Tax Exemption: An Overview

By | August 11, 2016

1665785_634956234516503750-1What is exempted income?

As per Section 10 to 13A, certain incomes are either totally exempt from tax or exempt up to a certain limit. Such incomes which do not form part of total income may also called incomes exempt from tax.

  • Exemptions = Tax free income
  • Income forming a part of total income on which  no income tax is payable.List-of-all-Incomes-Exempt-From-Income-Tax
Exemtion u/sDetails
  • Agricultural income = Totally exempt
  • Provided it falls within the definition of agricultural income given u/s 2(1A)
  • Payments received from family income
  • by a member of HUF
  • Entire Amount = Exempt from tax
  • Share of profit from a firm = Exempt
  • Interest received by a non resident
  • from prescribed securities = Exempt
  • Leave travel concession provide by an employer
  • to his Indian citizen employee
  • Please refer below link for more details and exemption limit:

10(6)Remuneration received by foreign diplomats of all categories = Exempt
  • Any allowance or perquisites – paid or allowed outside India
  • To citizen of India by government
  • For rendering service outside India = Exempt
10(10A)Commuted value of pension

  • Any uncommuted pension = Fully taxable
  • State and central government employees or employees of any authority or any statutory corporation = Exempt u/s 10(10A)
  • Non-government employees = Exempt u/s 10(10A) to the following-
  • (a) if he receives gratuity: 1/3 of the normal pension is exempt u/s 10(10A)
  • (b) if he doesn’t receive gratuity: 1/2 of the normal pension received is exempt u/s 10(10A)
10(10AA)Leave Salary

  • Leave encashment during service = Taxable
  • Leave encashment at the time of retirement/superannuation/resignation from service
  • (a) Central/State Government employees = Exempt
  • (b) Other employees = Least of the following is exempted
  • i. 30 days salary for every completed year of service (to the extent of leave credit)
  • ii. 10 months’ average salary
  • iii. Leave encashment actually received
  • iv. Amount specified by Government i.e. Rs. 3,00,ooo/-.
10(10B)Retrenchment Compensation

  • Any compensation received by victims
  • Under BHOPAL GAS LEAK ACT, 1985 = Exempt
  • Any amount received or receivable by an individual
  • From the Government or local authority by way of compensation = Exempt
  • The income tax actually paid by the employer
  • On non-monetary perquisite provided to employee
  • Shall be exempt in the hands of employee
  • Any some received from life insurance policy = Exempt
  • Any payments received
  • from a provident fund to which provident fund act applies
  • Or from PPF set up by Central Government = Exempt
 10(13A)Minimum of the following is exempt

  • 50% of salary if house is situated at Delhi, Mumbai, Madras and Calcutta OR
  • 40% of salary if house is at any other place
  • Actual HRA received
  • Rent paid less 10% of salary
10(16)Scholarships granted to meet cost of education = Exempt
10(17)Any of the following allowances received by an MP or MLA = Exempt

  • Daily allowance
  • Constituency allowance
  • Minor’s income clubbed with individual = Exempt
  • Up to Rs. 1500/- per child
  • Dividend declared by domestic company
  • Is liable to dividend distribution tax @ 15% + surcharge @ 7.5% + education cess @ 2% + SHEC @ 1% of the amount declared = Exempt
  • in the hands of shareholder
  • Any income received on units of UTI and mutual funds
  • Covered u/s 10(23D) = Exempt

Leave a Reply