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Saturday, April 30, 2016

Sec. 10 of the Income Tax Act,1961 - Exempted Incomes

Income Exempted from tax under Sec. 10:

1)      Agriculture Income [Sec.10 (1)]: Agriculture income is fully exempted from tax u/s 10(1) and as such does not form part of total income. As per Section 2(1A) agriculture income includes:
a)      Any rent or revenue derived from land which is situated in India and is used for agricultural purpose;
b)      Any income derived from such land by agriculture or by the process employed to render the product fit for market or by sale of such produce by the cultivator or receiver of rent in Kind.
c)       Any income derived from any building provided the following conditions were satisfied:
Ø  The building is or on the immediate vicinity of the agricultural land;
Ø  It is occupied by the cultivator or receiver of rent or revenue
Ø  It is used as a dwelling house or store house or out house ;
Ø  The land is assessed to land revenue and it is not situated within the specified area.

2)      Receipt of share in HUF as a member [Sec. 10(2)]: The share in the profit of the HUF received by the member of HUF is wholly exempt.
3)      Receipt of share of profit in Partnership firm as partner [Sec.10 (2A)]:  The share in the profit of the firm received by the partner is wholly exempt.

4)      Lump sum receipt from LIC:  Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy. Exceptions:
a.       Any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA; or
b.      Any sum received under a Key man insurance policy; or
c.       Any sum received under an insurance policy issued on or after 1.4.2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20% of the actual capital sum assured:
Provided that the provisions shall not apply to any sum received on the death of a person:
Explanation to sub-section (3) of section 80C the sum assured will not include any premium agreed to be returned or any benefit by way of bonus.
5)     Interest on securities [Sec.10 (15)]: The interest on following securities is exempted:
a.       interest on notified securities, bonds and certificates 12 years NSAC, National Defense Gold Bonds 1980, Post Office Cash certificates (5 years), National plan saving certificate (12 years), Post- Office National saving certificate (12 or 7 years), Post Office saving Bank A/c, etc.
b.      Interest on capital investment bonds of individual and HUF.               
c.       Interest received by NRI from notified bonds.
d.      Interest on notified bonds, debentures of Public Sector Company.
e.      Interest on bonds issued by state pooled finance entity & notified by central government
6) Educational Scholarship [Sec. 10(16)]: Scholarship granted to meet the cost of education is exempt. Cost of education includes tuition gees and all other incidental expenses. It is not necessary that Govt should finance scholarship.
7)  Family pension [Sec. 10(19)]: Family pension received by widow or children or nominated heirs of the armed force of union is exempt from tax, provided his death is on operational duty.
8)   Income of Professional Institution [Sec. 10(23A)]: Any income of professional institution is exempt except house property, interest, and dividend and by rendering any specific service. Conditions for exemptions:
a.       The institution is established for purpose of control, supervision and regulation on profession of law, medicine, accountancy, engineering and other notified profession.
b.      The income is applied wholly for the object for which it is established
c.       Approved by central government.
9)       Minor income [Sec. 10(32)]: Any income of minor included in the income of his parents as per Sec. 64 (1 A) is exempt up to Rs. 1500/- per child per annum.
10)     Dividend from domestic company [Sec. 10 (34)]: Any income by way of dividends referred to in section 115-O. As per sec-115 O dividend declared by domestic company on which corporate dividend tax is paid.
11)   Dividend/ income from units [Sec. 10(35)]: Any income on units of mutual funds or units of UTI Provided that this clause shall not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be.
12)  Long Term Capital Gains (LTCG) on Agricultural Land [Sec. 10 (37)] (Available to Individual or HUF): Capital gain arising from transfer of urban agricultural land. The land was used for agricultural purpose for 2 years immediately preceding the date of transfer by HUF or Individual or parents. Such transfer is by way of compulsory acquisition under law.
13) LTCG on Securities on the following securities [Sec. 10(38)]:
a.       LTCG on equity or equity oriented units.
b.      Such transfer is on or after 1-4-2004.

c.       Such transaction is chargeable to securities transaction tax.