener from an HUF
Section 10(2A) Income received by partners of a firm, as shared between them
Section 10(4)(i) Any interest that has been paid to a person who is not a resident Indian
Section 10(4)(ii) Any interest that has been paid to the account of a person who is not a resident Indian
Section 10(4B) Any interest that has been paid to a person who is not a resident Indian, but of Indian origin
Section 10(5) Concession on travel given to an employee who is also a citizen of India
Section 10(6) Any income earned or received by a nonIndian citizen
Section 10(6A), (6B), (6BB), (6C) Government tax paid on the income of a foreign firm
Section 10(7) Allowances received by government employees stationed abroad
Section 10(8) Income earned by foreign employees in India under the Cooperative Technical Assistance Program
Section 10(8A) Income earned by a consultant
Section 10(8B) Income earned by a consultant’s staff or employees
Section 10(9) Income earned by any family member of a foreign employee in India under the Cooperative Technical Assistance Program
Section 10(10) Gratuity
Section 10(10A) The commuted value of the pension earned by an individual
Section 10(10AA) Any amount earned via encashment of leave at the time of retirement
Section 10(10B) Compensation paid to workers due to relocation
Section 10(10BB) Any remittance obtained as per the Bhopal Gas Leak Disaster Act 1985
Section 10(10BC) Any compensation obtained in the event of a disaster
Section 10(10C) Compensation in lieu of retirement from a PBC or any other firm
Section 10(10CC) Any income received through taxation on perquisites
Section 10(10D) Any amount acquired via a life insurance policy
Section 10(11) Any payment received via the Statutory Provident Fund
Section 10(12) Any payment received via a recognised or authorised Fund
Section 10(13) Any payment received through a Superannuation Fund
Section 10(13A) House Rent Allowance
Section 10(14) Allowances utilised to meet business expenses
Section 10(15) Income received in the form of interest
Section 10(15A) Income received by an Indian firm through the lease of an aircraft from a foreign firm or government
Section 10(16) Income in the form of a scholarship
Section 10(17) Allowances granted to MLCs, MLAs or MPs
Section 10(17A) Income received in the form of a government award
Section 10(18) Income received in the form of pension by winners of awards for heroism
Section 10(19) Income received by family members of the armed forces in the form of pension
Section 10(19A) Income received from a single palace of an exruler
Section 10(20) Income received by a localised body or authority
Section 10(21) Income received by an association involved with scientific research
Section 10(22B) Income earned by a news or broadcasting agency
Section 10(23A) Income earned by certain Professional Institutes
Section 10(23AA) Income acquired through Regimental Fund
Section 10(23AAA) Income acquired through an employee welfare fund
Section 10(23MB) Insurance pension fund income
Section 10(23B) Income earned by village industry development institutions
Section 10(23BB) Income earned by state level Khadi and Village Industries Board
Section 10(23BBA) Income earned by regulatory bodies of institutions affiliated with religion and charity
Section 10(23BBB) Income received by the European Economic Community
Section 10(23BBC) Income received through SAARC funded regional projects
Section 10(23BBE) Income received by the IRDA
Section 10(23BBH) Income received through Prasar Bharti
Section 10(23C) Income received by any individual through certain specified funds
Section 10(23D) Income earned via Mutual Funds
Section 10(23DA)j Income earned via a Securitisation Trust
Section 10(23EA) Income earned through an IPF
Section 10(23EB) Income received by the Credit Guarantee Trust for Small Industries
Section 10(23ED) Income exemption of IPF
Section 10(23DFB) Income exemption of specified income received by Venture Capital Firms, Funds or Businesses
Section 10(24) Income earned by authorised trade unions
Section 10(25) Income earned via provident funds and superannuation funds
Section 10(25A) Income earned via Employee’s State Insurance Fund
Section 10(26), 10(26A) Income earned by Schedule Tribe Members
Section 10(26AAN) Income earned by an individual of Sikkimese origin
Section 10(26AAB) Marketing regulation with regards to agricultural produce
Section 10(26B) Income earned by corporations established for the upliftment of backward tribes and classes
Section 10(26BB) Income earned by corporations established for the protection of Minority interests
Section 10(26BBB) Income earned by corporations established for former servicemen
Section 10(27) Income earned by cooperative societies established for protection of scheduled castes and tribes interests
Section 10(29A) Income received by Community Boards
Section 10(30) Income earned in the form of subsidies via the Tea Board
Section 10(31) Income earned in the form of subsidies via the concerned Board
Section 10(32) Income earned by a child in accordance with Section 64 of the Income Tax Act
Section 10(33) Income earned through Unit Trust of India capital asset transfer
Section 10(34) Income earned in the form of dividends through an Indian firm
Section 10(34A) Income earned by a shareholder through the buyback of unlisted companies
Section 10(35) Income received through the sale or transfer of Unit Trust of India units as well as other mutual funds
Section 10(35A) Income from a securitisation trust that is exempt
Section 10(36) Income received on the sale of shares under specific conditions
Section 10(37) Any capital gains made on the mandatory acquirement of land in relation to urban agriculture
Section 10(38) Any long term capital gains made from share and security transfers that fall under the purview of Security Transaction Tax
Section 10(39) Any income received from any international event or function relating to sports
Section 10(40) Any income acquired in the form of a grant from a company deemed to be a subsidiary of the parent company
Section 10(41) Any income received on any asset transfer of a company or project that conducts power distribution, generation and transmission
Section 10(42) Any income earned by any authority that has been established by more than one country
Section 10(43) Any income in relation to reversal of mortgage
Section 10(44) Income generated through the NPS Trust
Section 10(45) Any allowance or perks granted to the chairman or any member of the UPSC
Section 10(46) Any income that comes under the category of ‘specified income’ with regards to specific authoritative bodies
Section 10(47) Any income that is exempt under the category of infrastructure debt fund
Section 10(48) Any income earned by a foreign firm or company due to crude oil sales within India
Section 10(49) Any income earned by the NFHC (National Finance Holdings Company)

Disclosure Of Exempted Income For Salary Allowances

Those individuals or taxpayers who receive income in the form of salaries are permitted specific allowances that are non taxable. Disclosure of this type of exempted income is required to be made under ‘’Schedule S - Details of Income from Salary’’ when filing tax returns under ITR-2.

Exemptions allowed under the following heads are required to be disclosed by a salaried individual when filing his or her income tax returns:

  • HRA
  • LTA
  • Encashment of Leave
  • Pension
  • Gratuity
  • Voluntary Retirement Scheme
  • Perquisites

Disclosure Of Exempted Income For Non-Salary Allowances

The Income Tax Act also specifies specific types of non-salary income that are also exempt from tax. These incomes include dividends, agricultural income, interest on funds, capital gains etc. Disclosure of these types of income is required to be made by the taxpayer under ‘’Schedule EI - Details of Exempt Income’’ when filing tax returns under ITR-1

Important Tip For Filing Of Income Tax Returns For The Financial Year 2019-20 With Regards to Exempted Income

As per the recent updation of taxation guidelines, any exempted income earned by a taxpayer during the course of the financial year, that is found to be in excess of Rs 5,000, will have to be disclosed in the ITR-2 form instead of the ITR-1 form when filing income tax returns for the financial year 2019-20 or the assessment year 2020-21

Consequences Of Not Disclosing Exempted Income

Due to the fact that certain income does not attract any tax, many taxpayers fail to disclose details regarding this type of income. However, individuals who do not disclose these particulars may end up under the scanned of the Income Tax Department, since they will be unable to pinpoint the origin of such income.

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