Transcript Section-10 - CA Pankaj Goel

INCOME EXEMPT FROM TAX
Chapter III of the Income-tax Act, 1961
deals with the Incomes which do not form
part of total income.

This Chapter covers sections 10
to 13A
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Section 10 contains numerous clauses subject to
amendments, exempting various kinds of
income from inclusion for purposes of tax.
These exemptions have been inserted from
social, economic, political, international and
other considerations and the contents and scope
of the exemptions change from time to time.
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Section 10 : Any income of any persons falling
within any of the clauses of section 10 shall not
be included in the total income.
EXEMPTION VS DEDUCTION
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Agricultural Income is exempt from
tax if it comes within the definition
of “agricultural income” as given in
Section 2(1A)
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Subject to the provisions of 64(2), any sum
received by an individual as a member of a HUF,
where such sum has been paid out of the income
of the family, or, in the case of any impartible
estate, where such sum has been paid out of the
income of the estate belonging to the family.
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In the case of a person being a
partner of a firm which is
separately assessed as such, his
share in the total income of the
firm.
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Any sum received on life insurance policies
(including bonus) is exempt.
Exclusions :
any sum received u/s. 80DD(3)
b.
any sum received under a Keyman Insurance Policy
c.
any sum received under an insurance policy (issued
after 31.03.2003) in respect of which the premium paid
in any year during the term of policy, exceeds 20% of
the actual sum assured
However, sum received under such policy on the
death of a person shall continue to be exempt
a.
Actual sum assured does not include
premiums agreed to be returned or
benefits by way of bonus
any
any
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Deduction is available to an Individual or HUF who is resident in India.
Individual can be a resident or a non resident or a foreign national.
Deduction is available for any amount paid for the medical treatment
(including nursing), training and rehabilitation of a handicapped
dependent.
Deduction is also available for any amount deposited in a scheme with
LIC or any other insurer or UTI in this regard for the maintenance of a
person who is dependent and disabled. This scheme should provide for
the payment of money in lump sum for the benefit of dependent in the
event of death of a person making such deposit.
Deduction is available for expenditure done on the treatment of
dependent that is a person with a disability.
The person should be atleast 40% disabled. If individual is less than 40%
disabled then no deduction is allowed.
Deduction allowed is Rs.50000 in case of a dependent being a disabled
and has a disability of atleast 40% but less or equal to 80% or Rs.75000 in
case a person is dependent and severely disable i.e. disability of more
than 80% of one or more disabilities
The amount of deduction is not dependent on the amount of actual
expenditure incurred by the assessee.
Dependent means in case of Individual spouse, children, parents,
brothers and sisters and in case of HUF any member of HUF.
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Such person should be wholly and mainly dependent for support
and maintenance on such individual or HUF.
Dependent himself should not claim deduction under section 80U in
computing his own total income.
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If the person being a person with a disability in whose name the sum has
been deposited with LIC or any other insurer or UTI, dies before the
assessee then the amount equal to the amount which has been deposited
shall be deemed to be the income of the assessee in the previous year in
which such sum has been received from insurer and shall be chargeable
to tax in the year of receipt.
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For claiming the deduction the assessee has to furnish a
certificate from the medical authorities and has to file it along
with ITR under section 139(1).
Disability for this section would mean blindness, low vision, leprosycured---meaning person who has been cured of leprosy but is
suffering from loss of sensation in feet or hands, hearing
impairment, locomotors disability---means disability of bones,
joints or muscles leading to substantial restriction of the
movement of the limbs, mental retardation---means incomplete
development of mind, which is specially characterized by sub
normality of intelligence, mental illness.
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In case the income of an individual includes
the income of his minor child in terms of
section 64(1A), such an individual shall be
entitled to exemption of Rs. 1,500/- in respect
of each minor child if the income of such
minor is includible under section 64(1A)
exceeds that amount.
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Any income accruing or arising to a minor child is
liable to be clubbed with father or mother whose
total income is greater before such clubbing.
Income derived by a minor child out of skill and
talent or by way of salary and wages shall not be
clubbed. However, if such income is invested and
income is earned thereon, such income shall be
clubbed.
Clubbing ceases to operate when the minor becomes
a major.
There is no clubbing of income in the case of a minor
child who is eligible for deduction u/s. 80U.
Similarly, where a minor child does not have parents,
clubbing of income does not arise. The minor child
will be assessable in his own case. Guardian will be
representative assessee for assessment purposes.
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Income of minor child will be included in the total income of that parent whose total income is greater
(before including income of child).
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If marriage of parents does not subsist it shall be income of that parent who maintains the child in the
previous year.
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Where any such income is once included in the total income of either parent any such income arising in
any succeeding year shall not included in the total income of the other parent unless AO is satisfied that
it is necessary to do so.
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Clubbing of incomes of minor accruing till the date of attaining majority shall be done and not
thereafter. On and from the date of attaining majority the incomes shall be taxed in the hands of child
himself.
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Brought forward loss of an individual assessee can be set off against the business income of minor child
which has been so clubbed under this section.
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Under this section only net incomes shall be clubbed and that too under the same head of income.
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Deductions of section 80C to 80U shall be allowed till the aggregate of the income of minor child and
that of parent.
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Minor shall not be allowed the deductions under sections 80C to 80U on account of the income, which
have been clubbed in the hands of parent.
In the following cases income of minor shall not be clubbed:
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Child is suffering from any disability of the nature specified in Section 80U like physically disability,
totally blind etc.
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Income of child on account of manual work or activity involving skill, talent or specialized knowledge
etc.
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If income of child is so included, the parent shall be entitled to an exemption in respect of each minor
child under section 10(32) which shall be of the lower of:
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`1, 500 pa per child
Income of minor so included in income of parent.
Such exemption is available from the total income of the minor child that is included in the total
income of the assessee. Exemption to parent under section 10(32) for ` 1,500 shall be available if the
clubbing of minor child’s income is done as per section 64(1A). If income is added as per section 27 of
deemed ownership then exemption of section 10(32) shall not be allowed
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DEDUCTION ALLOWED TO PHYSICALLY HANDICAPPED PERSON: SECTION 80U
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The assessee claiming the deduction should be an Individual
(can be Indian or a foreign national) being a resident and a person with a disability.
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The disability should be 40% or more.
Deduction shall be given only when he could satisfy the assessing officer that the
disability has the effect of reducing considerably his capacity to do normal work or
engaging in gainful employment or occupation.
He is certified by a medical authority to be a person with the disability at any time
during the PY and this certificate has to be furnished along with the ROI. Further
this certificate has to be furnished every year in which this deduction is claimed.
The amount of deduction shall be Rs.50000 in case of
a person with a disability and Rs.75000 in case of a
person with a severe disability (having disability of
over 80%).
Meaning of disability under this section is Blindness, Low vision, Leprosy-cured--meaning person who has been cured of leprosy but is suffering from loss of sensation
in feet or hands, Hearing impairment, Locomotors disability---means disability of
bones, joints or muscles leading to substantial restriction of the movement of the
limbs.
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Any income arising from the transfer of a capital
asset being a unit of US 64and where the transfer
of such assets takes place on or after 1.04.2002,
shall be exempt from tax. This exemption is
applicable whether US 64 Unit is long term
capital asset or short term capital asset.
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Any income by way of dividends received
from Domestic Company.
As per Section 2(22A), Domestic Company
means an Indian Company, or any other
company which, in respect of its income
liable to tax under this Act, has made the
prescribed
arrangements
for
the
declaration and payment, within India, of
the dividends (including dividends on
preference shares) payable out of such
income.
a)
b)
c)
Income received in respect of units of Mutual
Fund specified under clause (23D); or
Income received in respect of units from the
Administrator of the specified undertaking;
or
Income received in respect of units from the
specified company
It may please be noted that Transfer of the
abovementioned Units are not exempt under
this provision.
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Income from transfer of Agricultural Land is
exempt if following conditions are fulfilled :
a.
such land is situate in any area referred to in
item (a) or item (b) of sub-clause (iii) of
clause (14) of Section 2
(land within Municipality, cantonment board having
more than 10000 population, within 8 kms from
local
limits or municipality are not covered)
Section 10(37) : Contd….
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such land, during the period of two years
immediately preceding the date of transfer, was
being used for agricultural purposes by such HUF
or individual or a parent of his.
such transfer is by way of compulsory acquisition
under any low or a transfer the consideration for
which is determined or approved by the Central
Government or the Reserve Bank of India.
Such
income
has
arisen
form
the
compensation or consideration for such
transfer received by such assessee on or after
the 01.04.2004
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Long Term Capital Gains arising on transfer of
equity shares or units of equity oriented
mutual fund is not chargeable to tax from the
assessment year 2005-06 if such transaction is
covered by securities transaction tax.
Mutual Fund as defined u/s. 10(23D) i.e.
Mutual fund registered under the SEBI Act,
1992, Mutual fund set up by Public Sector
Bank, Public Financial Institution or
Authorised by the RBI and subject to such
conditions as the Central Govt. may by
notification in the Official Gazette, specify in
this behalf
(a)
(b)
(c)
(d)
Amount received (Compensation) at the time
of voluntary retirement or separation is
exempt from tax if the following conditions
are satisfied :
Compensation is received at the time
retirement or termination.
Compensation is received by an employee of
the specified undertakings.
Compensation is received in accordance with
the
scheme
of
voluntary
retirement/separation which is framed in
accordance with prescribed guidelines.
Maximum amount of exemption is Rs.
5,00,000/-.
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INTEREST ON SECURITIES: SECTION 10(15): Interest income
exempt from tax are given under section 10(15) some of which
are:
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Interest on post office saving bank account.
 Interest on fixed deposits with government or with post office.
 Interest on capital investment bonds.
 Interest on relief bonds.
10(16) Scholarships grant for education
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10(17) Daily allowances of MP
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10(17A) Award of Central or State Govt
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10(18) Pension income of winners of gallantry awards
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10(19) Family pension in case of death of members of armed forces
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.
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SECTION 10(39): INCOME EARNED FROM THE
NOTIFIED INTERNATIONAL SPORTING EVENTS held in
India are exempt from tax if such events are
approved by the international bodies and has a
participation of more than 2 countries.
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SECTION 10(43): REVERSE MORTGAGE: Any amount
received by an individual as a loan, either in lump
sum or in installment, in a transaction of reverse
mortgage is exempt.
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SECTION 10(44): NEW PENSION TRUST: Any income
received by any person on behalf of the New Pension
System Trust established on 27-2-2008 under the
provision of the Indian Trust Act of 1882 shall be
exempt from income tax.
 "disaster"
means a catastrophe, mishap, calamity
or grave occurrence in any area, arising from
natural or man made causes, or by accident or
negligence which results in substantial loss of
life or human suffering or damage to, and
destruction of, property, or damage to, or
degradation of, environment, and is of such a
nature or magnitude as to be beyond the coping
capacity of the community of the
 affected area