Exemption Under Section 10 of Indian Income Tax Act1961

1. Prof. Mohasin A. Tamboli
PIRENS Technical Campus, Loni
Email: mohasinat@gmail.com
1Prof.M.A.Tamboli

2. Items given in section 10 gives exemption
from income, so called as exempted
section.
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3. In India, agricultural income is totally
exempted from tax because Constitution of
India does not give any power to charge
tax on agriculture income.
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4. Agricultural Income Includes:
1. Any amount or revenue derived from
land.
2. Any income from process which make
prouse marketable.
3. Any income from farm house.
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5. Any income received from land is treated
as income derived from land only on
fulfillment of following conditions:
i. Income derived from land.
ii. Land must be situated in India
iii. Agricultural activity must be carried on it.
E.g. leveling, digging, sowing, irrigating,
fertilizing, cutting and polishing etc.
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6. Any income due to natural process for
which agricultural activity is not carried on
is not agricultural income.
Dairy, poultry, fishery are activity related to
agriculture but income from it is not
agriculture income.
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7. Prouse means raw crop. Any process
carried on for making prouse marketable is
agricultural activity and income derived
from it is agricultural income.
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8.  House in a farm is farm house and income from it
is agricultural income. Any house become farm
house if following three conditions are satisfied:
i. House must be immediate vicinity of agricultural
land.
ii. That house is used for dwelling or storing of
material.
iii. That house is not within 8 km from urban area.
Urban area means a place where the population
exceeds 10,000
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9. Double taxation is prohibited in India. HUF
is separate assessee and they have to pay
tax on their income.
After payment of tax if remaining amount is
distributed amoung family members is
totally exempted in the hand of family
members.
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10. Double taxation is prohibited in India.
Partnership Firm is separate assessee.
If Firm paid tax on profit of partnership firm
and remaining amount distributed among
partners is totally exempt.
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11. Any interest on investment by foreigner in:
i. Government Securities.
ii. Government Bond.
iii. Any amount credited to RBI is totally
exempt from income tax.
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12. Any amount paid by employer for travelling
within India for employee and their family
members is allowed as exemption.
This exemption is only for travelling
expenses of shortest route between two
places.
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13. For different travel conveyance exemption
is:
1. Bus - Volvo Ticket
2. Train - A.C. First Class
3. Ship - Normal Ticket
4. Air - Economy Ticket
This exemption is allowed once in a 4 year.
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14. Any income of foreigner in India is exempt
from tax if his stay in India is not more than
90 days.
This rule is applicable to crew(caption of
ship), to research student and foreign
players.
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15. Any allowances paid outside India to
employee of India for their services as
cooperative assistance agreement is
totally exempt in India
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16. Any income received in India by foreign
employee for their services as cooperative
assistance agreement is totally exempt in
India
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17. Gratuity means award or reward given by
employer to employee on retirement for
their continuous service.
Gratuity is lump sum amount given by
employer to employee on retirement.
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18. Gratuity
Government
Employee
Non
Government
Employee
Gratuity Act,
1972 is
applicable
Gratuity Act,
1972 is not
applicable
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19. Any person who provide service under
Central Government, State Government or
Local Authority is Government Employee.
For Government Employee 100%
exemption to gratuity is applicable.
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20.  A) Gratuity Act, 1972 is Applicable:
Where more than 10 employees are working,
for such organization Gratuity Act, 1972 is
applicable.
 B) Gratuity Act, 1972 is not Applicable:
Where less than 10 employees are working, for
such organization Gratuity Act, 1972 is
applicable.
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21. If Gratuity Act, 1972 is Applicable, the
exemption is least of following three:
1. 15/26 X Last drawn Salary X Number of
years completed (Consider fraction)
2. Rs. 10,00,000
3. Actual Received.
Salary = Basic + D.A. (forming part)
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22. If Gratuity Act, 1972 is not Applicable, the
exemption is least of following three:
1. ½ X Average Salary X Completed years
Only
2. Rs. 10,00,000
3. Actual Received
Salary=Basic + D.A. (forming part)+ % Commission
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23.  Commuted pension is lump sum payment in
lieu of periodical payment of pension.
Exemption is as follows:
1. Govt. Employee: Total value of commuted
pension is exempted.
2. Non Govt. Employee & Gratuity received:
Exemption is 1/3 of total value of pension
3. Non Govt. Employee & Gratuity not received:
Exemption is 1/2 of total value of pension
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24. Leave encashment means sale of leave
credited during the service.
If leave encashment is in service, it is
100% taxable
If leave encashment is at retirement, the
exemption is :
 Government Employee
 Non Government Employee
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25. A. Government Employee: Any leave encashment
received to government employee on retirement
is totally exempted.
B. Non Govt. Employee: Any leave encashment
received to non government employee on
retirement is exempted least of following four:
1. Number of days credit / 30 days X Avg. Salary
2. 10 X Avg. Salary
3. Actual leave encashment received.
Salary= Basic+DA(forming part)+% commission on turnover
Maximum days allowed to credit 30 days every year.
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26. Amount received from statutory provident
fund is totally exempted
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27. Any amount received on retirement from
super annuation fund is totally exempted to
any person
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28. Allowance means extra amount received
for specific purpose.
Normally allowance is given in addition to
salary.
HRA exemption is classified in two
categories:
 BCDM Criteria
 Other than BCDM Criteria
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29. If person working at Mumbai, Kolkata, Delhi
and Chennai then exemption is least of the
following three:
1. 50% of salary
2. Actual rent paid-10% of Salary
3. Actual HRA Received
Salary= Basic+DA (forming part)+% Commission
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30. If person working at other than BCDM, then
exemption is least of following three:
1. 40% of Salary
2. Actual rent paid-10% of Salary
3. Actual HRA Received
Salary= Basic+DA (forming part)+% Commission
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31. Exemption is not allowed in following
conditions:
1. If person reside in his own house
2. Answer of calculation 2 (Actual rent paid -
10% of salary) is negative
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32. Any amount received for special purpose in
addition with salary is special allowance and
exemption is depend upon two types:
1. Exemption depend upon actual expenditure
2. Standard exemption
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33. Under this head exemption is actual
expenditure incurred for that purpose.
1. Travelling allowance
2. Transfer allowance
3. Daily allowance
4. Helper allowance
5. Research allowance
6. Washing or dress allowance
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34.  Under this exemption certain specific amount
fixed by government allowed as deduction.
1. Children Education Allowance: Exemption is Rs.
100 p.m. per child upto maximum two children.
2. Children Hostel Allowance: Exemption is Rs.
300 p.m per child upto maximum two children.
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35. 3. Transport Allowance: Any amount paid to
driver or cleaner for specific journey and
exemption is least of following two:
1. 70% of allowance or
2. Rs. 6,000 p.m. which is less.
4. Conveyance Allowance:
1. In case of normal person maximum exemption is Rs. 800 p.m.
2. If a person is abnormal (handicapped, blind etc.) maximum
exemption is Rs. 1,600 p.m.
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36. 5. Special compensatory Hilly Allowance:
Exemption is varied from Rs. 300 to Rs.
7,000 p.m.
6. Border Area Allowance: Exemption is upto
Rs. 700 p.m.
7. Underground Allowance: Exemption is upto
Rs. 800 p.m.
8. Tribal Area or Scheduled Area Allowance:
Exemption is upto Rs. 200 p.m.
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37. 16. Interest on Government Securities
17. Educational Scholarship
18. Daily allowance to parliament member
19. Income or Pension of Galantri Award
20. Income or Amount of award given by
Government
21. Income of local authority
22. Income of sports association
23. Income of education institute
24. Income of medical institute
25. Dividend from Indian Company
26. Interest on mutual fund
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38. Any income of minor is taxable under the
Act.
Any income due to skill of minor then
exemption is Rs. 1,500 and remaining
amount is taxable.
When income received to minor without
any skill is added to income of father or
mother whose income is more.
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