G.

Jeevitha
Income tax assignment
 Income Exempt From Tax
What is Exempt Income?
Any income earned which is not subject to income tax is
called exempt income. As per Section 10 of the Income
Tax Act, 1961, there are certain types of income which
will be subjected to income tax within a financial year,
provided they meet certain guidelines and conditions.
Types of Exempt Income
• House Rent Allowance.

• Allowance on transportation, children’s

education, subsidy on hostel fee.
• Exemption on Housing Loan.
• Income defined as per Section 10, Section 54 of the
Income Tax Act, 1961.
• Leave and Travel Allowance.
 Income Exempt From
Tax As per section 10

 Agriculture Income [Section 10(1)]

 Amount received out of family income, Hindu

Undivided Family (H.U.F.) [Section 10(2)]
 Share of profit, [Section 10(2A)]
 Interest paid to Non-Resident [Section 10(4)(i)]
 Interest to Non-Resident on Non-Resident
(External) Account [Section 10(4)(ii)]
Meaning and importance of residential status
The taxability of an individual in India depends upon his
residential status in India for any particular financial year.
The term residential status has been coined under the
income tax laws of India and must not be confused with an
individual’s citizenship in India. An individual may be a
citizen of India but may end up being a non-resident for a
particular year. Similarly, a foreign citizen may end up
being a resident of India for income tax purposes for a
particular year.
Step 1: Determining whether resident or non-resident

Under the Income-tax Law, an individual will be treated

as a resident in India for a year if he satisfies any of
the following conditions (i.e.may satisfy any one or may
satisfy both the conditions):

(1) He is in India for a period of 182 days or more during

the previous year ; or

(2) He is in India for a period of 60 days or more during

the previous year and for a period of 365 days or more
in 4 years immediately preceding the relevant previous
year.
Step 2: Determining whether resident and ordinarily
resident or resident but not ordinarily resident

A resident individual will be treated as resident and

ordinarily resident in India during the year if he satisfies
following conditions:

(1) He is resident in India for at least 2 years out of 10

years immediately preceding the relevant year.

(2) His stay in India is for 730 days or more during 7

years immediately preceding the relevant year.
 Composite Rent
Composite rent means when the landlord or
owner of a property receives rent in respect of
building let out including:

 Other assets as for example furniture, fixtures,

plant, and machinery.
 For other services provided in the building, for e.
g.
 Elevator or Lifts;
 Security
 Generators or Power
backup;
 Composite Rent and Its Taxability in IT Act
When the total amount i.e. rent of the building along
with the hire charges for other assets such as
furniture or service charges for certain services
such as security, lift, etc. is received by the owner of
the building; such amount so received is defined as
Composite Rent.

Case1: Where total amount are inseparable

Where composite rent consists of rent for the
building & hire charges for other assets & the two
rents are inseparable, then the entire amount is
chargeable under the “Business Income†or
“Other Sourcesâ€, as case may be.
Case2: Where total amount are separable

 Where composite rent consists of rent for the

building & hire charges for other assets & the two
rents are separable, then rent of the building is
taxable under the head “Income from House
Property†whereas hire charges of other assets
is charged to tax under “Other Sourcesâ€.
 Also, if the composite rent is the mixture of rent
of the building & also includes service charges for
some services, then the total amount is spilt into
rent & service charges. Rent gets taxable under
“House-Property†& Service charges under
“Business Income.â€