EXEMPTED INCOMES U/S 10

Agricultural income [Sec 2(1A)]
Sec 10(1) excludes agricultural income from the total income of the person. Only the state govt. can levy tax on agricultural income. However agricultural income has become a factor in the determination of the tax on the non-agricultural income. In respect of an individual, HUF, unregistered firm, An AOP (except a company, registered firm, co-operative society and the local authority) the net agricultural income is included in the total income, if the non-agricultural income exceeds exemption limit. Thus the non-agricultural income is taxed at a higher rate. Onus of proving that an income is agricultural income is on assessee.
Sec 2(1A) of the Act defines ‘agricultural income. It includes the following incomes in agricultural income:
(a) Income derived from such land by (i) agriculture or (ii) the performance (by a cultivator or receiver of rent-in-kind) of any process ordinarily employed to render the produce fit to be taken to the market, or (iii) the sale of such produce made fit.
(b) Income from building linked to agricultural, agricultural house property. Such house property to be exempt from tax must be on or in the immediate vicinity of agricultural land and must be occupied by the cultivator or the recipient of agricultural income and the cultivator or the recipient should, by reason of his connection with the land, required it as his dwelling house or store house or other out-building. Further the land must be subject to land revenue / local tax, and where land is not assessed to land revenue, it should not be with in the jurisdiction of municipality cantonment board or within 8 Kms of it.
The three primary conditions, which must be satisfied before a particular item of income may be treated as agricultural income, are:
(i) That such income has relation to land,
(ii) That such land is situated in India and
(iii) That the land is used for agricultural purpose.
CIT VS RAJA BENOY KUMAR SAHAS ROY: Supreme Court held that agricultural process requires basic function of field cultivation in the sense of tiling the land, sewing of the seeds, planting and similar operations. So forest of spontaneous growth does not come in the preview of agriculture.


Receipt by a member from HUF [Sec 10(2)]
Any sum received by an individual as a member of HUF, either out of (i) Income of HUF or (ii) Income of the estate belonging to the family in case of impartible estate; is exempt.
Exemption is available only to those members who have an interest in the joint income of the HUF, i.e., when the member is entitled to demands his share in the event of partition of the HUF or he is entitled to maintenance under Hindu Law.

Share of the partner in the total income of the Firm [Sec 10(2A)]
In the case of a person being a partner of a firm, which is separately assessed as such, his share, as per Partner ship Deed, in the total income of the firm is not included in his income.


Allowances or perquisites granted abroad [Sec 10(7)]
Any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering services outside India is not included in his total income.

Sum received under a Life Insurance Policy [Sec 10(10D)]
Any sum received under a life insurance policy including the sum allocated by way of bonus on such policy is exempt from tax.
However the following sums are not eligible for exemption
1. Sum received under the Sec. 80 DD or 80DDA (3) (Mediclaim Policies)
2. Sum received under a Keymen Insurance Policy
3. Sum under a policy in which premium exceeds 20% of the sum assured. (Not applicable, if sum is received on death)

Scholarship [Sec10 (16)]
Any scholarship granted to meet the cost of education is exempt.

Allowances to MP/ MLA[Sec.10(17)]
1. Daily allowance to a MP or MLA or Member of any Committee thereof
2. Any other allowance to MP under MP (Constituency Allowance) Rules, 1986
3. All other Allowance not exceeding Rs.2000/- per month to MLA/ or Member of any Committee thereof

Pension to Gallantry Award holders [Sec 10(18)]
(i) Pension received by an individual who has been in the service of the Central Government or State Government and has been awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” or such other notified gallantry award;
(ii) Family pension received by any member of the family of an individual referred to in sub-clause (i).

Income of a local authority [Sec 10(20)]
Only income from a trade or business carried on by a local authority, which accrues or arises from the supply of a commodity or service (not being water and electricity) outside its jurisdictional area is chargeable to tax. All other incomes are not included in the total income of the local authority.

Exemption in respect of income of minor child [Sec 10(32)]
With respect to the parent in whose income the income of the minor child is included under section 64(1A), an exemption is granted in the following manner:
(1) The exemption is granted in respect of each child whose income is so included.
(2) Exemption is lower of (a) income of the minor child include in his income, or (b) Rs.1,500/- per child.

Dividend [Sec10 (34)]
Any income by way of dividends from domestic company under Section 115-O.


Capital gain on Compensation on Compulsory acquisition of Agricultural Land in Urban Area [Sec.10(37)]
To an individual / HUF, provided land being used for agricultural purpose during two years preceding the date of acquisition, by such individual or his parent or by such HUF

Long Term Capital gain on Sale of Shares and Units [Sec.10(38)]
Capital gain on transfer of Long Term Capital Assets (Equity shares of a Co. or Units of equity oriented Fund) be exempted provided
(1) Equity shares being sold throught Recognised Stock Exchange. In case of units, sale though recognized stock exchange or sold to the mutual fund.
(2) Such transaction is chargeable to Security Transaction Tax.

Amount Received as Loan in case of Reverse Mortgage Transaction [Sec.10(38)]
Any amount, either in Lump sum or in installments, by an individual is exempt.

Leave Travel Concession / Leave Salary/ Gratuity/ Commuted Pension/ Voluntary Retirement Compensation/ PF Balance Of Statutory or Recognised Provident Fund/ HRA/ Transport Allowance/ Medical Allowance: to be seen in ‘SALARY INCOME’