Incomes exempt from tax under section 10

7/31/2013 sanjaydessai@gmail.com 1
Income exempt from Tax under section 10
(Selected items)
By
Dr. Sanjay P Sawant Dessai
Associate Professor
VVM’s Shree Damodar College of Commerce and
Economics Margao Goa

EXEMPTIONS & EXCLUSIONS U/S. 10:
1. Agricultural Income u/s. 10(1)
2. Receipts by a member, from a HUF u/s. 10(2)
3. Share of Profit from partnership firm u./s.
10(2A)
4. Leave Travel Concession in India u/s. 10(5)
5. Gratuity u/s. 10(10)

EXEMPTIONS & EXCLUSIONS U/S. 10
6. Compensation received at the time of
Voluntary Retirement u/s. 10(10C)
7. Amount received under Life Insurance Policy
u/s 10(10D)
8. Payment received from Provident Fund u/s.
10 (11), (12)
9. Payment received from an Approved
Superannuation Fund u/s. 10(13)
10.House Rent Allowance u/s. 10 (13A).

EXEMPTIONS & EXCLUSIONS U/S. 10
11.Special Allowance u/s. 10 (14): Transport
Allowance, Conveyance Allowance, Daily
Allowance, Uniform Allowance, Helper
Allowance, Research Allowance, Children
Education Allowance, Children’s Hostel
Expenditure Allowance.
12.Interest on Securities u/s. 10(15)
13.Educational Scholarships u/s. 10(16)
14.Income of a minor child u/s 10 (32) [including
basic provisions of sec 64(1A)]
15.Dividends and Interest on Units u/s. 10(34) (35).

Income not included in total income
(U/s 10)
• The income tax Act 1961 enumerates in
section 10, the items of income which are
totally exempt from tax .
• While computing the total income of a
previous year of any person, any income
which falls within any of the following clause
shall not be included in the total income.

Agricultural Income u/s. 10(1)
Agriculture income is exempted from tax if it
comes from within the definition of
“agricultural income”

Receipts by a member, from a HUF
u/s. 10(2)
• Sum received by an individual, as a member of
HUF, either out of the family or out of income
of estate belonging to the family, is exempted
from tax.

Share of Profit from partnership firm
u/s 10(2A)
• Share of profit received by partners from a
firm is not taxable in the hands of partners.

Leave Travel Concession in India u/s.
10(5)
• The value of leave travel concession received
or due to an individual is exempted to the
extent it is actually spent.

Gratuity u/s. 10(10)
• Gratuity is paid for long and meritorious
services rendered by an employee.
• With the enactment of the payment of
Gratuity Act, 1972, gratuity payment has
become legally compulsory.
• Where the payment of Gratuity Act, 1972 is
inapplicable, an employee can claim gratuity
under the terms of contract of employment .

Tax treatment of Gratuity
• For Govt. employees – fully exempt from tax
• For Non-Govt. employee covered by payment of
Gratuity Act 1972. –
• Least of the following three is exempt from tax
1. 15 days salary (7days salary in case of seasonal
establishment ) based on salary last drawn for
each year of service
2. Rs. 10,00,000 (Rs 3,50,000 up to 23rd may 2010)
3. Gratuity actually received

Non- Govt. employee not covered by
the payment of Gratuity Act 1972
• Least of the following three is exempt from tax
1. Rs 10,00,000
2. Half months average salary for each
completed year of service
3. Gratuity actually received

Compensation received at the time of
Voluntary Retirement u/s. 10(10C)
• Compensation on voluntary retirement of an employee
of a public sector company and other entities shall be
exempted from tax to the extent of Rs. 5,00,000.
• Public sector undertaking and other entities include
• Company
• Local authority
• Establishment under central and state govt.
• Cooperative society
• Other state govt. and central govt. Institutions.

Amount received under Life Insurance
Policy u/s 10(10D)
• Any sum received under life insurance policy,
including the sum allocated by way of bonus
on such policy shall be totally exempt from
tax.

Payment received from Provident Fund
u/s. 10 (11), (12)
• Any payment from a provident fund to which
the provident fund Act ,1925 applies or from
any other provident fund set up by Central
Govt. and notified in the official gazette is
totally exempted from tax.
• Section 10 (12) Accumulated balance due and
become payable to an employee participating
in a recognised provident fund, is exempt from
tax

Payment received from an Approved
Superannuation Fund u/s. 10(13)
• Payment received from an approved
superannuation fund is exempted from tax

House Rent Allowance u/s. 10 (13A).
• Exemption in respect of house rent allowance
is least of the following three
• Amount equal to 50 percent of salary, where
house is situated in metros and 40 percent of
salary where residential house is situated at
any other place.
• Actual house rent allowance received
• Excess of rent paid over 10 percent of salary

salary for calculation purpose
• Basic salary
• Dearness allowance and grade pay
• Does not include any allowance and
perquisites

Special Allowance u/s. 10 (14):
• Conveyance Allowance, Daily Allowance,
Uniform Allowance, Helper Allowance,
Research Allowance
• Allowances are exempt to the extent the
amount is utilised for the specific purpose for
which allowance is received.
• Transport Allowance, Children Education
Allowance, Children’s Hostel Expenditure
Allowance. (fixed amount per month)

Transport Allowance
• Transport allowance is granted to meet his
expenditure for the purpose of commuting
between the place of his residence and place
of duty .
• Exemption
• Up to Rupees 800 per month
• Rupees 1600 per month in the case of blind or
orthopedically handicapped employee

Conveyance Allowance
• Conveyance allowance is granted to meet
expenditure on conveyance in performance of
duties of an office.
• Exemption –
1. Amount of the allowance or
2. The amount utilised for the specific purpose
– whichever is lower

Daily Allowance
• Exemption –
• Amount of the allowance or
• The amount utilised for the specific purpose –
whichever is lower

Uniform Allowance
• Exemption –
whichever is lower

Research Allowance
• Exemption –
whichever is lower

Children Education Allowance
• The allowance is given for children's education
• Rupees 100 per month per child up to a
maximum of 2 children

Helper Allowance
• Exemption –
whichever is lower

Hostel Expenditure Allowance
• The allowance is granted to an employee to
meet the hostel expenditure on his child
• Rupees 300 per month per child up to a
maximum of two children.

Interest on Securities u/s. 10(15)
• Income by way of interest, premium, etc from
certain securities, certificates, bonds, deposits
etc. as specified / notified in the official
gazette are exempted from tax.

Educational Scholarships u/s. 10(16)
• Scholarship granted to meet the cost of
education is totally exempt from tax and will
not be included in the computation of total
income of assessee.

Income of a minor child u/s 10 (32) [including basic provisions
of sec 64(1A)]
• In case the income of an individual includes
the income of his minor child in terms of
section of 64(1A), such individual shall be
entitled to exemption of Rs 1500 in respect of
each minor child.
• Section 64(1A) All income which arises or
accrues to the minor child shall be clubbed in
the income of his parents.

Dividends and Interest on Units u/s.
10(34) (35).
• Income by way of dividends 10(34)
• Income by way of dividend is exempted from
tax in the hands of shareholders.
• Income from mutual fund 10(35)
• Any income received in respect of units of a
Mutual Fund/ specific company is exempted
from tax.

Incomes exempt from tax under section 10

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