Income exempted under section 10 of Income tax Act 1961 for assessment year 2017-18

Income exempted under section 10 of income tax Act 1961 for assessment year 2017-18, based on B Com Syllabus of Goa University

1. 10-07-2017 [email protected] 1 Income exempt from Tax under section 10 (Selected items) For Assessment Year 2017-18

2. EXEMPTIONS & EXCLUSIONS U/S. 10: Agricultural Income u/s. 10(1) Receipts by a member, from a HUF u/s. 10(2) Share of Profit from partnership firm u./s. 10(2A) Leave Travel Concession in India u/s. 10(5) Gratuity u/s. 10(10) 10-07-2017 [email protected] 2

3. EXEMPTIONS & EXCLUSIONS U/S. 10 Compensation received at the time of Voluntary Retirement u/s. 10(10C) Amount received under Life Insurance Policy u/s 10(10D) Payment received from Provident Fund u/s. 10 (11), (12) Payment received from an Approved Superannuation Fund u/s. 10(13) House Rent Allowance u/s. 10 (13A). 10-07-2017 [email protected] 3

4. EXEMPTIONS & EXCLUSIONS U/S. 10 Special Allowance u/s. 10 (14): Transport Allowance, Conveyance Allowance, Daily Allowance, Uniform Allowance, Helper Allowance, Research Allowance, Children Education Allowance, Children’s Hostel Expenditure Allowance. Interest on Securities u/s. 10(15) Educational Scholarships u/s. 10(16) Income of a minor child u/s 10 (32) [including basic provisions of sec 64(1A)] Dividends and Interest on Units u/s. 10(34) (35). 10-07-2017 [email protected] 4

5. Income not included in total income (U/s 10) The income tax Act 1961 enumerates in section 10, the items of income which are exempt from tax . While computing the total income of a previous year of any person, any income which falls within any of the following clause shall not be included in the total income. 10-07-2017 [email protected] 5

6. Agricultural Income u/s. 10(1) Agriculture income is exempted from tax if it comes from within the definition of “agricultural income” Why Constitution gives exclusive power to make laws with respect to taxes on agricultural income to the State Legislature. 10-07-2017 [email protected] 6

7. What is agriculture income Any rent received from land which is used for agricultural purpose Any income derived from such land by agricultural operations including processing of agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale of such produce  Income attributable to a farm house 10-07-2017 [email protected] 7

8. Certain income which is treated as Agriculture Income    Income from sale of replanted trees.    Rent received for agricultural land. Income from growing flowers. Share of profit of a partner from a firm engaged in agricultural operations. Interest on capital received by a partner from a firm engaged in agricultural operations.   Income derived from sale of seeds 10-07-2017 [email protected] 8

9. Certain income which is not treated as Agricultural Income Income from poultry farming. Income from bee hiving. Income from sale of spontaneously grown trees. Income from dairy farming Purchase of standing crop Dividend paid by a company out of its agriculture income Income of salt produced by flooding the land with sea water. Royalty income from mines. Income from butter and cheese making Receipts from TV serial shooting in farm house is not agriculture income. 10-07-2017 [email protected] 9

10. Receipts by a member, from a HUF u/s. 10(2) Sum received by an individual, as a member of HUF, either out of the family or out of income of estate belonging to the family, is exempted from tax. Reason – HUF is taxed separately 10-07-2017 [email protected] 10

11. Share of Profit from partnership firm u/s 10(2A) Share of profit received by partners from a firm is not taxable in the hands of partners. Reason – partnership firm is taxed separately 10-07-2017 [email protected] 11

12. Leave Travel Concession in India u/s. 10(5) The value of leave travel concession received or due to an individual is exempted to the extent it is actually spent. 10-07-2017 [email protected] 12

13. Gratuity u/s. 10(10) Gratuity is paid for long and meritorious services rendered by an employee. With Gratuity Act, 1972, gratuity payment has become legally compulsory. 10-07-2017 [email protected] 13

14. Tax treatment of Gratuity For Govt. employees – fully exempt from tax For Non-Govt. employee covered by payment of Gratuity Act 1972. – Least of the following three is exempt from tax 15 days salary (7days salary in case of seasonal establishment ) based on salary last drawn for each year of service Rs. 10,00,000 Gratuity actually received 10-07-2017 [email protected] 14

15. Compensation received at the time of Voluntary Retirement u/s. 10(10C) Compensation on voluntary retirement of an employee of a public sector company and other entities shall be exempted from tax to the extent of Rs. 5,00,000. Public sector undertaking and other entities include Company Local authority Establishment under central and state govt. Cooperative society Other state govt. and central govt. Institutions. 10-07-2017 [email protected] 15

16. Amount received under Life Insurance Policy u/s 10(10D) Any sum received under life insurance policy, including the sum allocated by way of bonus on such policy shall be totally exempt from tax. 10-07-2017 [email protected] 16

17. Payment received from Provident Fund u/s. 10 (11), (12) Section 10 (11) Any payment from a provident fund to which the provident fund Act ,1925 applies or from any other provident fund set up by Central Govt. and notified in the official gazette is totally exempted from tax. Section 10 (12) Accumulated balance due and become payable to an employee participating in a recognised provident fund, is exempt from tax 10-07-2017 [email protected] 17

18. Payment received from an Approved Superannuation Fund u/s. 10(13) Payment received from an approved superannuation fund is exempted from tax 10-07-2017 [email protected] 18

19. House Rent Allowance u/s. 10 (13A). Exemption in respect of house rent allowance is least of the following three Amount equal to 50 percent of salary, where house is situated in metros and 40 percent of salary where residential house is situated at any other place. Actual house rent allowance received Excess of rent paid over 10 percent of salary 10-07-2017 [email protected] 19

20. salary for calculation purpose Basic salary plus dearness allowance and grade pay Dearness Allowance to be included if terms of employment so provides Commission to be included if commission paid is based on a fixed percentage of turnover. Does not include any allowances and perquisites 10-07-2017 [email protected] 20

21. Important points When salary, house rent allowance, rent paid and place of residence are the same throughout the previous year, the exemption should be calculated on annual basis . However, where there is a change in respect of any of the aforesaid factors, then the exemption shall be worked out on monthly basis 10-07-2017 [email protected] 21

22. Salary for this purpose mean Basic salary Dearness Allowance if terms of employment so provides. commission based on a fixed percentage of turnover. all other allowances and perquisites is to be excluded. Salary related to period of rent should only be considered on due basic . 10-07-2017 22

23. Important points Salary received in period as advance or arrear not related to calculation period should not be included. For calculating 40/50 % of salary, residential accommodation is important, not where the person is working The calculation should be done on separately(monthly) if salary or HRA varies during the year. No, HRA exemption if House rent paid is less than 10 % of salary. No exemption allowed where an employee lives in his own house, or in a house for which he has not paid any rent.

24. Mr. Sanjay Dessai , who resides in Goa, receives Rs . 78,000 as basic pay during previous year 2015-16. He stays in his fathers house up to 31 st august 2015 for which he did not pay any rent and thereafter in an accommodation taken on monthly rent of Rs. 3,000. The employer, however, pays Rs 700 per month as house rent allowance throughout the previous year. 10-07-2017 [email protected] 24

25. Calculation of house rent allowance exemption for assessment year 2016-17 RS. Rs . House Rent Allowance received (700 per month for 12 months ) 8,400 Less – Exempted 40 percent of Salary ( 78000/12 =6500 X 40% = 2,600 HRA received Rs 7,00 per month 700 Excess rent paid over 10 percent of salary ( rent paid 3000 – 10 percent of Salary 650) = 2350 2,350 Amount exempted Rs . 700 X 7 4,900 Taxable 3,500 10-07-2017 [email protected] 25

26. Special Allowance u/s. 10 (14): Conveyance Allowance, Daily Allowance, Uniform Allowance, Helper Allowance, Research Allowance Allowances are exempt to the extent the amount is utilised for the specific purpose for which allowance is received. Transport Allowance, Children Education Allowance, Children’s Hostel Expenditure Allowance. (fixed amount of exemption per month) 10-07-2017 [email protected] 26

27. Transport Allowance Transport allowance is granted to meet his expenditure for the purpose of commuting between the place of his residence and place of duty . Exemption Up to Rupees 1,600 per month Rupees 3,200 per month in the case of blind or orthopedically handicapped employee 10-07-2017 [email protected] 27

28. Conveyance Allowance Conveyance allowance is granted to meet expenditure on conveyance in performance of duties of an office. Exemption – Amount of the allowance or The amount utilised for the specific purpose – whichever is lower 10-07-2017 [email protected] 28

29. Daily Allowance/ Uniform allowance and Research allowance Exemption – Amount of the allowance or The amount utilised for the specific purpose – whichever is lower 10-07-2017 [email protected] 29

30. Uniform Allowance Exemption – Amount of the allowance or The amount utilised for the specific purpose – whichever is lower 10-07-2017 [email protected] 30

31. Research Allowance Exemption – Amount of the allowance or The amount utilised for the specific purpose – whichever is lower 10-07-2017 [email protected] 31

32. Children Education Allowance The allowance is given for children's education Rupees 100 per month per child up to a maximum of 2 children 10-07-2017 [email protected] 32

33. Helper Allowance Exemption – Amount of the allowance or The amount utilised for the specific purpose – whichever is lower 10-07-2017 [email protected] 33

34. Hostel Expenditure Allowance The allowance is granted to an employee to meet the hostel expenditure on his child Rupees 300 per month per child up to a maximum of two children. 10-07-2017 [email protected] 34

35. Tiffin allowance – taxable Fixed medical allowance – taxable Servant allowance – taxable 10-07-2017 [email protected] 35

36. Interest on Securities u/s. 10(15) income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits as the Central Government may, by notification in the Official Gazette. 10-07-2017 [email protected] 36

37. Educational Scholarships u/s. 10(16) Scholarship granted to meet the cost of education is totally exempt from tax and will not be included in the computation of total income of assessee . 10-07-2017 [email protected] 37

38. Income of a minor child u/s 10 (32) [including basic provisions of sec 64(1A)] In case the income of an individual includes the income of his minor child in terms of section of 64(1A), such individual shall be entitled to exemption of Rs 1500 in respect of each minor child. Section 64(1A) All income which arises or accrues to the minor child shall be clubbed in the income of his parents. 10-07-2017 [email protected] 38

39. Dividends and Interest on Units u/s. 10(34) (35). Income by way of dividends 10(34) Income by way of dividend is exempted from tax in the hands of shareholders. Income from mutual fund 10(35) Any income received in respect of units of a Mutual Fund/ specific company is exempted from tax. 10-07-2017 [email protected] 39