By Prof.

Prabhupatkar
Income Exempt from Tax u/s 10 ( i.e. Income not to be included in Gross Total Income )
Section 10 of the Income Tax Act provides for items which are exempt from tax i.e. the items
which are otherwise fulfilling the characteristics of the term Income, which is actually received
by the assessee, enoyed by the assessee but from taxability point of view it does not form part
of total income of the assessee.
Sec. 10 (1) Agricultural Income Since the !ntry "o. #$ in the %nion &ist of '
th
Schedule to
the (onstitution empowers central government to levy tax on ) income other than agricultural
income*, it is evident that central government can not levy tax on income derived by the
assessee from agriculture+ agricultural activity. ,ather, it is the privilege of the state
government to levy tax on agricultural income.
-owever, as per the rules governing taxability of income, it is specifically provided that
agricultural income is to be ta.en in to account along with non/agricultural income of the
assessee for deriving the rate of income tax, which is to be applied on such non agricultural
income of the assessee.
Say for example, 0r. A is having non1agricultural income of ,s.1,'0,000+/ 2 he also earns
agricultural income of ,s.30,000+/. Then rate applicable to combined income 4i.e. agricultural 5
non/agricultural6 708 will be applicable to income from non/agricultural income.
Sec. 10(!) "a#ment recei$ed b# a member of a %indu &ndi$ided 'amil# 4-%96 from the
family income is exempt from tax. -%9 is different entity for tax purpose from the individual
members those who constitute -%9. Since the income earned by -%9 is held taxable in the
hands of -%9 as a distinct taxable entity. :hen a member derives his share from family
income 4which is already brought to tax6, in the hands of such -%9 member 4in his individual
capacity6 the said income is held exempt.
Sec. 10(!A) S(are of profits recei$ed b# t(e "artner from a "artners(ip 'irm is exempt
from tax. Since the partnership firm ends up paying income tax on the profits 2 gains earned
by the firm, if the tax is levied on the share received by the partner from the tax paid income of
the firm, it would tantamount to double taxation of the same income 4i.e. once in the hands of
the firm 2 secondly on the share of the partner received from the firm6. -ence the exemption is
based on the principles of avoidance of double taxation.
Sec. 10()) Interest recei$ed b# a *on+,esident in respect of certain securities or bonds
notified by the (entral ;overnment 2 interest received by an individual < who is ),esident out
side India* as defined u+s $4=6 of 9!,A, 13'7 or permitted by ,>I to maintain a "on/,esident
4!xternal6 Account with any >an. in India ?.
Sec. 10(-) Amount of lea$e tra$el allo.ance received by an employee from employer in
respect of meeting cost of travel 4while on leave6 in India for himself 2 his family is exempt
subect to fulfilling certain conditions as laid down u+r $> of Income Tax ,ules.
The exemption is available in respect of two ourneys in bloc. of four years. 9amily for this
clause includes spouse 2 children of the individual, parents, brothers 2 sisters of the individual
who are wholly or mainly dependant on the individual. The concession would be available in
respect of the cost of travel involved by the shortest route available and with a ceiling of train
By Prof. Prabhupatkar
fare of Ist A.(. wherever available or to IInd A.(. class.2 where places are not connected by
,ail then first class or deluxe class fare of the public transport system as would be available to
the place of destination by the available shortest route.
Sec 10(/) Allowance or per=uisites paid or allowed out side India by (entral ;overnment to it@s
employee who is a citiAen of India for rendering services out side India.
Sec 10(0) 9oreign income and remuneration received by an individual who is assigned to
duties in India from the ;overnment of a 9oreign State for services rendered in connection
with bi/lateral co/operative technical assistance programmes and proects set/up in pursuance
of agreements entered in to by the (entral ;ovt. of India with the ;ovt. of 9oreign States.
Sec 10(10) Gratuit# received by an employee from employer on resignation, retirement,
termination of services etc.
Beath cum retirement gratuity received by employees of (entral ;ovt., State ;ovt., local
authorities and members of Befense services are totally exempt from tax.
;ratuity received under payment of ;ratuity Act, 13'$ is exempt to the extent of least of a6 1C
days wages for every completed year of service or part there of in excess of six months based
on the rates of wages last drawn by the employee 1r b6 amount of gratuity payable to the
employee subect to maximum of ,s.10,00,000+/ 4 Dld limit of !xempt ;ratuity / ,s. 7,C0,000+/
applicable for the period from $E.03.133' till $7.0C.$0106.
;ratuity received+ receivable by employees of private sector and statutory corporations 4in
respect of retirement, death, incapacitation or termination of employment6 is exempt to the
least of a6 half months salary for each year of completed service calculated on the basis of
average salary of ten months immediately preceding the month in which such incidence occurs
or b6 gratuity actually paid or c6 ,s.10,00,000+/ 4old limit of exemption applicable for the period
$E.03.133' till $7.0C.$010 1 ,s. 7,C0,000+/.6
Sec. 10(10A) (ommuted value of Fension received by an employee from ;overnment.
Sec. 10(10AA) Amount received by way of encas(ment of un+utilised earned lea$e whether
on superannuation or otherwise 4retirement, retrenchment, resignation etc. but not while in
service6 is exempt subect to following conditionsG a6 !arned leave entitlement must not exceed
70 days for every year of actual service performed by the employee, b6 !arned leave so en/
cashed should not be for more than 10 months, c6 &eave salary must be based on average
salary drawn by the employee during 10 months immediately preceding his
retirement+superannuation, d6 the sum so payable shall not exceed ,s. 7,00,000+/.
Sec. 10(102) ,etrenc(ment compensation received by an !mployee under the Industrial
Bisputes Act, 13E' or under any other Act or ,ules, award or contract of service is exempt
from tax.
Sec. 10(103) Amount received or receivable 4i.e. in installments6 by !mployee under the
Holunteer ,etirement Scheme of a company 4i.e. 4,S 3ompensation6, or public sector
company, (entral or State ;ovt. or it@s underta.ing. The maximum amount of such exemption
By Prof. Prabhupatkar
could be ,s.C &a.hs 4 from all employers put together 1 in case of entitlement of H,S
compensation from more than one employer 6.
Sec. 10(11) 5 (1!) Amounts received by way of accumulated balance at the credit of
!mployee in his Frovident 9und Account 4"'6 under F9 Act, 13$C or standing at the credit in
,ecognised "'.
Sec. 10(16) An# pa#ment recei$ed from an appro$ed Superannuation 'und a6 to
widow+widower, children, dependents of deceased employee6 on account of death of the
beneficiary/employee, b6 to an employee in lieu of or in commutation of any annuity on his
retirement at or after reaching specified age or upon he+she becoming incapacitated prior to
such retirement, c6 by way of refund of contributions on the death of a beneficiary, is exempt
from tax.
Sec. 10(16A) %ouse ,ent Allo.ance received by an employee from his employer is exempt
from tax. If !mployee is residing in rented premises then the amount of exemption is minimum
of a6 C08 of Salary 4if house is located at 0umbai, Belhi, Iol.atta, (hennai6 or E08 of salary
4if house is located at any other place6, b6 Actual -,A received by the employee, c6 ,ent paid
in excess of 108 of Salary.
Sec. 10(17) 9amily Fension received by the widow or children or nominated heirs of the
member of the Armed forces.
Sec. 10(!1) Income of a Scientific ,esearch Association approved u+s 7C4164ii6 of the I.Tax Act
is exempt from tax.
Sec. 10(6!) Income of a 0inor (hild up/to ,s. 1,C00+/ per child, whose income is includible in
the taxable income of the concerned parent under Sec. JE41A6.
Sec. 10(6)) Any Income by way of 8i$idends referred to in Sec. 11C/D declared, distributed or
paid by the domestic company on or after 01.0E.$007.
Sec. 10(6-) Any income by way of di$idend received in respect of &nits of 9utual 'und
specified u+s 104$7B6 of the I.Tax Act, 13J1.
Sec. 10(6:) &ong term (apital ;ains on the transfer of listed !=uity Shares.
Sec. 10()6) Any income received by an Individual as a loan either in lump sum or by way of
installments in a transaction of ,everse 0ortgage 4applicable from A.K. $00#/036