Incomes exempt from tax under section 10

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Useful for undergraduate students of taxation, covers selected items exempt from tax under section 10 of Income Tax Act 1961

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Incomes exempt from tax under section 10

  1. 1. 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
  2. 2. 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) 7/31/2013 sanjaydessai@gmail.com 2
  3. 3. 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). 7/31/2013 sanjaydessai@gmail.com 3
  4. 4. 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). 7/31/2013 sanjaydessai@gmail.com 4
  5. 5. 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. 7/31/2013 sanjaydessai@gmail.com 5
  6. 6. Agricultural Income u/s. 10(1) Agriculture income is exempted from tax if it comes from within the definition of “agricultural income” 7/31/2013 sanjaydessai@gmail.com 6
  7. 7. 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. 7/31/2013 sanjaydessai@gmail.com 7
  8. 8. 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. 7/31/2013 sanjaydessai@gmail.com 8
  9. 9. 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. 7/31/2013 sanjaydessai@gmail.com 9
  10. 10. 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 . 7/31/2013 sanjaydessai@gmail.com 10
  11. 11. 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 7/31/2013 sanjaydessai@gmail.com 11
  12. 12. 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 7/31/2013 sanjaydessai@gmail.com 12
  13. 13. 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. 7/31/2013 sanjaydessai@gmail.com 13
  14. 14. 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. 7/31/2013 sanjaydessai@gmail.com 14
  15. 15. 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 7/31/2013 sanjaydessai@gmail.com 15
  16. 16. Payment received from an Approved Superannuation Fund u/s. 10(13) • Payment received from an approved superannuation fund is exempted from tax 7/31/2013 sanjaydessai@gmail.com 16
  17. 17. 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 7/31/2013 sanjaydessai@gmail.com 17
  18. 18. salary for calculation purpose • Basic salary • Dearness allowance and grade pay • Does not include any allowance and perquisites 7/31/2013 sanjaydessai@gmail.com 18
  19. 19. 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) 7/31/2013 sanjaydessai@gmail.com 19
  20. 20. 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 7/31/2013 sanjaydessai@gmail.com 20
  21. 21. 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 7/31/2013 sanjaydessai@gmail.com 21
  22. 22. Daily Allowance • Exemption – • Amount of the allowance or • The amount utilised for the specific purpose – whichever is lower 7/31/2013 sanjaydessai@gmail.com 22
  23. 23. Uniform Allowance • Exemption – • Amount of the allowance or • The amount utilised for the specific purpose – whichever is lower 7/31/2013 sanjaydessai@gmail.com 23
  24. 24. Research Allowance • Exemption – • Amount of the allowance or • The amount utilised for the specific purpose – whichever is lower 7/31/2013 sanjaydessai@gmail.com 24
  25. 25. Children Education Allowance • The allowance is given for children's education • Rupees 100 per month per child up to a maximum of 2 children 7/31/2013 sanjaydessai@gmail.com 25
  26. 26. Helper Allowance • Exemption – • Amount of the allowance or • The amount utilised for the specific purpose – whichever is lower 7/31/2013 sanjaydessai@gmail.com 26
  27. 27. 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. 7/31/2013 sanjaydessai@gmail.com 27
  28. 28. 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. 7/31/2013 sanjaydessai@gmail.com 28
  29. 29. 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. 7/31/2013 sanjaydessai@gmail.com 29
  30. 30. 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. 7/31/2013 sanjaydessai@gmail.com 30
  31. 31. 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. 7/31/2013 sanjaydessai@gmail.com 31

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