CHAPTER 3

INCOME WHICH DO NOT FORM PART OF TOTAL INCOME

Exclusion from Total Income

Section 10 enumerates the various items of income that are exempt from tax. Section 11 to 13 deals with tax exemption to Charitable or Religious Trusts and Institutions

Income totally exempt

1. Agricultural Income (Section 10(1)) 2. Amounts received by a member from the income of the Hindu Undivided Family (Section 10(2)) Receipts by an individual as a member of a HUF out of the income of the family or out of income of the impartible estate belonging to the family.

Income totally exempt

3. Share of profit of a partner in a firm (Section 10(2A)) A partner of a firm will be exempt from tax on his share in the firms income. 4. Any payments made under the Bhopal Gas Leak Disaster Act, 1985 (Section (10BB))

Income totally exempt

5. Any amount received or receivable from the Central Govt. or a State Govt. or a local authority by an individual or his legal heir by way of compensation on account of any disaster (Section (10BC)) 6. Any sum received under a life insurance policy including the sum allocated by way of bonus on such policy (Section(10D))

(Except amount received under Sec 80DD or Sec 80DDA, Keyman insurance policy & Where the premium payable exceeds 20% of the actual capital sum assured)

Income totally exempt

7. Income by way of interest, premium on redemption or other payments on securities, bonds or certificates etc., notified for this purpose (Section 10(15)) Eg: 12 year National Savings Annuity Certificates Treasury savings Deposit Certificates etc., 8. Scholarships granted to meet the cost of education (Section 10(16))

Income totally exempt

9. In the case of individual and HUF, any capital gains arising out of transfer of agricultural land, which was used for agricultural purposes during the period of two years immediately preceding the date of transfer by such individual or his parent or HUF.(Section 10(37)) The exemption is available only if: 1. The transfer is by way of compulsory acquisition under any law or 2. a transfer where the consideration is determined or approved by the Central Govt. or the RBI

Income totally exempt

10. Any long term capital gain arising on transfer of a listed security being an equity share in a company or a unit of an equity oriented fund(Section 10(37)) For availing exemption, the transaction should be: 1. chargeable to securities transaction tax and 2. transfer should take place through a recognized Stock Exchange

Income totally exempt

11. Any income which accrues or arises to a Sikkimese individual (a) from any source in the State of Sikkim or (b) by way of dividend or interest on securities

This exemption is not applicable in case of a Sikkimese woman, who marries a nonSikkimese on or after the April 1, 2008.
12. Allowances payable outside India

Income totally exempt- Non resident & Foreign Companies

1. Any income by way of interest on notified Govt. Securities and bonds including income by way of premium on the redemption of such bonds (Section 10(4)(i)) 2. In the case of an individual who is a person resident outside India under the FERA, 1973, any income by way of interest on moneys standing to the credit of a NRE Account in any bank in India. (Section 10(4)(ii))

Income totally exempt- Non resident & Foreign Companies

3. In the case of an Indian citizen or person of Indian origin, any income from interest on National Savings Certificate issued by Central Govt. before 1-6-2002, provided such certificate has been subscribed out of convertible foreign exchange remitted from outside India (Section 10(4B)) 4. In the case of a foreign company, any income derived by way of royalty or fees for technical services from Govt. or an Indian concern under an approved agreement where the tax has been paid by Govt. or an Indian concern, the tax so paid shall be exempt(Section 10(6A))

Income totally exempt- Non resident & Foreign Companies

5. Any income derived other than by way of salary, royalty or technical fees under an approved agreement entered into between the Govt. of respective countries or international orgn. before 1-6-2002, where tax has been paid by Govt. or an Indian concern, the tax so paid shall be exempt(Section 10(6B)) 6. Any income arising to foreign company as the Central Govt. may notify, by way of royalty or technical fees received in pursuance of an agreement entered into with that Govt. for providing services in or outside India in projects connected with security of India (Section 10(6C))

Income totally exempt- Charitable Purpose

Income derived from property held under trust wholly for charitable or religious purpose is exempted from tax u/s 11 Charitable purpose include 1. Relief of the poor 2. Education 3. Medical relief 4. Preservation of enviornment 5. Preservation of monuments or places or objects or artistic or historic interest & 6. the advancement of any other object of general public utility

Income totally exempt- Charitable Purpose

The conditions to be fulfilled are 1. The trust should be registered with the Commissioner of Income tax u/s.12A 2. The accounts of the trust for the previous year should be audited if the total income exceeds Rs. 1,60,000. 3. At least 85% of the income is required to be applied for the approved purposes 4. The unapplied income and the money accumulated or set apart should be invested or deposited in the specified forms or modes.