- Agricultural Income (Section 10(1)):
- Definition: Income derived from agricultural operations, including income from land, buildings on agricultural land, and produce from agriculture, is exempt from income tax.
- Conditions: Agricultural income is fully exempt unless it exceeds INR 5,000 per year. If it exceeds this threshold, the excess amount is included in the total income for rate purposes, potentially affecting the tax rate on non-agricultural income.
- HUF Estate Income (Section 10(2)):
- Definition: Income received by a member of a Hindu Undivided Family (HUF) from the HUF’s estate is fully exempt from tax.
- Conditions: This exemption applies to income derived from the estate managed and owned by the HUF.
- Share of Profit from Partnership Firm (Section 10(2A)):
- Definition: Any share of profit received by a partner from a partnership firm is exempt from tax.
- Conditions: Since the partnership firm itself pays taxes on its earnings, the share of profit received by partners is not taxed again in their hands.
- Leave Travel Concession (LTC) (Section 10(5)):
- Definition: LTC provided by an employer to an employee for travel expenses within India is partially exempt from tax.
- Conditions: The exemption applies to expenses incurred on actual travel costs during the leave period, subject to specific conditions and limits set by the Income Tax Act.
- House Rent Allowance (HRA) (Section 10(13A)):
- Definition:HRA received by an employee from an employer to meet rental expenses is exempt from tax to the extent of the least of the following:
- Actual HRA received.
- 50% of salary (for metros) or 40% (for non-metros).
- Excess of rent paid over 10% of salary.
- Conditions: The exemption is available if the employee actually pays rent for the accommodation occupied.
- Definition:HRA received by an employee from an employer to meet rental expenses is exempt from tax to the extent of the least of the following:
- Allowances for MPs/MLAs (Section 10(17)):
- Definition: Allowances received by Members of Parliament (MPs) and Members of State Legislatures (MLAs) to cover expenses related to their official duties are exempt from tax.
- Conditions: These allowances are provided to meet specific expenses incurred during the performance of their duties and are fully exempt under this section.
- Pension (Section 10(10A)):
- Definition: Pension received by individuals is exempt from tax under certain conditions.
- Conditions: Commuted pension received by government employees is fully exempt. For non-government employees, the exemption depends on factors like the existence of gratuity and the extent of commutation.
- Gratuity (Section 10(10)):
- Definition: Gratuity received by an employee on retirement or death is exempt from tax.
- Conditions:The exemption amount is the least of the following:
- 15 days’ salary based on last drawn salary for each completed year of service.
- INR 20 lakhs (maximum exemption limit).
- Actual gratuity received.
- Provident Fund (Section 10(11) and 10(12)):
- Definition: Withdrawals from Statutory Provident Fund (SPF) and Public Provident Fund (PPF) are fully exempt from tax.
- Conditions: Both SPF and PPF are savings schemes where contributions and accumulated interest are tax-exempt at the time of withdrawal.
- Scholarships (Section 10(16)):
- Definition: Scholarships granted for the purpose of education are exempt from tax.
- Conditions: This exemption applies regardless of the source of the scholarship, whether provided by the government, educational institutions, or other organizations.
- Awards and Rewards (Section 10(17A)):
- Definition: Awards and rewards approved by the government for excellence in various fields are exempt from tax.
- Conditions: These awards are intended to recognize achievements and contributions in fields like arts, sciences, sports, and literature, promoting excellence without tax implications.
- Income of Local Authorities (Section 10(20)):
- Definition: Income of local authorities from specified sources is exempt from tax.
- Conditions: This exemption encourages local governance and development activities undertaken by municipal bodies, panchayats, and other local governing bodies.
- Income from Foreign Sovereign Funds (Section 10(23FE)):
- Definition: Income of specified foreign sovereign funds investing in India under specific conditions is exempt from tax.
- Conditions: This provision aims to attract foreign investment by exempting income earned by sovereign wealth funds from certain types of investments in India.
- Income of Charitable Trusts and Institutions (Section 11 and 12):
- Definition: Income derived from property held under trust for charitable or religious purposes is exempt from taxation.
- Conditions: Charitable trusts and institutions must comply with specified conditions related to the application of income and registration with the Income Tax Department to qualify for this exemption.
These exemptions under the Income Tax Act are crucial in promoting specific economic activities, providing relief in certain situations, and encouraging investments in sectors deemed beneficial for national development. Understanding these provisions helps taxpayers plan their finances effectively while ensuring compliance with tax laws.