SESSION 2024-25

SUBJECT
“TAX LAW”

PROJECT ON
“INCOME EXEMPTED FROM TAX AND
DEDUCTION UNDER INCOME TAX LAW”

SUBMITED UNDER SUPERVISION; SUBMITED BY;

MS. BHAWANA PRIYANSHI BHOOTRA
ASST. PROFESSOR BALLB VII SEMESTER
FACULTY OF LAW
 DECLERATION

I declare that the project entitled “INCOME EXEMPTED FROM TAX

AND DEDUCTION UNDER INCOME TAX LAW ” is the outcome of
my own work conducted under the supervision of MS. BHAWANA
at Jagannath University, Jaipur.
I further declare that to the best of my knowledge the project does not
contain any part of any work, which has been submitted for the
award of any degree either in this University or in another University
/ Deemed University without proper citation.

PRIYANSHI BHOOTRA
DATE :
 CERTIFICATE OF THE SUPERVISOR

This is to certify that the research work entitled “INCOME

EXEMPTED FROM TAX AND DEDUCTION UNDER
INCOME TAX LAW” is the work done under my guidance and
supervision for the Partial fulfilment of the requirement of BA/BBA
LLB degree at Jagannath University.
To the best of my knowledge and belief the project:
1. embodies the work of the candidate himself;
2. has been duly completed; and
3. Is up to the standard both in respect of contents and
language for being referred to the examiner.

MS. BHAWANA
FACAULTY OF LAW
SUPERVISOR
 ACKNOWLEDGEMENT

I would like to express profound gratitude to MS. BHAWANA, for

her invaluable support, encouragement, supervision and useful
suggestions throughout this research work. Her moral support and
continuous guidance enabled me to complete my work successfully.
Her intellectual thrust and blessings motivated me to work rigorously
on this study. In fact this study could not have seen the light of the
day if her contribution had not been available. It would be no
exaggeration to say that it is her unflinching faith and unquestioning
support that has provided the sustenance necessary to see it through
to its present shape.
Among those who have sustained me over the years with their loyalty
and friendship, I would particularly mention my friends RAHUL,
have always taken a special interest in my work and unconditional
support at each turn of the life.
I express my deep sincere gratitude towards my parents for their
blessing, patience, and moral support for this project.

PRIYANSHI BHOOTRA
 TABLE OF CONTENT

DECLERATION………………………………………………….2
CERTIFICATE OF THE SUPERVISOR……………………....3
ACKNOWLEDGEMENT……………………………………….4
INTROUCTION………………………………………………....5
KEY PROVISIONS OF THE ACT…………………………..…7
EXEMPTIONS………………………………………………......7
DEDUCTIONS……………………………………………......…9
MODE OF PAYMENT…………………………………………12
DIFFERENCE BETWEEN EXEMPTION AND DEDUCTION……...16
DIFFERENCE BETWEEN EXEMPTION AND DEDUCTION………17
CONCLUSION………………………………………………....32
REFERENCES…………………………………………………33
BIBLIOGRAPHY……………………………………………...34
INTRODUCTION
The Income Tax Act, of 1961 is the primary legislation in India that governs the imposition,
collection, and administration of income tax. The Act was enacted on 1st April 1962, and it
has been amended several times since then to reflect changes in the Indian tax system and to
incorporate new provisions.
is the governing legislation for income tax in India. It was enacted to consolidate and amend
the laws relating to income tax and introduced a comprehensive set of provisions that govern
the levy, administration, collection, and recovery of income tax.
The Income Tax Act, of 1961, has been amended several times since its inception, and it
comprises various sections and schedules.
Income tax laws are designed to determine how much individuals and businesses owe in
taxes based on their income. However, these laws also recognize that not all income should
be taxed and that certain expenses can be deducted to arrive at a taxable income.
Understanding the distinction between income exemptions and deductions is crucial for
effective tax planning.
Income Exempted from Tax
Income exemptions refer to specific types of income that are not subject to taxation. This can
include:
1. Personal Exemptions: Amounts that taxpayers can claim for themselves and their
dependents, reducing their taxable income.
2. Certain Types of Income: Examples include:
o Gifts and Inheritances: Generally, not subject to income tax.
o Interest from Municipal Bonds: Often exempt from federal income tax.
o Certain Scholarships and Grants: Educational funds that meet specific
criteria.
3. Retirement Income: Withdrawals from qualified retirement accounts may be
partially or fully exempt from income tax, depending on the structure of the account.
Deductions under Income Tax Law
Deductions allow taxpayers to reduce their taxable income by specific expenses incurred
during the tax year. These can be categorized into:
1. Standard Deduction: A fixed amount that reduces taxable income, available to all
taxpayers unless they choose to itemize deductions.
2. Itemized Deductions: Specific expenses that can be deducted, such as:
o Medical Expenses: Costs exceeding a certain percentage of adjusted gross
income (AGI).
o State and Local Taxes: A limit exists on the amount that can be deducted.
 o Mortgage Interest: Interest paid on home loans can often be deducted.
o Charitable Contributions: Donations made to qualified organizations.
3. Above-the-Line Deductions: These are deducted from gross income to calculate
adjusted gross income (AGI) and may include student loan interest and contributions
to retirement accounts.

KEY PROVISIONS OF THE ACT

Some of the key provisions of the act include the following:
 Scope of Income: The Act defines the scope of taxable income, which includes all
income earned or received by an individual or a company during a financial year.
 Taxation of Different Sources of Income: The Act provides for taxation of different
sources of income such as salary, business or profession, capital gains, house property,
and other sources.
 Tax Slabs: The Act provides for different tax slabs based on the income level of the
taxpayer. Currently, there are three tax slabs: 0-2.5 lakhs (no tax), 2.5-5 lakhs (5%
tax), 5-10 lakhs (20% tax), and above 10 lakhs (30% tax).
 Deductions and Exemptions: The Act allows for various deductions and exemptions,
such as deductions for investments made in specified instruments, exemptions for
certain types of income, and deductions for medical expenses.
 Tax Deducted at Source (TDS): The Act requires certain entities to deduct tax at
source while making certain payments such as salary, rent, interest, etc.
 Advance Tax: The Act requires taxpayers to pay their tax liabilities in advance, based
on an estimation of their income for the financial year.
 Tax Return Filing: The Act mandates the filing of income tax returns by taxpayers
who have a certain level of income or have certain types of income.
 Penalties and Prosecution: The Act provides for penalties and prosecution in case of
non-compliance with the provisions of the Act.
Top of Form
Income tax is a crucial source of revenue for governments worldwide, and it is mandatory for
individuals to pay taxes on their income. However, not all income is taxable under India’s
Income Tax Act, of 1961. Certain exemptions and deductions provided by the government
can reduce an individual’s taxable income.

EXEMPTIONS
Exempt income refers to certain kinds of income that is non-taxable for the taxpayers. In
India, Section 10 of the Income Tax Act governs the provisions related to such exempt
income, provided that they fulfil certain guidelines and conditions. Exempt income can be of
any form such as interest received from the agricultural land, interest received through PPF,
and more.
Exempt income refers to income that is not taxed at all and it is different from income
tax deduction. The word deduct means to subtract from the total. Under income tax
provisions, deduction is an amount reduced from the total income of the taxpayer. These
deductions are offered to taxpayers when they invest in certain tax-saving instruments. In
short, they get a tax deduction on the way they spend their income.
For example, income tax deduction of up to Rs 1.5 lakh can be availed when spent
on insurance premium, PPF, ELSS and so on, under Section 80C.
Here is a list of exempt income as specified under Section 10 of the Income Ttax Act: 1.
Agricultural income 2. Amount received out of family income 3. Interest paid to a non-
resident 4. Leave travel concession 5. Amount received as leave encashment on retirement 6.
Gratuity 7. House rent allowance 8. Scholarship income 9. Amount received under a life
insurance policy
Who is eligible to pay?
Any person earning income from one of the qualifying exempt income sources can avail this
benefit. He has to declare the same while filing the income tax returns. Even though he is not
required to pay any tax on the exempt income, it is important to report such income to the
income tax department.
A detailed breakdown of the procedure for filling the tax
For salaried individuals, the disclosure of certain exempt income is required under Schedule-
S of the income tax return form. The list of such exempt income is as follows:
1. House Rent Allowance
2. Leave Travel Allowance
3. Leave Encashment Amount
4. Pension Amount
5. Gratuity Amount
6. Any form of perquisites received
7. Amount received from a Voluntary Retirement Scheme
For taxpayers with other sources of income, the exempt income such as dividend income and
agricultural income will be disclosed under Schedule EI of the income tax return form.
The income exemptions under income tax law, 1961 are:
A. Agricultural Income: Agricultural income earned by an individual in India is
exempted from tax under Section 10(1) of the Income Tax Act. Agricultural income is
defined as income derived from land that is situated in India and is used for
agricultural purposes. However, if the individual’s total income exceeds the basic
 exemption limit, then the agricultural income will be taken into account for
computing the tax liability.
B. Dividend Income: Dividend income received by an individual from a domestic
company is exempted from tax under Section 10(34) of the Income Tax Act.
However, the company distributing the dividend has to pay dividend distribution tax
(DDT) at the rate of 15% on the gross amount of the dividend. The dividend received
from a foreign company is taxable under the Income Tax Act.
C. Interest on Tax-Free Bonds: Interest earned on tax-free bonds is exempted from tax
under Section 10(15)(iv)(h) of the Income Tax Act. The government issues these
bonds to finance specific infrastructure projects. The interest earned on these bonds is
tax-free and issued with a specific maturity period.
D. Life Insurance Proceeds: Any sum received from a life insurance policy is exempted
from tax under Section 10(10D) of the Income Tax Act. However, this exemption is
applicable only if the premium paid does not exceed 10% of the sum assured.
E. Long-Term Capital Gains on Equity Shares and Equity-Oriented Mutual Funds: Long-
term capital gains (LTCG) on equity shares and equity-oriented mutual funds are
exempted from tax under Section 10(38) of the Income Tax Act. LTCG on equity
shares is exempted if the shares are held for more than 12 months, and on equity-
oriented mutual funds if the funds are held for more than 36 months. However, from
the financial year 2018-19, LTCG exceeding INR 1 lakh is taxed at 10%.
F. Gifts: Gifts received by an individual are exempted from tax under Section 56(2)(vii)
of the Income Tax Act. However, this exemption is applicable only if the value of the
gift received does not exceed INR 50,000 in a financial year. If the value of the gift
exceeds INR 50,000, then the entire amount is taxable.
G. Scholarship: Any scholarship granted to meet the cost of education is exempted from
tax under Section 10(16) of the Income Tax Act. However, this exemption is
applicable only to the extent of the amount spent on education. Any additional amount
received is taxable.
H. Gratuity: Gratuity received by an employee from his/her employer is exempted from
tax under Section 10(10)(iii) of the Income Tax Act. The exemption limit is the least
of the following: 15 days of the last drawn salary for each completed year of service,
or INR 20 lakhs.
I. HRA: HRA or House Rent Allowance received by an employee from his/her
employer is exempted from tax under Section 10(13A) of the Income Tax Act. The
exemption is allowed up to the least of the following: actual HRA received, 50% of
salary for employees living in metro cities, and 40% of salary for non-metro people

DEDUCTIONS
The Income tax department with a view to encourage savings and investments amongst the
taxpayers have provided various deductions from the taxable income under chapter VI A
deductions. 80C being the most famous, there are other deductions which are beneficial for
the taxpayers to reduce their tax liability. Let us understand these deductions in detail:
Section 80 Deduction List
Section 80C – Deductions on Investments
Section 80C is one of the most popular and favorite sections amongst taxpayers as it allows
them to reduce taxable income by making tax-saving investments or incurring eligible
Deduction Limits Under Section 80C, 80CCC, 80CCD(1), 80CCE, 80CCD(1B)
Sec 80CCC and Sec 80CCD provide deductions for the investments in the pension scheme
either by yourself or by way of the employer’s contribution.
The maximum deduction under Section 80C, 80CCC and 80CCD(1) put together is Rs 1.5
lakhs. However, you may claim an additional deduction of Rs 50,000 allowed u/s
80CCD(1B) for contributions made to NPS(National Pension Scheme). Thus, the maximum
deduction limit is Rs 2 lakhs under Section 80C+80CCC+80CCD(1) + Section 80CCD(1B).
Section 80TTA – Interest on Savings Accounts
 Who can claim Section 80TTA deduction?: Section 80TTA deduction can be
claimed by an individual or HUF.
 Maximum deduction allowed under section 80TTA?: Rs 10,000
Section 80TTB – Interest From Deposits Held by Senior Citizens
Section 80GG – Income Tax Deduction on House Rent Paid
 Who is eligible to claim deduction under Section 80GG?: Those who do not
receive HRA in their salary structure but live in rented accommodations.
 Conditions for claiming Section 80GG:
 Taxpayer must be self-employed or salaried individual who does not receive
HRA
 Taxpayer must be paying rent for residential purpose only
 The taxpayer should not have self-occupied residential property in any other
place. Also, the taxpayer, their spouse or minor child or their HUF should not
own any residential accommodation in the place where they currently reside.
 File Form 10BA -
 How much deduction is available Under Section 80GG?
The least of the following is available as deduction:
 Rent paid (-) 10% of adjusted total income*
 Rs 5,000/- per month
 25% of adjusted total income*
*Adjusted Gross Total Income =
 Gross Total Income
Less:
- LTCG, if any, included in total gross income
- STCG u/s 111A
- Deductions u/s 80C to 80U except deduction under section 80GG
- Incomes of NRIs and foreign companies are taxed at a special tax rate, such as incomes u/s
115A, 115AB, 115AC, or 115AD.
An online ITR e-filing software like that of ClearTax is extremely easy as the limits are auto-
calculated. So you do not have to worry about making complex calculations.
Section 80E – Interest on Education Loan
 Who is eligible to claim deduction under Section 80E? An individual can claim a
deduction of interest paid on an education loan taken for pursuing higher education.
 The education loan can be taken for the taxpayer, their spouse or children or for a
student for whom the taxpayer is a legal guardian.
 80E deduction is available for a maximum of 8 years (beginning the year in which the
interest starts getting paid) or till the entire interest is paid, whichever is earlier. There
is no ceiling limit on the amount of interest that can be claimed.
Section 80EEA – Interest on Home Loan for First-Time Home Owners
Section 80EEA, which provides taxpayers with an extra deduction for paying interest on a
house loan. Whereas Section 24 exempted interest on home loans up to Rs.2 lakhs, this
section provides a tax exemption of up to Rs1.5 lakhs per financial year to individuals on the
interest paid on home loans for purchasing/constructing an affordable house. Deduction can
be claimed for the housing loan taken between 1st April 2019 to 31st March 2022. Read in
detail here.

80EE- Interest on Home Loan for First-Time Home Owners

This deduction can be claimed from FY 2016-17 and onwards only if the loan has been taken
in FY 2016-17.
The deduction under section 80EE is available only to home-owners (individuals) having
only one house property on the date of sanction of the loan. The value of the property must be
less than Rs 50 lakh and the home loan must be less than Rs 35 lakh. The loan taken from a
financial institution must have been sanctioned between 1 April 2016 and 31 March 2017.
There is an additional deduction of Rs 50,000 available on your home loan interest on top of
the deduction of Rs 2 lakh (on the interest component of home loan EMI) allowed under
section 24.
Section 80EEB - Interest paid on Electric Vehicle Loan
To encourage the purchase and usage of electric vehicles, deduction is allowed for interest
paid on vehicle loan availed to purchase the electric vehicles up to Rs.150,000.
 Deduction
Preventive
for Deduction for
Policy for? Health Maximum Deduction
self & parents
check-up
family

Self & Family

25,000 - 5,000 25,000
(below 60 years)

Self & Family +

Parents
25,000 25,000 5,000 50,000
(all of them below 60
years)

Self & Family (below

60 years)
25,000 50,000 5,000 75,000
+ Parents (above 60
years)

Self & Family +

Parents 50,000 50,000 5,000 1,00,000
(above 60 years)

Section 80D – Deduction on Medical Insurance Premium

You (as an individual or HUF) can claim a deduction of Rs.25,000 under section 80D on
insurance for self, spouse and dependent children. An additional deduction for insurance of
parents is available up to Rs 25,000, if they are less than 60 years of age. If the parents are
aged above 60, the deduction amount is Rs 50,000.
In case, both taxpayer and parent(s) are 60 years or above, the maximum deduction available
under this section is up to Rs.1 lakh.
In case of senior citizens, the amount paid on account of medical expenditure incurred is
allowed as deduction under Section 80D provided health insurance is not taken on them.
MODE OF PAYMENT
Premium Payment to be made in any mode other than cash, however for preventive health
check-up cash payments are acceptable.
Example: Rohan’s age is 65 and his father’s age is 90. In this case, the maximum deduction
Rohan can claim under section 80D is Rs. 100,000.
From FY 2015-16 a cumulative additional deduction of Rs. 5,000 is allowed for preventive
health check.
 Section 80DD – Deduction for Medical Treatment of a Dependent with Disability
 Section 80DD deduction is available to a resident individual or a HUF
 Deduction: Expenditure incurred on medical treatment (including nursing), training
and rehabilitation of specially-abled (handicapped) dependent relative.
 To claim this deduction a certificate of disability is required from the prescribed
medical authority.

Disability Level of Disability Amount of Deduction

Normal Disability 40% - 79% Rs 75,000

Severe Disability 80% or more Rs 1,25,000

Note: Dependant means the spouse, children, parents, brothers and sisters of the individual in
case of Individuals, a member of the Hindu undivided family in the case of HUF and such
dependent should not claim deduction under section 80U in his/her income tax return.
Section 80DDB – Deduction for Medical Treatment etc
 Who is eligible to claim Section 80DDB deduction?: 80DDB deduction is available
to a resident individual or a HUF. You can get a deduction for any money you spend
on medical treatments for yourself or your dependents
 Quantum of deduction under 80DDB?:

Age Amount of deduction

< 60 years Amount paid or 40,000, whichever is less

60 and above Amount paid or 1,00,000, whichever is less

 For reimbursement claims: Any reimbursement of medical expenses by an

insurance company or employer shall be reduced from the quantum of deduction the
taxpayer can claim under this section. Also, remember that you need to get a
prescription for such medical treatment from the concerned specialist to claim such a
deduction. Read our detailed article on Section 80DDB.
 Section 80U – Deduction for Disabled Individuals

Disability Level of Disability Amount of Deduction

Normal Disability upto 80% Rs 75,000

Severe Disability 80% or more Rs 1,25,000

A deduction of Rs.75,000 is available to a resident individual who suffers from a physical

disability (including blindness) or mental retardation. In case of severe disability, one can
claim a deduction of Rs 1,25,000.
Section 80G – Income Tax Benefits Towards Donations for Social Causes
The various donations specified in u/s 80G are eligible for deduction up to either 100% or
50% with or without restriction.
From FY 2017-18, any donations made in cash exceeding Rs 2,000 will not be allowed as a
deduction. Donations above Rs 2000 should be made in any mode other than cash to qualify
for an 80G deduction.
a. Donations with 100% deduction without any qualifying limit
 National Defence Fund set up by the Central Government
 Prime Minister’s National Relief Fund
 National Foundation for Communal Harmony
 An approved university/educational institution of National eminence
 Zila Saksharta Samiti constituted in any district under the chairmanship of the
Collector of that district
 Fund set up by a State Government for the medical relief to the poor
 National Illness Assistance Fund
 National Blood Transfusion Council or to any State Blood Transfusion Council
 National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities
 National Sports Fund
 National Cultural Fund
 Fund for Technology Development and Application
 National Children’s Fund
  Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to
any State or Union Territory
 The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air
Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund,
1996
 The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October
6,1993
 Chief Minister’s Earthquake Relief Fund, Maharashtra
 Any fund set up by the State Government of Gujarat exclusively for providing relief
to the victims of earthquake in Gujarat
 Any trust, institution or fund to which Section 80G(5C) applies for providing relief to
the victims of earthquake in Gujarat (contribution made during January 26, 2001 and
September 30, 2001) or
 Prime Minister’s Armenia Earthquake Relief Fund
 Africa (Public Contributions — India) Fund
 Swachh Bharat Kosh (applicable from financial year 2014-15)
 Clean Ganga Fund (applicable from financial year 2014-15)
 National Fund for Control of Drug Abuse (applicable from financial year 2015-16)
b. Donations with 50% deduction without any qualifying limit
 Jawaharlal Nehru Memorial Fund*
 Prime Minister’s Drought Relief Fund
 Indira Gandhi Memorial Trust*
 The Rajiv Gandhi Foundation*
Note: * Deductions won’t be available for the donations made on or after 1st April 2024.
c. Donations to the following are eligible for 100% deduction subject to 10% of adjusted
gross total income
 Government or any approved local authority, institution or association to be utilized
for the purpose of promoting family planning
 Donation by a Company to the Indian Olympic Association or to any other notified
association or institution established in India for the development of infrastructure for
sports and games in India or the sponsorship of sports and games in India
d. Donations to the following are eligible for 50% deduction subject to 10% of adjusted
gross total income
 Any other fund or any institution which satisfies conditions mentioned in Section
80G(5)
  Government or any local authority to be utilised for any charitable purpose other than
the purpose of promoting family planning
 Any authority constituted in India for the purpose of dealing with and satisfying the
need for housing accommodation or for the purpose of planning, development or
improvement of cities, towns, villages or both
 Any corporation referred in Section 10(26BB) for promoting the interest of minority
community
 For repairs or renovation of any notified temple, mosque, gurudwara, church or other
places.
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Section 80GGB – Company Donation to Political Parties
Section 80GGB deduction is allowed to an Indian company for the amount contributed by it
to any political party or an electoral trust. A deduction is allowed for donations done by any
mode of payment other than cash.
Section 80RRB – Deduction on Income via Royalty of a Patent
80RRB Deduction for any income by way of royalty for a patent, registered on or after 1
April 2003 under the Patents Act 1970, shall be available for up to Rs.3 lakh or the income
received, whichever is less. The taxpayer must be an individual patentee and an Indian
resident. The taxpayer must furnish a certificate in the prescribed form duly signed by the
prescribed authority.
Section 80QQB – Deduction on Royalty Income of Authors
Authors of India who are earning royalty or copyright income are eligible to claim deduction
under section 80QQB of up to Rs.3 lakh or the income received, whichever is less . There
are certain conditions that must be satisfied to be eligible for this tax deduction.

DIFFERENCE BETWEEN EXEMPTION AND DEDUCTION

PARAMETERS EXEMPTION DEDUCTION

Deduction refers to the subtraction of the

Exemption refers to the amount
amount that is not subjected to taxation
Meaning excluded from taxation.

Included in gross taxable

Calculation Not included in gross taxable income
income

Encourage investment and

Objective Avoid exploitation and over taxation
saving

Eligibility Conditional Unconditional

Concession and
Concession Relation
relaxation

Taxable income Deductible income Tax-free income

DIFFERENCE BETWEEN EXEMPTION AND DEDUCTION

DIFFERENCE BETWEEN INCOME TAX EXEMPTION AND DEDUCTION

INCOME TAX EXEMPTION INCOME TAX DEDUCTION

Income tax exemptions are granted on specific Income tax deductions, on the other hand, can be
sources of income rather than on overall income. It claimed on the gross total income. Certain defined
may also imply that you are exempt from paying investments and expenditures are eligible for tax
taxes on income derived from that source. breaks. Deductions can be claimed for
Agriculture revenue, for example, is free from investments in specific mutual funds, student loan
taxation. Furthermore, long-term capital gains from interest repayment, and premium payments for
the sale of a property might be tax-free if reinvested medical insurance. In addition, salaried taxpayers
in real estate or selected bonds within a defined time can deduct Rs.40,000 from their gross wages. This
period. Salary earners receive a housing rent standard deduction is now worth Rs.50,000. This
allowance (HRA) as part of their pay. Under certain
decreases their overall taxable income and, as a
situations, this component can be utilized to claim
result, their tax liability
tax exemption.

EXEMPTION UNDER SECTION 10 INCOME TAX ACT, 1961

For the determination of the total gross income of any person, the following incomes
mentioned under the clauses of Section 10 of the Act shall not be included in the computation
process unless otherwise stated:
Agricultural income [Section 10(1)]
In accordance with Section 10(1) of the of the Act, the agricultural income of a person shall
not be considered during the computation of an assessee’s total income. To get a better
picture of the dimensions of the word ‘agricultural income’, it is paramount to understand the
wide scope of this particular word.
Scope of the term ‘agricultural income’ under Section 10(1)
 Any form of revenues or rents originating or derived from a land in India which is
being used for agricultural purposes fall under the ambit of the term ‘agricultural
income’. These revenues or rents may be received by the owner from the tenant or
even from sub-tenant to tenant. The implication of this is that the ownership of the
land is not necessary to have agricultural income. It may be noted in this regard that if
the agricultural land is present in a foreign country, then the entire income will be
taxable. In other words, agricultural income from foreign lands is not exempt under
Section 10(1).
 The term ‘agricultural income’ under Section 10(1) also includes any income
originating from the basic operations or subsequent operations that are used to make
the agricultural produce fit for being taken for their sale in the market. These
operations include activities like tilling of the land, sowing seeds, cleaning,
winnowing, drying, crushing etc. Thus, any income derived from all these activities or
operations (whether manual or mechanical) will fall under the head of ‘agricultural
income’ under Section 10(1).
Case law related to exemption of agricultural income
Dy. CIT v. Best Roses Biotech (P) Ltd.1 (2011, ITAT Ahmedabad Bench)
Facts of the case
 The assessee had obtained a piece of land on lease from an agriculturalist and had
constructed a greenhouse project.
 In this greenhouse project, he was growing roses but not in the conventional style.
 The roses were grown with the latest scientific techniques in a controlled atmosphere
on a bridge of plastic trays present a couple of feet above the ground.
1
(2011, ITAT Ahmedabad Bench)
  The income from the rose plants was claimed as an exemption under agricultural
income under Section 10(1) but the Assessing Officer refused the same on the
grounds that the roses were not planted on earth (land) and thus not eligible for
exemption.
Judgement
 It was held that the assessee’s income falls under the ambit of ‘agricultural income’
under Section 10(1) and thus, cannot be computed under the total income of the
assessee.
 Reliance was placed on the fact that the use of the advancement of technology and
advanced equipment for cultivation purposes amounted to the agricultural operation
of the assessee.
 Several other connected authorities also endorsed the assessee’s operation as an
agricultural operation and as a corollary, the income from it became exempted
agricultural income.
Does income from nursery constitute agricultural income
In accordance with Explanation 3 to Section 2(1A) of the Act, income arising from nurseries
indeed falls under the category of agricultural income and is exempt from income tax. It is
immaterial whether the saplings or seeds were grown on land or not.
Income tax exemption for income from farm buildings
It is pertinent to note that income accruing out of the use of farm buildings for any plans or
purposes (including letting out for residential reasons or for the objective of business or
profession) other than agriculture would not constitute agricultural income and thus would
not be exempt from income tax under this clause.
Although subject to the following conditions, income from farm buildings can constitute
agricultural income, viz:
1. The building should be on the agricultural land or in its immediate vicinity and the
assessee should, by reason of his relation with such agricultural land, require it as a
dwelling place or as a storehouse.
2. The agricultural land should either be subject to land revenue in India or be assessed
subject to a local rate and the same be collected by government officers.
3. If the agricultural land is not subject to land revenue, then as per Income Tax Rules,
such income from those farm buildings may constitute agricultural income subject to
government rules related to distance from nearby municipalities and their population.
In accordance with Section 10(2) of the Act, when a member of HUF (Hindu Undivided
Family) receives his share of family income or his share from the impartible family estate, as
the case may be, such income is fully exempt from income tax. It is pertinent to be noted in
this regard that a member of HUF’s personal income is not exempt from income tax. Only the
money given to him out of the family income or impartible family estate belonging to the
HUF is exempt from income tax.
Interest to non-residents [Section 10(4)]
In accordance with Section 10(4)(i) of the Act, when a non-resident [defined under Section
2(w) of the Act] has income from interests accrued from certain bonds and securities duly
notified by the Central Government, such income is exempt from income tax.
And according to Section 10(4)(ii) of the Act, when a non-resident individual has income
from interest on money standing to his credit in a Non-Resident (External) Account
maintained with any banks in India as per the provisions of Foreign Exchange Management
Act, 19992 (42 of 1999), and the rules made thereunder and subject to compliance with RBI
norms, such income is exempt from income tax.
Interest on notified savings certificates [Section 10(4B)]
In accordance with Section 10(4B) of the Act, any non-resident individual who is an Indian
citizen or a person of Indian origin (PIO), who has any income in the manner of interest
accruing from notified savings certificates subscribed in convertible foreign exchanges,
issued before the 1st day of June, 2002 by the Government of India is exempt from income
tax.
Leave travel concession [Section 10(5)]
In accordance with Section 10(5) of the Act, any employee who has made an actual
journey can claim the exemption in respect of Leave Travel Concession (LTC) subject to
these conditions under Rule 2B of the Income Tax Rules. It may be noted in this regard that
this exemption is available to all employees i.e. Indian and foreign citizens alike. An
employee can use this benefit of exemption under Section 10(5) in respect of the value of any
travel concession or assistance accepted or due to him from his current or former employer
for himself and his family members in relation to his travelling on leave to any place within
India. Some of the conditions based on which Leave Travel Concession can be taken are as
follows:
 Where the journey is made by air transport, the amount of exemption available under
clause (5) of Section 10 will be the lesser of the actual amount spent for such flight or
the economy class airfare of the national carrier via the shortest route.
 When the journey is made by railways, the amount of exemption under this clause
will be the lesser of the actual amount spent or the quantum of air-conditioned first-
class railway fare via the shortest route.
 When the place of destination is neither connected by air travel or railways, then
 In the case where recognised public travel is availed, the exemption will be the lesser
of the actual amount spent or deluxe class or first class fare by the shortest route.
 In the case where no recognised public transport system is available, the exemption
will be an amount equivalent to the air-conditioned first class railways fare, for the
distance of the journey via the shortest route, and it shall be assumed as if such
journey had been carried out by railways or the actual amount spent will be exempted,
whichever is less.

2
Foreign Exchange Management Act, 1999 (42 of 1999), and the rules made thereunder
  These exemptions under Section 10(5) are available for a total of two journeys in a
block of four years. The current block year is 2022-2025 and the previous block year
was 2018-2021.
 If the employee has unused exemption available under one block, he can carry
forward one block to the next block but in case of such carry over at least one travel
exemption must be claimed in the first year of the block.
 Family members can also travel with the employee but family for the purposes of the
exemption under this clause will include the spouse and children of the individual
employee, whether dependent or not and parents, sisters, brothers of the individual
employee or any of them who are mainly or wholly reliant on him. This exemption is
restricted to only two surviving children born after the date of October 1, 1998
(multiple births post the birth of the first single child will be treated as one child only
for this clause), however, such restriction is not applicable to children born before the
date of October 1, 1998.
 Exemptions are available only for fare incurred i.e. other expenditures related to
lodgings, porter charges etc do not fall attract exemption vide Section 10(5).
Thus, under this clause and subject to the conditions mentioned above any employee can
claim exemption from Income Tax in respect of Leave Travel Concession (LTC) or Leave
Travel Allowance (LTA) for actual journeys made. Lastly, it goes without saying that no
actual journey made means no exemption.
Case law related to Leave Travel Concession (LTC)
Commissioner of Income tax & ANR v. M/s Larsen & Toubro Ltd.3 (Supreme Court, 2009)
Issue: Whether the assessee(s) was under a statutory obligation under the Income Tax Act,
1961, and/or the Income Tax Rules to gather evidence to show that its employee(s) had
actually utilised the amount(s) paid for the purposes of Leave Travel Concession (LTCs) or
Conveyance Allowance?
Judgement: It was observed by the Hon’ble Supreme Court that the individual employee is
the sole beneficiary of the exemption provided under clause (5) of Section 10. The Hon’ble
Court further held that no employer is required to collect supporting evidence for the
declarations made by the employees as far as LTC/LTA is concerned. Thus, it was held that
the employer is under no obligation to gather such evidence or verify such claims related to
LTC or LTA.
Payments received by individuals, who are not Indian citizens [Section 10(6)]
People, who are not Indian citizens, are entitled to avail the exemption from income tax from
the provisions of Section 10(6) of the Act. They are discussed as follows:
Payments made to specified diplomats and their staff [Section 10(6)(ii)]
In accordance with Section 10(6)(ii) of the Act, any individual who is not an Indian citizen
but receives remuneration as an official (in any position) of an Embassy, Consulate, High
Commission, or Trade Representative of a Foreign State, or works as a staff of any of such
3
Supreme Court, 2009
official is exempt from income tax only if their Indian counterparts in their country enjoys the
same privilege.
Remuneration of a foreign employee and non-resident member of crew [Section 10(6)(vi),
(viii)]
In accordance with Section 10(6)(vi) of the Act, the payments obtained by a foreign
individual in his capacity as an employee of a foreign enterprise for services rendered by him
during his stay in India is exempt from income tax, if the following prerequisites are
satisfied:
(a) the foreign enterprise is not involved in any form of trade or business within India;
(b) he has not stayed in India more than a total a period of 90 days in such year; and
(c) such payment is not amenable to be deducted from the income of his employer
In accordance with Section 10(6)(viii) of the Act, any remuneration received by or due to a
non-resident foreign individual, who has not stayed in India more than a total a period of 90
days in such year, and has rendered services in connection with his employment on a foreign
ship, enjoys exemption from income tax.
Payment to a foreign trainee [Section 10(6)(xi)]
In accordance with section 10(6)(xi) of the Act, the payments made to a foreign trainee in his
capacity of an employee of a foreign government during his tenure of stay in India in relation
with his training in any government establishment or office or any central government or
state government company, or any company which is a subsidiary of a government company
or any corporation formed by or under a statute or any co-operative society fully financed by
the central or state government is exempt from income tax.
Tax paid for a foreign company generating income by way of royalty or fees for technical
services [Section 10(6A)]
In accordance with Section 10 (6A) of the Act, taxes that are paid by any Indian concern or
government (central/state) for a foreign company generating income in the mode of royalty or
fees for technical services provided in accordance with an agreement made post-March 31,
1976 but before June 1, 2002 is exempt from income tax in the hands of such foreign
company provided such agreement is in conformation with the industrial policy of the Central
government or it is sanctioned by the Indian Government.
Tax paid for a foreign company or non-resident individual in connection with other income
[Section 10(6B)]
In accordance with Section 10 (6B) of the Act, taxes that are paid by any Indian concern or
government (central/state) for a foreign company or non-resident individual in connection
with any income that is not salary, royalty or fees for technical services provided is exempt
from income tax in the hands of such foreign company or non-resident individual if such
income is received in accordance with an agreement entered into before June 1, 2002 by the
central government with the government of a foreign sovereign State or international
organisation or any other related agreement duly sanctioned by the central government.
Tax paid for foreign government or foreign company generating income by leasing aircraft or
aircraft engine [Section 10(6BB)]
In accordance with Section 10 (6BB) of the Act, taxes that are paid by an Indian company,
involved in the business of operation of aircraft, on behalf of foreign governments or foreign
companies generating income by leasing such aircrafts or aircraft engines is exempt from
income tax in the hands of such foreign governments or foreign companies if such lease is
approved under an agreement which is duly sanctioned by the Indian government and entered
during the phase between 31.03.1997 to 01.04.1999, or post 31.03.2007.
Technical fees accepted by a foreign company notified by the central government [Section
10(6C)]
In accordance with Section 10(6C) of the Act, notified foreign companies can claim
exemption from income tax in lieu of income generated by way of royalty or fees for
technical services rendered in pursuance of an agreement entered into with that foreign
government and Indian government for providing services in security projects inside or
outside India.
Royalty or fees for technical services payment by NTRO to a non-resident [Section 10(6D)]
NTRO stands for National Technical Research Organisation and according to Section 10(6D)
of the Act, when the NTRO pays any remuneration (herein royalty) or due fees for technical
services provided to such a non-resident individual, not being a foreign company, then such
individual enjoys exemption from income tax. As a corollary, the NTRO will not be obliged
to deduct tax on any such payments.
Allowance or perquisites are given to government employees working outside India [Section
10(7)]
In accordance with Section 10(7) of the Act, any allowances or perquisites provided or
allowed as such outside India by the Indian government to an Indian citizen for providing
services outside India is exempt from income tax.
Income of foreign government employee working under cooperative technical assistance
programme [Section 10(8)]
In accordance with Section 10(8) of the Act, remuneration received directly or indirectly by
any individual, from the foreign government in relation with a co-operative technical
assistance programme and projects in conformation with an agreement entered into by the
central government and such sovereign foreign government, is exempt from income tax.
Moreover, such exemption is available in respect of any other income of such a foreign
individual which accrues from working outside India and is not deemed to accrue from his
work in India, provided that such foreign individual should be required to pay income tax or
social security tax to his own (foreign) government.
Payments received by a non-resident consultant or his foreign employees as remuneration or
fees [Section 10(8A), (8B)]
In accordance with Section 10(8A) of the Act, firstly, when an international organisation pays
remuneration or fees to a non-resident consultant, under a technical assistance agreement
between such organisation and the government of a foreign sovereign State and secondly,
when such non-resident consultant has any other income which he obtained outside India and
that is not considered to accrue or arise in India, in respect of which he is required to pay
income tax or social security tax to the foreign government of the country of his origin or
residence, enjoys exemption of such income from income tax.
Income of a family member of an employee working under a co-operative technical
assistance programme [Section 10(9)]
In accordance with Section 10(9) of the Act, when a family member accompanies an
individual mentioned in Sections 10(8) or Section (8A) or Section (8B) of the Act and comes
to India, then any income of such family member arising from outside India will be exempt
from income tax provided that he pays income tax or social security tax to his own
government where he hails from.
Gratuity [Section 10(10)] of Income Tax Act, 1961
In accordance with Section 10(10) of the Act, gratuity (where gratuity is voluntary payment
by the employer, as an appreciation of the long-standing services, usually more than 5 years)
so received at the time of retirement or termination of employment or death of the individual
employee, is exempt as under:
1. The central or state government employees and the members of the Defence Services
are eligible for full exemption from income tax pertaining to any amount received as
gratuity at the time of death or retirement.
2. For all other employees in the private sector any death-cum-retirement gratuity is
exempt from income tax to the extent of least of the following:
 Rs. 20,00,000/-
 Gratuity actually obtained
 Fifteen days’ salary based on salary last drawn for each year of service or part thereof
in excess of six months and in case the employee is NOT covered under the Payment
of Gratuity Act, 1972, this subpoint gets replaced by ‘‘half months’ salary based on
last 10 months’ average salary drawn immediately preceding the month of
retirement/death, for each completed year of service (fraction of year to be ignored).’’
Retrenchment compensation [Section 10(10B)]
In accordance with Section 10(10B) of the Act,when a workman receives any compensation
at the time of his retrenchment, as per the provisions of Industrial Disputes Act, 1947 or
under any other Act or Rules or Orders in force at the time being shall be exempt from
income tax subject to the minimum of the following limits:
 Actual amount obtained;
 Fifteen days of average remuneration for every completed year of service or part
thereof in excess of six months;
 Amount notified by the central government, i.e. Rs. 5,00,000.
It may be noted in this regard that beyond the limits mentioned above, any amount of
retrenchment will fall under the ambit of gross salary and thereby becoming taxable.
Compensation for Bhopal gas leak disaster [Section 10(10BB)]
Compensation received under the Bhopal Gas Leak Disaster (Processing of Claims) Act,
19854 by victims of Bhopal gas leak tragedy is exempt from income tax. Although, it may be
noted in this regard that if compensation is received against a loss or damage or expenditure
for which deduction has already been claimed earlier, it shall not be exempt from income tax.
Compensation on account of any disaster [Section 10(10BC)]
In accordance with Section 10(10BC) of the Act, any amount received from the State as
compensation for any disaster by any individual or his legal heirs is exempt from income tax.
Although, it may be noted in this regard that if such an individual or his legal heirs has been
allowed a deduction under the Act because of such losses from the disaster, no further
exemption is allowed.
Remuneration received at the moment of voluntary retirement [Section 10(10C)]
In accordance with Section 10(10C) of the Act, when an employee obtains any compensation
at the time of voluntary retirement or termination of service, then such payment is exempt
from income tax, subject to the fulfilment of the following conditions viz:
 Compensation is received by the individual employee at the time of voluntary
retirement or termination or voluntary separation in the case of a public sector
company.
 The maximum amount of exemption under this clause is Rs. 5,00,000.
 The compensation granted should be as per the provision of Rule 2BA of Income-tax
Rules, 1962.
 In the event an employee takes the exemption under this Section 10(10C), he shall not
be entitled to any other exemption under this section for any other assessment year.

Case law related to Section 10(10C)

R. Banumathy v. CIT [2018] (Madras High Court)5
Facts of the case: In this case, an employee of ICICI bank had opted for Voluntary Retirement
Scheme (VRS) and he got a consolidated payment from the bank for the same. The Income
Tax Department argued that payments received from ICICI bank via early retirement schemes
do not conform to Income Tax Rules and thus will not be exempted from income tax.
Issue: Are retiring employees of ICICI bank under Voluntary Retirement Scheme (VRS)
eligible for Section 10(10C) exemption [Assessment year 2004-05]?
Judgement: The Hon’ble Court observed that Section 10(10C) of the Act and Rule 2BA of the
Income Tax Rules, do not specifically apply to the Reserve Bank of India (RBI) alone and,
4
Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985
5
[2018] (Madras High Court)
thus, benefit was applicable to the assessee i.e. the retired ICICI bank employee also. Thus,
the assessee was held to be entitled to Section 10(10C) exemption benefit.
Tax on perquisites that are paid by the employer [Section 10(10CC)]
Perquisites are basically perks offered by virtue of an individual’s job by his employer.
Perquisites may be monetary or non-monetary in nature. Section 10(10CC) of the Act
provides exemption from income tax to the employee for non-monetary perquisites that are
given to the employees by the employer. In other words, non-monetary perquisites are
exempt from income tax but monetary perquisites are not exempt from income tax under this
clause.
Amount paid on life insurance policy [Section 10(10D)]
In accordance with Section 10(10D) of the Act, when an individual receives any money under
a life insurance policy, including a bonus, then such amount is exempt from income tax.
Although, the following sum of money received under a life insurance policy are not exempt
under this clause:
1. Any sum received from a life insurance policy under Section 80DD(3); or
2. Any sum of money obtained under a Keyman Insurance Policy; or
3. Any sum of money received, under a life insurance policy issued on or post
01.04.2003 but on or before 31.03.2012 in respect of which the premium payable for
any of the years during the terms of the policy is more than 20% of the actual capital
sum insured. Although, such sum received on the death of the insuree shall be exempt
from income tax;
4. Any sum of money received under a life insurance policy issued on or post
01.04.2012 in respect of which the premium payable for any of the years during the
terms of the policy is more than 10% of the actual capital sum insured; or
5. Any sum of money received under a life insurance policy issued on or after
01.04.2013 for life insurance of any individual, who is
 an individual with a disability or an individual with severe disability as mentioned
in Section 80U; or
 an individual suffering from ailment or disease as mentioned in the rules prescribed
under Section 80DDB in respect of which the premium payable is in excess of 15% of
the actual capital sum insured for any of the years during the terms of policy.
Payment from provident fund [Section 10(11)]
In accordance with Section 10(11) of the Act, any form of payment from a notified provident
fund or any other provident fund under the ambit of the Provident Funds Act, 1925 is exempt
from income tax. Although, according to Amendment vide Finance Act, 2021 if an individual
makes more contribution than Rs. 2.5 lakhs in any previous year in that fund, on or post 1st
day of April, 2021, then such interest earned on contribution over Rs. 2.5 lakhs shall be
subject to income tax. However, it is pertinent to note in this regard that if the employer
makes no contribution to the provident fund of the employee, then the upper limit for income
tax exemption under this clause will be raised to Rs. 5 lakhs.
Payment from the Sukanya Samriddhi Account opened in conformation with the Sukanya
Samriddhi Account Rules, 2014 [Section 10(11A)]
In accordance with Section 10(11A) of the Act, any payment in the form of interest and
withdrawals from an account opened in conformation with the Sukanya Samriddhi Account
Rules, 2014 formed under the Government Savings Bank Act, 1873 is fully exempt from
income tax.
Exemption of payment from the accumulated balance in a recognized provident fund [Section
10(12)]
Subject to the provision of Rule 8 of Part A of the Fourth Schedule, an employee receiving
the accumulated balance from a recognised provident fund is entitled to exemption of such
payment from income tax. Although, according to Amendment vide Finance Act, 20216 if an
employee makes more contribution than Rs. 2.5 lakhs in any previous year in that fund, on or
post 1st day of April, 2021, then such interest earned on contribution over Rs. 2.5 lakhs shall
be subject to income tax. However, it is relevant to note in this aspect that if the employer
makes no contribution to the provident fund of the employee, then the upper limit for income
tax exemption under this clause will be raised to Rs. 5 lakhs.
Payment given from the National Pension System Trust to an individual employee [Section
10(12A)]
In accordance with Section 10 (12A) of the Act, any form of payment is exempt from income
tax made from the National Pension System (NPS) Trust to –
 an assessee (employee or non-employee);
 on closure of account of the assessee or his opting out of the NPS scheme envisaged
in Section 80CCD;
 upto the extent it does not cross 60% of the total amount payable to such assessee at
the time of closing of the NPS account; or
 his preferring out of the NPS scheme.
Partial withdrawal from NPS [Section 10(12B)]
Section 10(12B) of the Act has been effective from the assessment year 2018-19 and it was
introduced to provide relief to individuals making withdrawals from the NPS scheme. Such
withdrawals from the NPS shall be exempt from income tax subject to the following
conditions:
 The amount of withdrawal from the NPS scheme should not be more than 25% of the
total contribution made by the individual in the scheme.

6
Amendment vide Finance Act, 2021
  Partial withdrawal by the individual should be made in conformation with the Pension
Fund Regulatory and Development Authority Act, 2013 7 and related regulations
formed therein.
Payment received from sanctioned superannuation fund in notified circumstances and subject
to certain specified limits [Section 10(13)]
In accordance with Section 10(13) of the Act, in case of superannuation funds that are
approved by the Commissioner of Income Tax, payments made from such funds are exempt
from income tax in the following scenarios:
 Payment on passing away of beneficiary is exempt; or
 Payment to employee when such employee retires or becomes incapable of working
or incapacitated before his retirement is exempt;
 When a beneficiary dies, then due payment by way of refund of contributions is
exempt; or
 Payment by way of transfer to the individual employee’s pension account under a
sanctioned pension scheme envisaged under Section 80CCD and duly notified by the
central government is exempt;
However, it is pertinent to note in this regard that the employer’s contribution to the
superannuation fund is exempt from income tax, but, from the assessment year 2010-11
onwards any contribution made by the employer which is more than Rs. 1,50,000 per year is
taxable as perquisite. And the employee’s contribution is eligible for deduction under the
provision of Section 80C and the interest on accumulated balance is not liable to income tax.
House Rent Allowance (HRA) [Section 10(13A)]
In accordance with Section 10(13A) of the Act read with Rule 2A of Income Tax Rules, an
individual employee receiving House Rent Allowance (HRA) enjoys exemption to the extent
of least of the following:
 50% of salary for metro cities (i.e. Kolkata, Delhi, Mumbai and Chennai) or 40% of
salary in case of other cities;
 HRA actually received;
 Rent paid minus 10% of the salary.
Allowances for meeting business expenditure [Section 10(14)]
Section 10(14) of the Act read with Rule 2BB of Income Tax Rules allows partial
exemption for special allowances. In accordance with this provision, any such special
allowance or benefit, which is not a prerequisite as envisaged under Section 17(2), explicitly
given to meet expenses incurred during the carrying out of the duties of an office or
employment of profit, to the extent to which such expenses have actually been spent for that
purpose is exempt from income tax.
Awards [Section 10(17A)]
7
ACT 2013
In accordance with Section 10(17A) of the Act, any payment received either in cash or in
kind in pursuance of an award granted by the central or state government or by any body
approved by the central government in this behalf is exempt from income tax.
Pension given to a gallantry award winner [Section 10(18)]
In accordance with Section 10(18) of the Act, any central or state government employee who
has been awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or any other notified
gallantry award enjoys full exemption of his pension amount from income tax and in the
event of the death of such employee, the pension received by their family members is also
exempt from income tax.
Family pension given to the family members of armed forces [Section 10(19)]
In accordance with Section 10(19) of the Act read with Rule 2BBA of the Income Tax Rules,
when a member of the military or paramilitary forces of India dies in the line of duty, then
irrespective of his rank, the family pension given to the widow or children or nominated heirs
of such martyr is exempt from income tax. This benefit is also available to the armed forces
members who had no option but to take retirement owing to disabilities or bodily injuries
incurred in the line of duty. But this benefit of exemption is not available to those personnels
of armed forces who have been retired on superannuation or otherwise.
Income of a news agency [Section 10(22B)]
In accordance with Section 10(22B) of the Act, any income of a news agency which has been
duly notified, set-up in India solely for the collection and distribution of news is exempt from
income tax under the condition that such news agency uses its income or saves it for
application exclusively for the collection and distribution of news and does not disburse its
income in any form to its members.
Income of an association engaged in professional activities [Section 10(23A)]
In accordance with Section 10(23A) of the Act, any income (that is not income from house
property or income from rendering any specific service or income by way of interest or
income from dividend earned on investment) of a professional institution or association is
exempt from income tax, if the following conditions are satisfied:
 Such professional associations or institutions must be established in India for the
purpose of control, regulation, supervision or encouragement of the profession of law,
medicine, engineering, accounting, architecture or other similar notified professions.
 Such association or institution has been duly approved by the central government by
general or special orders.
 Such an association or institution applies their income for the sole purpose it was
formed.
Income accepted on account of Regimental Fund [Section 10(23AA)]
In accordance with Section 10(23AA) of the Act, any income which is accepted by an
individual on account of any regimental fund or non-public fund formed by the armed forces
of India for the welfare and benefit of the preceding and present members of such forces or
their family dependents, is exempt from income tax.
Income of a fund set up on account of welfare of employees [Section 10(23AAA)]
In accordance with Section 10(23AAA) of the Act read with Rule 16C of the Income Tax
Rules, when an individual employee receives any income from a duly notified and approved
fund formed for the welfare of employees and their family dependents, then such income is
exempt from income tax. It must be noted in this regard that such a welfare fund must work
for the exclusive purpose of its formation and must invest in the modes specified in Section
11(5) of the Act.
Income of pension fund [Section 10(23AAB)]
Income accruing from Khadi or cottage industry [Section 10(23B)]
In accordance with Section 10(23B) of the Act, any income of a not for profit institution
formed as a public charitable trust or society that is involved in the development of khadi and
cotton/village industries is exempt from income tax, if the following criteria are fulfilled:
 Such income arises from the business of production, sale and/or marketing of khadi or
other products of village or cottage industries.
 Such income is solely used or accumulated for the development of khadi or village
industries or both.
 Such an institution must be sanctioned by the Khadi and Village Industries
Commission.8
Income from fund or trust or hospital or other medical institution or university or other
educational institution [Section 10(23C)
In accordance with Section 10(23C) of the Act, any income received by an individual from a
fund or trust or hospital or other medical institution or university or other educational
institution is exempt from income tax subject to various related rules of the Income Tax
Rules,1962.
Income from mutual fund [Section 10(23D)]
In accordance with Section 10(23D) of the Act, any income generated from registered mutual
funds (subject to the provisions envisaged in Sections 115R to 115T) is exempt from income
tax.
Income from a notified Investor Protection Fund (IPF) [Section 10(23EA)]
In accordance with Section 10(23EA) of the Act, any income received by way of
contributions from a notified Investor Protection Fund (IPF), formed by recognised stock
exchanges in India is exempt from income tax. This exemption is subject to the condition that
where some contribution to such fund is pending and it was not charged under income tax
during any previous year, then when such due amount is shared in whole or in parts with the
notified IPF, then the full amount so shared shall be construed as the income of the previous
year in which such amount is so shared and shall be taxed accordingly.
8
Khadi and Village Industries Commission
Income from a notified Investor Protection Fund (IPF) formed by commodity exchange
[Section 10(23EC)]
In accordance with Section 10(23EC) of the Act, any income received by way of
contributions from commodity exchanges of a notified Investor Protection Fund (IPF),
formed by commodity exchanges in India is exempt from income tax. This exemption is
subject to the condition that where some contribution to such fund is pending and it was not
charged under income tax during any previous year, then when such due amount is shared in
whole or in parts with the notified commodity exchange, then the full amount so shared shall
be construed as the income of the previous year in which such amount is so shared and shall
be taxed accordingly.
Income of a notified Investor Protection Fund (IPF) formed by a depository [Section
10(23ED)]
In accordance with Section 10(23ED) of the Act, any income received by way of
contributions from a depository of a notified Investor Protection Fund (IPF), established by
a depository, in conformation with the regulations made under the SEBI Act,
19929 and Depository Act, 199610 is exempt from income tax. This exemption is subject to the
condition that where some contribution to such fund is pending and it was not charged under
income tax during any previous year, then when such due amount is shared in whole or in
parts with the notified depository, then the full amount so shared shall be construed as the
income of the previous year in which such amount is so shared and shall be taxed
accordingly.
Income of a venture capital fund or company accruing from investment in a venture capital
undertaking [Section 10(23FB)]
In accordance with conditions specified in Section 10(23FB) of the Act, when a venture
capital fund or a venture capital company invests in a venture capital undertaking and
generates income from the same, then such income is exempt from income tax from the
assessment year 2001-02 onwards. Although, it may be noted in this regard that these
provisions is not applicable in respect of any income of a venture capital company or venture
capital fund, being an investment fund specified in the provision of Clause (a) of the
Explanation 1 to Section 115UB of the Act, of the previous year relevant to the assessment
year beginning on or post 01.04.2016.

9
SEBI Act, 1992
10
Depository Act, 1996
CONCLUSION
Income exemptions and deductions play a crucial role in the overall tax system, promoting
fairness and encouraging certain behaviours, such as saving for retirement or supporting
charitable organizations. Understanding these elements can help taxpayers effectively
manage their financial situations and minimize their tax liabilities. For personalized advice,
consulting with a tax professional is often recommended to navigate the complexities of tax
law. To conclude, the Income Tax Act of 1961 provides various deductions and exemptions to
taxpayers to reduce their tax liability. Deductions are allowed on certain expenses incurred by
the taxpayer, such as medical expenses, education expenses, donations to charitable
institutions, and home loan repayments.
Exemptions, on the other hand, are allowed on certain incomes, such as agricultural income
and income earned by charitable institutions. Some of the popular deductions and exemptions
available under the Income Tax Act of 1961 include the standard deduction, deduction for
interest paid on a home loan, deduction for health insurance premiums, deduction for
contributions to the National Pension System (NPS), and exemption for long-term capital
gains on the sale of listed equity shares and mutual fund units.
It is important for taxpayers to understand the various deductions and exemptions available
to them and to take advantage of them while filing their tax returns. This can help them
reduce their tax liability and save money in the long run. However, it is also important to note
that there are limits to the amount of deductions and exemptions that can be claimed, and
taxpayers should consult with a tax professional or use tax filing software to ensure they are
correctly claiming all available deductions and exemptions
It is really unfortunate that despite the benefit provided under multiple clauses of exemptions
available, merely around 6.25% of India’s population pays income tax compared to the USA’s
45% population paying income tax, this poor income tax scenario is really miserable. No
wonder, frequent loans (with hefty strings attached) from international bodies have become
the common culture of our government. It is easy to blame the complex tax regime,
corruption or the poverty of the nation but unless this apathy towards the payment of income
tax is resolved at the earliest, the future is bound to look bleak. The blame game on the tax
collectors is slowly chipping away at the branch where we reside at the dear cost of inviting
economic catastrophes for our future generations.

BIBLIOGRAPHY

LINLK REFERENCES
 https://legalvidhiya.com/income-exemptions-and-deductions-under-income-tax-
act-1961/
 https://cleartax.in/glossary/exempt-income
 https://blog.ipleaders.in/section-10-of-income-tax-act-1961/
 http://dx.doi.org/10.29039/01840-8.
 http://repositorio.pucp.edu.pe/index/handle/123456789/118962.

BOOK REFERED

 Jin, Chaowu. Chinese tax law. Beijing: Law press, 2004.

 Glen, Loutzenhiser, ed. Revenue law: Introduction to UK tax law,
income tax; capital gains tax, inheritance tax. 7th ed. Oxford, United
Kingdom: Hart Publishing, 2012.
 Zhutaev, Aleksey, Elena Pokachalova, and Mihail Sadchikov. Tax
law. ru: INFRA-M Academic Publishing LLC., 2023.
 Poland. Tax law. Edited by Kierzkowska Danuta. Warsaw: Tepis
Pub. House, 2000.
 Kolesnichenko, Ol'ga. Tax Law. ru: Publishing Center RIOR, 2019.