Section 10- Incomes Not Included in Total Income

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The Income Tax Act, of 1961 is the main statute of Income Tax in India. It provides for levy, administration, collection, and recovery of Income Tax.

Many categories of income are exempt from income tax under Section 10 of The Income Tax Act, 1961. The assessee has to establish and find out n which case he falls into the said provisions of the act.

1. Agriculture Income:

As we all know that India is vastly known for its contribution to the agricultural sector. Agriculture income will be excluded from the assessee total income but it will be taken for considering rate to tax non-agriculture income.

2. Share Of Profit From A Firm:

A partner’s share in the total income of the company is totally exempted from the total income of the hands of the partner because the company is separately assessed as such. However, any salary interest commission paid or payable to the partner which was deductible from the total income of the firm will be included in the income of the partner’s total income as his business.

3. Leave Travel Concession:

If an employee goes on leave to travel with his family then the traveling cost is reimbursed by the employer, then such reimbursement is fully exempted. But some provisions for it were as below;

• Journey can be performed during service or after retirement.

• Employer may be present or former.

• Journey must be performed to any place within India.

• In case, a journey was performed to various places together, then exemption is limited to the extent of cost of journey from the place of origin to the farthest point reached, by the shortest route.

• Employee may or may not be a citizen of India.

• Stay cost is not exempt.

4. Allowance Or Perquisite Paid Outside India [Sec. 10(7)]:

Any allowance or perquisite paid outside India by the Government to a citizen of India for Rendering Services Outside India.

5. Death-Cum-Retirement-Gratuity [Sec. 10(10)]:

Gratuity is basically a retirement benefit given to the employee by the employer after their retirement for the consideration for the services they offered in the past. Such exemption can be claimed by a salaried assessee. Gratuity received by an assessee other than employee shall not be eligible for exemption u/s 10(10). E.g. Gratuity received by an agent of LIC of India is not eligible for exemption u/s 10(10) as agents are not employees of LIC of India.

6. Compensation For Any Disaster [Sec. 10(10bc)]

Any amount received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensating on account of any disaster, except the amount received or receivable to the extent such individual or his legal heir has been allowed a deduction under this Act on account of any loss or damage caused by such disaster.

7. Sum Received Under A Life Insurance Policy [Sec. 10(10d)]:

Any sum received under a life insurance policy including a bonus on such policy is wholly exempt from tax. But the exemption is not available on –

• any sum received u/s 80DD(3) or u/s 80DDA(3),

• any sum received under a Keyman insurance policy;

• any sum received under an insurance policy issued on or after 1-4-20121 in respect of which the premium payable for any of the years during the term of the policy exceeds 10%2 of the actual capital sum assured.

8. Payment From National Pension Trust [Sec. 10(12a) & 10(12b)]:

Any payment from the National Pension Scheme Trust to an assessee on the closure of his account or on his opting out of the pension scheme referred to in sec. 80CCD, to the extent it does not exceed 60% of the total amount payable to him at the time of such closure or his opting out of the scheme [Sec. 10(12A)] Any payment from the National Pension System Trust to an employee under the pension scheme referred to in sec. 80CCD, on partial withdrawal made out of his account in accordance with the terms and conditions, specified under the Pension Fund Regulatory and Development Authority Act, 2013, to the extent it does not exceed 25% of the number of contributions made by him [Sec. 10(12B)].

9. Payment From Approved Superannuation Fund [Sec. 10(13)]:

Any payment from an approved superannuation fund made –

• on the death of a beneficiary; or

• to an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement; or

• by way of refund of contributions on the death of a beneficiary; or

• by way of refund of contributions to an employee on his leaving the service (otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement) to the extent to which such payment does not exceed the contributions made prior to 1-4-1962 and any interest thereon.

• by way of transfer to the account of the employee under a pension scheme referred to in sec. 80CCD and notified by the Central Government.

10. Income Of Mutual Fund [Sec. 10(23D)].

Any income of – a. A Mutual Fund registered under the Securities and Exchange Board of India Act, 1992 or regulation made thereunder; b. A Mutual Fund is set up by a public sector bank or a public financial institution or authorized by the Reserve Bank of India and subject to certain notified conditions.

11. Income Of Business Trust [Sec 10(23FC)]:

Any income of a business trust by way of a) interest received or receivable from a special purpose vehicle, or b) dividend referred to in sec. 115-O(7) Ø “Special purpose vehicle” means an Indian company in which the business trust holds controlling interest and any specific percentage of shareholding or interest, as may be required by the regulations under which such trust is granted registration.

12. Income Of Specified Boards [Sec. 10(29A)]:

Any income accruing or arising to The Coffee Board; The Rubber Board; The Tea Board; The Tobacco Board; The Marine Products Export Development Authority; The Coir Board; The Agricultural and Processed Food Products Export Development Authority and The Spices Board.

13. Subsidy Received From Tea Board [Sec. 10(30)]:

Any subsidy received from or through the Tea Board under any scheme for replantation or replacement of tea bushes or for rejuvenation or consolidation of areas used for cultivation of tea as the Central Government may specify is exempt.

14. Awards And Rewards [Sec. 10(17A)].

Any payment made, whether in cash or in-kind – a. in pursuance of any award instituted in the public interest by the Central Government or any State Government or by any other approved body; or b. as a reward by the Central Government or any State Government for approved purposes.

15. Income Of Scientific Research Association [Sec. 10(21)]:

Any income of a scientific research association [being approved for the purpose of Sec. 35(1)(ii)] or research association which has its object, undertaking research in social science or statistical research [being approved and notified for the purpose of Sec. 35(1)(iii)], is exempt provided such association— a. applies its income or accumulates it for application, wholly and exclusively to the objects for which it is established; and b. invest or deposit its funds in specified investments.

16. Expenditure Related To Exempted Income [Sec. 14A]:

For the purposes of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which does not form part of the total income under this Act. Where the AO is not satisfied with the correctness of the claim of such expenditure by the assessee, he can determine the disallowable expenditure in accordance with the method prescribed by the CBDT.