INCOME EXEMPT FROM TAXATION

PROJECT REPORT SUBMITTED TOWARDS FULFILLMENT OF THE SUBJECT :

‘LAW OF TAXATION’

Under the guidance of : DR. G.P.PANDEY

(FACULTY OF LAW OF TAXATION )

Submitted by : Rajeev Ranjan

B.A.L.LB(HONS.), Roll No.-1360

7th semester, 4th Year

CHANAKYA NATIONAL LAW UNIVERSITY

PATNA

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 ACKNOWLEDGEMENT
I would like to thank my faculty Dr. G.P. Pandey whose guidance helped me a lot with structuring
my project.
I owe the present accomplishment of my project to my friends, who helped me immensely with
materials throughout the project and without whom I couldn’t have completed it in the present
way.
I would also like to extend my gratitude to my parents and all those unseen hands who helped me
out at every stage of my project.
THANK YOU,
RAJEEV RANJAN

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 PARTICULARS PAGE

1. ACKNOWLEDGEMENT 2

2. RESEARCH METHODOLOGY 4-5

3. CHAPTER 1 6-14

4. CHAPTER 2 15-20

5. CHAPTER 3 21-23

6. BIBLIOGRAPHY 24

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RESEARCH METHODOLOGY
Aims and Objectives:
The aim of this research paper is to present a detailed study on Income which are exempt from
Taxation .
Scope and Limitations:
The researcher has used the doctrinal method and has relied on the secondary sources for the
content of the research paper.
Owing to the large number of topics that could be included in the project, the scope of this research
paper is exceedingly vast. However in the interest of brevity, this paper has been limited to the
topics which deal with economical aspect of the topic only.
.Research Questions:
The two research questions are as follows:
1. What is the scope of taxation ?
2. What are the exemptions under taxation ?

Chapterisation:
The project has been divided into three chapters :
 The first chapter deals with the concept of Fully Exempt Incomes.
 The second chapter deals with the concept of Partially Exempt Incomes and fully exempt
allowances.
 The third chapter deals with the Conclusion part.

Sources of data :
The researcher has relied on the following secondary sources of data:
• Books
• Websites
• Articles
Method of Writing
The method of writing followed in this project is both analytical and descriptive.

Mode of Citation
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The researcher has followed a uniform mode of citation in this project.
Hypothesis
The researcher before doing any such research for this project was having a belief that Indian
taxation system was very strict and it was unable to escape from the ambit of it but after the
research, the researcher is very much convinced that with the exemptions under section 10, it is
not very necessary to ponder upon the issue because almost every such thing which deserves to
be outside the scope of taxation has been provided relief under section-10.

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CHAPTER-1
FULLY EXEMPT INCOMES

Section 10(1) – Agriculture Income Exemption

▪ As per section 10(1), agricultural income earned by the taxpayer in India is exempt from
tax. Any rent or revenue derived from land used for agricultural purposes or agricultural
produce to sell in the market.
▪ Any income from farm house subject to certain satisfactory conditions specified in section
2(1A) would be exempt.
Section 10(2) – Amount received by a member of the HUF from the income of the HUF, or in case
of impartible estate out of income of family estate
▪ As per section 10(2), amount received out of family income, or in case of impartible estate,
amount received out of income of family estate by any member of such HUF is exempt
from tax.
▪ Example-1. HUF earned 5, 00,000 during the previous year and paid tax on its income.
Mr A, a co-partner is an employee and earns a salary of ` 20,000 p.m. During the previous
year Mr A also received ` 1, 00,000 from HUF. Mr A will pay tax on his salary income but
any sum of money received from his HUF is not chargeable to tax in Mr A’s hands.
▪ Example-2. HUF earned ` 90,000 during the previous year 2016-17 and it is not chargeable
to tax. Mr A, a co-partner is earning individual income of Rs 20,000 p.m. Besides his
individual income, Mr A receives ` 30,000 from his HUF
▪ Mr A will pay tax on his individual income but any sum of money received by him from
his HUF is not chargeable to tax in the hands of co-parcener whether the HUF has paid tax
or not on that income.1
Section 10(2a) – Share of profit from Partnership Firm
▪ As per section 10(2A), share of profit received by a partner from a firm is exempt from tax
in the hands of the partner.
▪ Further, share of profit received by a partner of LLP from the LLP will be exempt from tax
in the hands of such partner.

1
https://taxguru.in/income-tax/all-about-tax-free-exempt-income-under-income-tax-act-1961.html
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 ▪ This exemption is limited only to share of profit and does not apply to interest on capital
and remuneration received by the partner from the firm/LLP.
Section 10(4) of Income Tax Act – Certain Interest to Non-Residents
Any income earned by way of interest on certain notified securities or bonds (income by way of
premium on the redemption of such bonds) or NRE account in the hands of individual taxpayer, is
exempt from tax.2
Section 10(4)(ii) – Interest to Non-Resident on Non-Resident (External) Account
▪ Any income by way of interest on money standing to his credit in a Non-Resident
(External) Account in any bank in India shall be exempt from tax in case of an individual;
▪ Who is a person resident outside India or is a person who has been permitted by the RBI to
maintain the aforesaid account.
▪ The person residing outside India shall have the same meaning as defined under Foreign
Exchange Regulation Act, 1973, FEMA, 1999.
▪ This exemption shall not be available on any income by way of interest paid or credited on
or after 1-4-2005.
Section 10(5) – Leave Travel Concession
▪ An employee can claim exemption under section 10(5) in respect of Leave Travel
Concession.
▪ Exemption under section 10(5) is available to all employees (i.e. Indian as well as foreign
citizens).
▪ Exemption is available in respect of value of any travel concession or assistance received
or due to the employee from his employer (including former employer) for himself and his
family members in connection with his proceeding on leave to any place in India.
Section 10(6) – Remuneration received by an individual who is not a citizen of India
▪ Such individuals include ambassadors or other officials of the Embassy, High Commission
or Legation of a foreign State in India, Consulate Officer of a foreign State in India and
trade commissioner or other official representatives in India of a foreign State3

2
https://www.taxmann.com/budget-2015-16/file/samd424/earlier-section.aspx
3
https://www.charteredclub.com/allowances-exempt-under-section-10.html
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 ▪ The remuneration received an employee of a foreign enterprise for services rendered in
India, provided:
(a) The foreign enterprise is not engaged in any trade or business in India;
(b) His stay in India does not exceed in the aggregate a period of 90 days in such previous
year; and
(c) Such remuneration is not liable to be deducted from the income of the employer
chargeable under this Act
Section 10(7) of the Income Tax Act – Perquisites and Allowances paid by Government to its
Employees serving outside India
▪ All the perquisites and allowances paid by the Government to its employees for services
rendered outside India are exempt from tax.
▪ This exemption is allowed only to such employees of the Government who are citizens of
India.
Section 10(10CC)- Tax on Perquisites paid by employer
▪ Sometimes for non-monetary perquisites employer pay tax on behalf of employee in that
case the tax so paid by the employer is treated as exempt in the hands of the employee.
Section 10(10d) – LIC Tax Exemption
Any sum received under a life insurance policy is fully exempt in the following cases:
▪ If any sum received from insurance company on insurance of a dependent handicapped
member [under subsection (3) of section 80DD].
▪ If any sum received from insurance company when a dependent, or a member of family is
suffering from a notified disease [under subsection (3) of section 80DDA].
▪ Any sum received under a key man insurance policy.
▪ Any other policy (not being the case when sum received on the death of a person).
Policy issued before April 1st, 2003 –Exemption available, nothing is chargeable to tax.
Policy issued on or after April 1st, 2003 but before April 1st, 2012 – Exemption available
only when annual premium payable exceeds 20% of sum assured.
Policy issued on or after 1st April 2012 – Exemption available only when annual premium
4
payable.
Policy issued on or after April 1st, 2013 for a disabled person referred to in section 80U

4
https://www.bankbazaar.com › Tax
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 or a person with disease or ailment specified in section 80DDB – Exemption available only
when annual premium payable exceeds 15% of sum assured.
▪ Any other policy (sum received on the death of a person) – exemption available, nothing
is chargeable to tax.5
Section 10(11) of Income Tax Act – Payment from Statutory Provident Fund
Any payment received on statutory provident fund related to employer’s contribution, interest,
amount received on termination will be exempted.
Section 10(16) – Stipend Scholarship
▪ Scholarship is free education to students. It covers the cost of education like tuition fees
and other related expenses.
▪ The scholarship may have been given by Govt., University, Board, Trust, etc. is exempt to
the fullest amount.
Section 10(18) of Income Tax Act – Pension received by certain winners of gallantry awards
Individual who has received any of the gallantry awards stated below will have to pay no taxes on
their pension:
▪ service to Central or State Government
▪ awarded ‘Param Vir Chakra’ or ‘Mahavir Chakra’ or ‘Vir Chakra’ or such other notified
gallantry awards
Also, any amount received as a family pension by any member of the family of such an individual
will also qualify for exemption u/s 10(18).6
Section 10(19) of Income Tax Act – Family pension received by family members of armed forces
including paramilitary forces
Family pension received by the widow or children or nominated heirs of a member of the armed
forces (including paramilitary forces) where the death of such member has occurred in the course
of operational duty is fully exempt. W.E.F 01/04/2005.
Section 10(19A) – Income from one palace of a former ruler
▪ Annual value of any one palace or a portion of a palace in the occupation of a former ruler
shall be exempted.

5
https://help.cleartax.in/hc/en-us/articles/115008155308-Salary-section-10
6
https://www.incometaxindia.gov.in/Charts%20%20Tables/Allowances_Available.html

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 ▪ But in case such palace or a portion of a palace is let out , its income shall not be exempted.
Section 10(20) – Income of a local authority
The following income of a local authority is exempt from tax:
▪ Income which is chargeable under the head “Income from house property”, “Capital gains”
or “Income from other sources” or
▪ Income from a trade or business carried on by it which accrues or arises from the supply of
a commodity or service (not being water or electricity) within its own jurisdictional area or
▪ Income from business of supply of water or electricity within or outside its own
jurisdictional area.
Section 10(23BB) – Income of Khadi and Village Industries Boards
Any income of Khadi and Village Industries Boards is exempt from tax under section 10(23BB).
Section 10(23BBB) – Income of European Economic Community7
Any income of European Economic Community derived in India by way of interest, dividends or
capital gains, from investments made out of its funds under a notified scheme is exempt from tax.
Section 10(23BBC) – Income of SAARC fund
Any income of SAARC fund for Regional Projects is exempt from tax under section 10(23BBC).
Section 10(23BBD) – Income of Secretariat of Asian Organization of Supreme Audit Institutions
Any income of Secretariat of Asian Organization of Supreme Audit Institutions is exempt from
tax for the assessment years 2001-02 to 2010-11.
Section 10(23BBE) – Income of Insurance Regulatory and Development Authority
Any income of the Insurance Regulatory and Development Authority established under section
3(1) of the Insurance Regulatory and Development Authority Act, 1999 is exempt from tax.
Section 10(23BBF) – Income of North-Eastern Development Financial Corporation Limited
No exemption is available under section 10(23BBF) from the assessment year 2010-11.
Section 10(23BBG) – Income of Central Electricity Regulatory Commission
Income of Central Electricity Regulatory Commission is exempt from tax from the assessment
year 2008-09.
Section 10(23BBH) – Income of the Prasar Bharati
Any income of the Prasar Bharati (Broadcasting Corporation of India) established under section
3(1) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is exempt from tax.

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Section 10(23C)(iiia) – Income of National Foundation for Communal Harmony
[As amended by Finance Act, 2018] Any income received by any person on behalf of the Prime
Minister’s National Relief Fund, the Prime Minister’s Fund (Promotion of Folk Art) or the Prime
Minister’s Aid to Students Fund is exempt from tax under clause (i), (ii) and (iii) of section 10(23C)
respectively.
Any income of National Foundation for Communal Harmony is exempt from tax under section
10(23C)(iiia)
Section 10(23C)(iiiaa) – Income of Swachh Bharat Kosh
Income of the Swachh Bharat Kosh, set up by the Central Government is exempt under section
10(23C)(iiiaa).
Section 10(23C)(iiiaaa) – Income of Clear Ganga Fund
Income of the Clear Ganga Fund, set up by the Central Government is exempt under section
10(23C)(iiiaaa).
Section 10(23C)(iiiaaaa) – Income of Chief Minister’s Relief Fund or Lieutenant Governor’s
Relief Fund
As per section 10(23C)(iiiaaaa) (as inserted by the Finance Act, 2017 with retrospective effect
from the assessment year 1998-99),income of the Chief Minister’s Relief Fund or the Lieutenant
Governor’s Relief Fund in respect of any state or union territory is exempt from tax.8
Section 10(23C)(iiiab)/(iiiad)/(vi) – Income of Educational Institutions
Section 10(23C)(iiiab)
Income of any university or other educational institution existing solely for educational purposes
and not for purposes of profit, and which is wholly or substantially financed by the Government
would be exempt under section 10(23C)(iiiab).
Section 10(23C)(iiiad)
Income of any university or other educational institution existing only for educational purposes
and not for purposes of profit would be exempt under section 10(23C)(iiiad) if the aggregate annual
receipts of such university or educational institution do not exceed Rs. 1 Crore.
Section 10 (34A) – Exemption of income to a shareholder on buyback of shares of unlisted
company

8
https://www.myloancare.in/tax/exemptions-under-section-10
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Any income arising on buyback of shares by the company as referred to in section 115QA will be
exempt from tax.
Section 10(35) – Income from units of UTI and other mutual funds
All the below following are exempt:
▪ Dividend income covered by section -115-O
▪ Income in respect of units of a mutual fund
▪ Income received by unit holder of UTI
▪ Income earned units of a specified company

Note:
1. Under section 115-O and section 115R, the person paying the dividends on share or income
on units will have to pay distribution tax on dividend/income distributed.
2. It should be noted that under this clause, Income on the transfer of units is not exempt.
Section 10(23D) – Tax free mutual funds
Any income of following mutual funds (subject to provisions of sections 115R to 115T) is exempt
from tax:
▪ A mutual fund registered under the Securities and Exchange Board of India Act or
regulation made thereunder.
▪ A mutual fund set-up by a public sector bank, or a public financial institution or authorized
by RBI (subject to conditions notified by the Central Government).
Section 10(23DA) – Exemption of income from securitization trust
Any person who is an investor of securitization trust receives any income from such a trust, by
way of distributed income shall be exempt.9
Section 10(36) – Income from sale of shares in certain cases
The transfer of a long-term capital asset for arising any income, when a company purchases eligible
equity shares held for a period of 12 months or more shall be exempt.
Section 10(37) – Capital Gain on compulsory acquisition of urban Agricultural Land
Any income chargeable under the head “Capital Gain” arising from the transfer of agriculture land
shall be exempt.

9
www.moneycontrol.com/tax/.../whatallowanceswhich-allowancesexempt_622827.html
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Section 10(38) of income tax act – Long Term Capital Gain on transfer of shares and securities
covered under Security Transaction Tax (STT)
When the transfer of securities are not chargeable to tax to any individual then long-term capital
arises, following conditions should be satisfied:
▪ At the time of transfer, transactions must be liable to securities transactions tax.
▪ At the time of transfer of assets, it should be equity shares or a unit of a business trust or
units of an equity oriented mutual fund.
▪ Assets must be a long-term capital asset.
▪ Transfer must be taken place on or after October 1, 2004.
Section 10(39) – Income from international sporting event
Any specified income (which is from such international event and which is notified by the Central
Govt.) of specified persons from any international event held in India shall be fully exempted if;
▪ Such event is approved by the international body regulating the international sport relating
to such event.
▪ It has participation by more than two countries; and
▪ is notified by the Central Govt. in this regard.
Section 10(40) – Income received as grant by a subsidiary company
Income of any subsidiary company by way of grant or otherwise received from its Indian holding
company which is engaged in the business of generation/ transmission/distribution of power is
exempt, only if;
▪ Such receipt is for settlement of dues in connection with reconstruction
▪ Or revival of an existing business of power generation.
The exemption is available if the reconstruction or revival is by way of transfer of business to the
Indian company notified under section 80 IA(4)(v)(a).
Under section 10(41), any capital gain arising in the above case is not chargeable to tax, if the
transfer has taken place before April 1, 2006.
Section 10(41) – Income from transfer of asset of an undertaking engaged in the business of
generation, transmission or distribution of power
Income from transfer of capital asset of an undertaking engaged in the business of generation,
transmission or distribution of power where such transfer takes place on or before 31.3.2006 and
transfer is made to the Indian company as notified u/s 801A.

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Section 10(43) – Reverse mortgage
Any amount received by an individual as a loan, either in lump-sum or in instalment in a transaction
of reverse mortgage referred in clause (xvi) of Section 47 shall be exempted.
Section 10(44) – New Pension System Trust
Any income received by any person for, or on behalf of the New Pension System Trust established
on 27th February, 2008 shall be exempted.
Section 10 (45) – Exemption of Allowance or perquisite to chairman/member of UPSC
Any allowance or perquisite, as may be notified by the Central Government in the Official Gazette,
in this behalf, paid to the chairman or a retired chairman or any other member or retired member
of the Union Public Service Commission, shall be exempt.10
Section 10(47) – Exemption of Income of notified ‘Infrastructure debt fund’
It shall be exempt from income tax, when the fund is set up as per prescribed guidelines and the
notifications are issued by the government in this regard.
Section 10(49) – Exemption of income of National Financial Holdings Company
Any income of the National Financial Holdings Company, being a company set up by the Central
Government, shall be exempt.

10
https://economictimes.indiatimes.com › Wealth › Tax
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CHAPTER-2
PARTIALLY EXEMPT INCOMES

This category includes allowances which are exempt up to certain limit specified in Income Tax
Rules. For certain allowances, exemption depends on amount of allowance spent for the purpose
for which it was received and for other allowances, there is a fixed limit of exemption. They are
as follows:
Section 10(13a) – HRA Exemption
An allowance granted to a person by his employer to meet expenditure incurred on payment of
rent in respect of residential accommodation occupied by him is exempt from tax to the extent of
least of the following :
1. House Rent Allowance actually received by the assessee
2. Excess of rent paid less 10% of salary* due to him
3. An amount equal to 50% of salary due to assessee
Note: If the rent is more then 100,000/- individual need to compulsory submit PAN of the
landlord under Circular No. 08 /2013 dated 10th October 2013.
*Salary – Basic + DA (if part of retirement benefit) + Turnover based Commission.11

Entertainment Allowance
This allowance is first included in gross salary under allowances and then deduction is allowed .In
the case of government employees ,least of the following is exempt:
1. Rs 5,000;
2. 20% of salary; or
3. entertainment allowance actually received.
Leave Travel Concession [Section 10(5)]
For a government employee, leave encashment upon retirement or leaving the job is tax free under
Section 10.12 For a non-government employee, it is exempt up to least of the following:
1. Earned leave (No. of months) multiplied by Average monthly salary

11
https://www.charteredclub.com/allowances-exempt-under-section-10
12
https://www.incometaxindia.gov.in/Charts%20%20Tables/Allowances_Available.html
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 2. 10 multiplied by Average monthly salary
3. Rs. 3, 00,000
4. Actual leave encashment received
Section 10(13) – Superannuation Fund Taxability
A pension fund created by company for his employee’s benefit paid after retirement or
withdrawal with approval of commissioner of income tax.
Exempted up to 1, 50,000 and entire accumulated interest is also exempt.
Section 10(14) of Income Tax Act – Prescribed allowances or benefits
As per section 10(14), read with rule 2BB following allowances granted to an employee are exempt
from tax subject to certain limit:

Allowance Name Exemption limit

Up to Rs. 100 per month per child up

Children Education Allowance to a maximum of 2 children is
exempt

Up to Rs. 300 per month per child up

Children Hostel Allowance to a maximum of 2 children is
exempt

Transport Allowance granted to an employee or (who is a blind and Rs. 1600/- p.m.
handicap) meet expenditure on commuting between place of Or
residence and place of duty Rs. 3200/- p.m. (for handicapped)

Rs. 10,000/- p.m.

Any Allowance granted to an employee working in any transport Or
system to meet his personal expenditure 70% of allowance
(whichever is lower)

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Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c)
Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal Rs. 200/- p.m.
(h) Bihar (i) Orissa

Underground Allowance Rs. 800/- p.m.

Compensatory Field Area Allowance Rs. 2,600/- p.m.

Compensatory Modified Field Area Allowance Rs. 1,000/- p.m.

Counter-insurgency allowance to members of armed forces Rs. 4200 /-p.m.

Conveyance Allowance granted to meet the expenditure on Exempt to the extent of expenditure
conveyance in performance of duties of an office incurred for official purposes

Exempt to the extent of expenditure

Travelling Allowance to meet the cost of travel on tour or on transfer
incurred for official purposes

Daily Allowance to meet the ordinary daily charges incurred by an Exempt to the extent of expenditure
employee on account of absence from his normal place of duty incurred for official purposes

Exempt to the extent of expenditure

Helper/Assistant Allowance
incurred for official purposes

Research Allowance granted for encouraging the academic research Exempt to the extent of expenditure
and other professional pursuits incurred for official purposes

Exempt to the extent of expenditure

Uniform allowance
incurred for official purposes

Special compensatory Allowance (Hilly Areas) (Subject to certain Amount exempt from tax varies
conditions and locations) from Rs. 300 to Rs. 7,000 per month.

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 Border area, Remote Locality or Disturbed Area or Difficult Area Amount exempt from tax varies
Allowance (Subject to certain conditions and locations) from Rs. 200 to Rs. 1,300 per month.

a) Up to Rs. 1,060 per month (for

High Altitude Allowance granted to armed forces operating in high altitude of 9,000 to 15,000 feet)
altitude areas b) Up to Rs. 1,600 per month (for
altitude above 15,000 feet)

Section 10(12) – Recognized provident fund

Any amount received against recognized provident fund by way of:
▪ Employer’s contribution = exempted up to 12%
▪ Interest = exempted up to 9.5%
▪ Amount received on termination = fully exempted
Section 10(10) – Gratuity Exemption
The amount received by Government employee (i.e., Central Government or State Government
or local authority) for Death-cum-retirement is fully exempt.
Gratuity income received by employees who are covered under Payment of Gratuity Act, 1972 is
exempt from Income tax.13
Least of the below is exempt:
▪ a) 15 day’s salary x years of services
▪ b) Maximum amount i.e. 20lacs
▪ c) Amount actually received
Section 10(10a) of Income Tax Act – Commuted Pension Taxability
▪ The full amount of commuted value of pension received is exempted if it is received from
the Government, a local authority or a statutory corporation.
▪ Any payment in commutation of pension received under any scheme from any other
employer to the extent it does not exceed
(a) In a case where the employee receives any gratuity, the commuted value of 1/3rd of
pension which he is normally entitled to receive ; and
(b) In any other case the commuted value of 1/2 of such pension.

13
https://www.taxmanagementindia.com/.../detail_article.asp?ArticleID...SECTION-10
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 ▪ Section 10(10AA) – Leave Encashment Exemption
▪ Central & State Govt. Employees—any payment received as the cash equivalent of the
leave salary in respect of the earned leave at his credit at the time of his retirement shall be
fully exempt.14
▪ Other Employees—any payment received as the cash equivalent of the leave salary at his
credit at the time of superannuation shall be exempt up to least of the following:
(a) Actual amount received
(b) (average salary means average of salary drawn by employee during 10 months
immediately preceding the month of his retirement);
(c) Cash equivalent of leave salary due at the time of retirement.
(d) Notified Limit—Rs 3,00,000.
Excess of amount received over the least of the above shall be taxable.
Section10 (10B) – Retrenchment compensation paid to workmen
As per section 10(10B), compensation received at the time of retrenchment is exempt from tax to
the extent of lower of the following:
1. An amount calculated in accordance with the provisions of section 25F(b) of the Industrial
Dispute Act, 1947; or
2. Maximum amount specified by the Central Government (Rs 5,00,000);
3. Actual amount received.

14
https://www.taxfactor.in › Income Tax
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CHAPTER-2.1
Fully Taxable Allowances (Individual salaried employees)
Allowances generally mean any sum of money given to a person to meet his/her needs or
expenses. These allowances are given to employees to meet some of the particular
requirements like house rent, expenses on uniform conveyance, here is a list of some fully
taxable allowance:
City Compensatory Allowance
These are given to compensate for the high cost of living in a particularly big city of India or
any other capital city. These are also fully taxable.
Fixed Medical Allowance
Medical expenses paid to the employees irrespective of whether they submit the bills to
substantiate the expenditure or not are fully taxable
Tiffin, Lunch, Dinner or Refreshment Allowance
Any amount received for lunch or dinner refreshment is fully taxable.
Servant Allowance
servant provided at employee’s resident would be fully taxable
Project Allowance
Any allowance provided by employer to employees to meet project expenses are taxable.
Overtime Allowance
Employee working beyond working hours and receives the amount for the same will be
taxable.
Any Other Cash Allowance
Cash given for telephone allowance, holiday allowance, it is fully taxable.

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CHAPTER-3
CONCLUSION

Agricultural income: India is primarily an agrarian economy. To boost the agricultural sector
as a whole, the Indian Income Tax Act of 1961 exempts any income one generates through
agriculture from tax liability. However, agriculture income is included while computation, for
the limited purpose of determining the tax rate, in computing the income tax liability if the net
agricultural income exceeds Rs 5,000 for, say, FY15 and total income, excluding net
agricultural income, exceeds applicable basic income exemption of Rs 2,50,000. Currently,
the basic income exemption for an individual of age between 60 and 80 years is Rs 3 lakh for
FY15 and the basic exemption for an individual above 80 years of age is Rs 5 lakh.

Receipts from Hindu Undivided Family: If you receive or inherit money as a member of a
Hindu Undivided Family (HUF), it is exempted from any income tax obligation. This
exemption comes under Section 10(2) of the Income Tax Act, which states that amount
received out of family income, or in case of impartible estate, amount received out of income
of family estate by any member of such HUF is exempt from tax. HUF is a separate assessable
entity under the Income Tax Act, 1961.

Interest income on savings bank: Currently, the interest earned on savings account up to a
maximum of Rs 10,000 in a year is allowed as deduction under Section 80TTA. This, however,
does not make it an exempted income. One has to show this amount as one's 'income from
other sources' in the ITR and then claim deduction under Section 80TTA which was introduced
for the first time in 2013-14. "The cap of Rs 10000 is for the interest you receive from all your
accounts across banks and not with one bank. For example, if you are getting Rs 5,000 as
interest from your SB account at bank X and Rs 10000 from bank Y, your taxable income from
savings bank interest is Rs 5000,"

Shares from a partnership firm: If you are a partner of any partnership firm, any share you
may have in the total income of the firm is exempt from income tax obligation. As per section

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 10(2), any partner or partners are not liable to pay tax on income which is exempt in the hands
of any partnership firm. Any other funds received by the partner of a partnership firm or LLP
other than the share of profits, such as any remuneration or interests, remain taxable. But the
interest on capital or remuneration received by the partner is not exempt.

Long-term capital gains: Currently, Long-term capital gains (LTCG) from the sale of equity
shares and equity oriented mutual funds on which Securities Transaction Tax (STT) has been
charged on sell transaction are completely exempted from tax, which means that any gains
from sale of equity shares held for more than a year are not subject to any kind of tax
whatsoever. "In other words, any income you may generate on account of sale of these
instruments are exempt from income tax obligation as per Section 10(38) of the Income Tax
Act. But, for this, the equity instrument should be held for more than a year. This is not
applicable to debt mutual funds".

Allowance for foreign services: Any Indian resident rendering service outside the country
and receiving any allowances or perquisites outside the country remain tax free under Section
10(7) of the Income Tax Act. This section makes it possible for government servants to accumulate
tax-free perquisites and allowances they might receive when working outside India.

Income from gratuity: Gratuity is paid by the employer as part for gratitude for acknowledging
the employee’s long-standing meritorious service. Gratuity received by any government
employee is fully exempted from income tax. For non-government employees covered by the
payment of Gratuity Act of 1972, the least of the three is exempted from income tax.

· 15 days salary based on the last drawn salary for each year of service.

· Rs. 10,00,000 ( Rs 3,50,000 up to 23rd May,2010)

· Total gratuity received.

The gratuity received by an employee is not taxable if it is received on his retirement, his

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received by his widow, children or dependants on his death.

"In case any such gratuities are received by an employee from more than one employer in the
same financial year, the aggregate amount so exempt should not exceed the overall exemption
limit. Similarly, if gratuities were received in one or more financial years, the exempt amount
claimed earlier has to be taken into account while computing the exemption at present.”

Amount received under voluntary retirement: Any amount received by an employee of a

company or local authority where the scheme of voluntary retirement is framed as per Rule 2BA
of the Income Tax Rules gets a tax exemption of up to Rs 5 lakh from the amount received as
voluntary retirement.

Scholarships and awards: Any kind of scholarship or award granted to any deserving
student to meet the cost of education is exempted from tax under Section 10(16) of the
Income Tax Act of 1961. There is no cap on the maximum limit and the entire sum of money
received as a scholarship gets the tax exemption treatment.

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 BIBLIOGRAPHY

BOOKS:
1. Singhania Dr. Vinod K, Direct Taxes Ready Reckoner,Taxmann,39th Edition.
2. Mehrotra Dr.H.C and Goyal Dr.S.P, Income Tax Law And Practice,57th Edition,
Sahitya Bhawan Publications.

WEBSITES:
1. https://taxguru.in/income-tax/all-about-tax-free-exempt-income-under-income-tax-act-
1961.html
2. http://www.rediff.com/money/2008/apr/02tax.htmhttp://www.rediff.com/money/2008/apr
/02tax.html
3. incometaxmanagement.com/-/Tax-Incomes/Exempted-Incomes-Under-Section-10.html
4. https://www.charteredclub.com/allowances-exempt-under-section-10.html

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