Any sum received by a Co-parcener from Hindu Undivided

Family (H.U.F.) [Section 10(2)]

As per section 10(2), amount received out of family income,
or in case of impartible estate, amount received out of income
of family estate by any member of such HUF is exempt from
tax.

Example-1.
HUF earned Rs.1,00,000 during the previous year and paid tax
on its income. Mr. A, a co-parcener is an employee and earns
a salary of Rs.25,000 p.m. During the previous year Mr. A also
received Rs.50,000 from HUF. Mr. A will pay tax on his salary
income but any sum of money received from his HUF is not
chargeable to tax in Mr. A’s hands.
Example-2.
HUF earned `.75,000 during the previous year 2018-19 and
it is not chargeable to tax. Mr. A, a co-parcener is earning
individual income of Rs.40,000 p.m. Besides his individual
income, Mr. A receives Rs.20,000 from his HUF.
Mr. A will pay tax on his individual income but any sum of
money received by him from his HUF is not chargeable to tax
in the hands of co-parcener whether the HUF has paid tax or
not on that income.
Share of Income from the Firm [Section 10(2A)]
As per section 10(2A), share of profit received by a partner
from a firm is exempt from tax in the hands of the partner.
Further, share of profit received by a partner of LLP from the
LLP will be exempt from tax in the hands of such partner.
This exemption is limited only to share of profit and does not
apply to interest on capital and remuneration received by the
partner from the firm/LLP.

Interest paid to Non-Resident [Section 10(4)(i)]

As per section 10(4)(i), in the case of a non-resident any
income by way of interest on certain notified securities or
bonds (including income by way of premium on the redemption
of such bonds) is exempt from tax.
As per section 10(4)(ii), in the case of an individual, any income
by way of interest on money standing to his credit in a Non-
Resident (External) Account in any bank in India in accordance
with the Foreign Exchange Management Act, 1999, and the
rules made thereunder is exempt from tax.

Exemption under section 10(4)(ii) is available only if such

individual is a person resident outside India as defined in
clause (q) of section 2 of the said Act or is a person who has
been permitted by the Reserve Bank of India to maintain the
aforesaid Account.
Interest to Non-Resident on Non-Resident (External)
Account [Section 10(4)(ii)]
Any income by way of interest on moneys standing to his
credit in a Non-Resident (External) Account in any bank in
India shall be exempt from tax in case of an individual who is
a person resident outside India or is a person who has been
permitted by the RBI to maintain the aforesaid account. The
person residing outside India shall have the same meaning as
defined under Foreign Exchange Regulation Act, 1973, FEMA,
1999. This exemption shall not be available on any income by
way of interest paid or credited on or after 1-4-2005.
Interest paid to a person of Indian Origin and who is
Non-Resident [Section 10(4B)]
In case of an individual, being a citizen of India or a person of
Indian origin, who is nonresident, any income from interest on
such savings certificates issued by the Central Government,
as Government may specify in this behalf by notification in the
Official Gazette, shall be fully exempt. The exemption under
this section shall not be allowed on bonds or securities issued
on or after 1-6-2002.
This exemption shall be allowed only if the individual has
subscribed to such certificates in Foreign Currency or other
foreign exchange remitted from a country outside India in
accordance with the provisions of the Foreign Exchange Act,
1973, FEMA, 1999 and any rules made there under.
For this purpose, a person shall be deemed to be of Indian
origin if he or either of parents or any of his grandparents, was
born in India or in undivided India.

Leave Travel Concession or Assistance (LTC/LTA) to an

Indian Citizen Employee [Section 10(5)]
The employee is entitled to exemption under section 10(5) in
respect of the value of travel concession or assistance received
by or due to him from his employer or former employer for
himself and his family, in connection with his proceeding—
a. on leave to any place in India.
b. to any place in India after retirement from service or after
the termination of his service.
The exemption shall be allowed subject to the following:
i. where journey is performed by air — Maximum exemption
shall be an amount not exceeding the air economy fare of
the National Carrier by the shortest route to the place of
destination;
ii. where places of origin of journey and destination are
connected by rail and the journey is performed by any mode
of transport other than by air — Maximum exemption shall
be an amount not exceeding the air-conditioned first class
rail fare by the shortest route to the place of destination;
and
iii. where the places of origin of journey and destination or
part thereof are not connected by rail and the journey is
performed between such places — The amount eligible for
exemption shall be:
A. where a recognised public transport system exists, an
amount not exceeding the 1st class or deluxe class
fare, as the case may be, on such transport by the
shortest route to the place of destination; and
B. where no recognised public transport system exists, an
amount equivalent to the air conditioned first class rail
fare, for the distance of the journey by the shortest
route, as if the journey had been performed by rail.
Exemption will, however, in no case exceed, actual
expenditure incurred on the performance of journey.

HOW MANY TIMES CAN EXEMPTION BE CLAIMED?

• The assessee can claim exemption in respect of any two
journeys in a block of 4 years. For this purpose, the first
block of 4 years was calendar years 1986-89, second block
was 1990-93, third block was 1994-97, fourth block was
1998-2001, fifth block was 2002-05 sixth block was 2006-
09, seventh block is 2010 to 2013, eight block is 2014-
2017 and ninth block will be 2018-2021.
• If the assessee has not availed of the exemption of LTC
in a particular block, whether for both the journeys or for
one journey, he can claim the exemption of first journey in
the calendar year immediately succeeding the end of the
block of four calendar years. In other words, maximum
one journey can be carried forward and that too only for
the first journey in the following calendar year unless the
period is otherwise extended. Such journey undertaken
during the extended period will not be taken into account
for determining the tax exemption of two journeys for the
succeeding block.
Exemption available only in respect of two children
The exemption relating to LTC shall not be available to more
than two surviving children of an individual after 1.10.1998.
Exception: The above rule will not apply in respect of children
born before 1.10.1998 and also in case of multiple birth after
one child.
IMPORTANT NOTES :
1. In case the LTC is encashed without performing the journey,
the entire amount received by the employee would be
taxable.
2. Family for this purpose includes:
a. the spouse and children of the employee;
b. parents, brothers & sisters of the employee, who are
wholly or mainly dependent upon him.

3. The exemption can be availed for the journey undertaken

while on leave during the tenure of service or even after
retirement/termination from service.
4. The exemption is allowed only in respect of fare. Expenses
incurred on porterage, conveyance from residence to the
railway station/airport/bus stand and back, boarding and
lodging or expenses during the journey will not qualify for
exemption.
5. Exemption is available in respect of shortest route. Where
the journey is performed from the place of origin to
different places in a circular form or in any other manner,
the exemption for that journey will be limited to what is
admissible for the journey from the place of origin to the
farthest point reached, by the shortest route.
Remuneration or Salary received by an individual who
is not a citizen of India [Section 10(6)]
The following incomes are exempt when received by an
individual who is not a citizen of India:
(i) Remuneration [U/s 10(6)(ii)].
a. The remuneration received by an ambassador or other
officials of the Embassy, High Commission or Legation
of a foreign State in India.
b. The remuneration by a consular officer of a foreign
State in India.
c. The remuneration received by a trade commissioner or
other official representative in India of a foreign State,
provided corresponding officials of the Government of
India in that country are given a similar concession.
d. The remuneration received by a member of the staff of
any of the officials referred to in (a), (b) and (c) above.
If the person mentioned above in (a) to (d) is a
subject of the country represented, is not engaged
in any business, profession or employment in India
(otherwise than as a member of such staff), and the
country represented gives similar concession to the
members of the staff of corresponding officials of the
Government of India.

(ii) Remuneration received by him as an employee of foreign

enterprise [U/s 10(6)(vi)]
(e.g., technician deputed by a foreign firm to work in
India), for service rendered by him during his stay in India
provided the following conditions are fulfilled—
1. the foreign enterprise is not engaged in any trade or
business in India ;
2. his stay in India does not exceed in the aggregate a
period of 90 days in such previous year ; and
3. such remuneration is not liable to be deducted from the
income of the employer chargeable under the Act.
(iii)Employment on a foreign ship [U/s 10(6)(viii)].
Any income chargeable under the head “Salaries” received
by or due to any such individual being a non-resident, as
remuneration for service rendered in connection with his
employment on a foreign ship where his total stay in India
does not exceed in the aggregate of a period of 90 days in
the previous year.
(iv)Remuneration received by an employee of foreign govt.
during his stay in India for his training in India [U/s 10(6)
(xi)].
Such remuneration shall be fully exempted if he is taking
training in any of the following concern :
a. Institution owned by govt.
b. A company wholly owned by Central or State govt. or
partly owned by Central and partly by State govt.
c. A subsidiary Co. of company referred at point (b) above
d. Any corporation established by or under Central, State
or Provincial Act
e. Any society registered under Societies Registration Act;
186Q and which is wholly financed by Central or State
govt.

Tax paid by Government or Indian concern on Income of a

Foreign Company [Section 10(6A), (6B), (6BB) and (6C)]
(6A):
1. Where a foreign company renders technical services to
Government of India or to a State Government or to an
Indian enterprise and for such services a foreign company
is paid income by way of royalty or fees.
2. Such fees or royalty is paid by an India concern in pursuance
of an agreement entered into before 1-6-2002 and such
agreement is approved by Government of India and it is in
accordance with the Industrial Policy of the Government of
India.
3. Since royalty or fees paid to a foreign company accrues
in India, so such income is liable to be taxed in India and
as per agreement the payer of income in India pays tax
liability of the foreign company.
4. Tax so paid by Government of India or a State Government
or an Indian enterprise will be exempted i.e., it will not be
grossed up with the income of the foreign company.
Example. A foreign company renders technical services to
an Indian company and as per agreement, foreign company
is to be paid a fees of Rs.2,00,000. Tax of Rs. 30,000 on
such fees is also paid by the Indian company. Tax paid
by Indian company will be exempt and so it will not be
grossed up with the income of the foreign company and
such foreign company’s income will be only Rs.2,00,000.
(6B):
The tax liability of a non-resident (Not being a company)
or a foreign company if paid by an Indian concern or
Government of India or a State Government the same will
be exempted and so will not be grossed up with the income
of the foreign entity.
(6BB):
Tax paid on income received by foreign government or a
foreign enterprise on leasing aircraft.
In case any income is received by a foreign government
or a foreign enterprise from an Indian company which is engaged in the operation of
aircraft and such income is by
way of consideration of acquiring an aircraft or an engine
of aircraft (other than payment for providing spares or
services in connection with the operation of leased aircraft)
on lease under an agreement entered into after 31-3-
1996 but before 1-4-2007 and approved by the Central
Government in this behalf, and the tax on such income
is payable by such Indian company under the terms of
agreement, the tax so paid shall be fully exempted.
This benefit shall be available only to that foreign enterprise
which is non-resident.
(6C):
Any income derived by a foreign company (so notified
by Central govt.) by way of royalty or fees for technical
services under an agreement for providing services in or
outside India in projects connected with security of India
shall be fully exempted.
Perquisites and Allowances paid by Government to its
Employees serving outside India [Section 10(7)]
Any allowances or perquisites paid or allowed, as such,
outside India by the Government to a citizen of India, for
rendering services outside India, are exempt.
The following conditions have to be satisfied before such
income is treated as deemed to accrue or arise in India:
i. Income should be chargeable under the head ‘Salaries’;
ii. The payer should be Government of India;
iii. The recipient should be an Indian citizen — whether
Resident or Non-Resident;
iv. The services should be rendered outside India.
While salary of Indian citizen in the above case shall be deemed
to accrue or arise in India but all allowances or perquisites
paid outside India by the Government to the above Indian
citizens for their rendering services outside India are exempt
under section 10(7).

Employees of Foreign Countries working in India under

Cooperative Technical Assistance Programme [Section
10(8)]
The persons who are working in India under co-operative
technical assistance programmes in accordance with an
agreement entered into by the Central Government and the
Government of a foreign State, the following incomes of such
individuals shall be exempt provided the terms of agreements
provide for such exemption
1. the remuneration received by him directly or indirectly
from the Government of the foreign State for such duties
rendered in India ; and
2. any other income of such individual which accrues or arises
outside India and is not deemed to accrue or arise in India,
in respect of which individual is required to pay any income
or social security tax to the Government of that foreign
State.
Income of a Consultant [Section 10(8A)]
Any remuneration or fee received by a consultant from an
international organisation who derives its fund under technical
assistance grant agreement between such organisation and
the Foreign Government, and any other income accruing or
arising to him outside India (which is not deemed to accrue
or arise in India) and which is subject to income-tax or social
security tax in foreign country, shall be fully exempted. The
agreement of the service of consultant must be approved by
the competent authority.
The consultant means :
1. an individual who is (a) not a citizen of India; or (b) if
citizen but is not ordinarily resident in India ; or
2. any person who is non-resident ; and is rendering technical
services in India in connection with any technical assistance
programme or project.

Conditions laid down for Tax Exemption U/s 10(8A)

A. The fees or remuneration is paid for technical services
rendered in India under the technical assistance programme
or project.
B. The sum is paid directly or indirectly out of funds made
available to international organization as per agreement
between such organization & government of foreign state.
C. The technical assistance provided is in accordance with
such agreement.
D. Any agreement for appointment of consultant shall have to
be approved by the authorities prescribed.
E. Any other income which accrues or arises outside India
is subjected to any income or social security tax in other
state.
Income of Employees of Consultant [Section 10(8B)]
In case of an individual who is assigned duties in India under
technical assistance programme—
1. the remuneration received by him directly or indirectly
from any consultant as referred u/s 10 (8A) above and
2. any other income accruing or arising to him outside India
(which is not deemed to accrue or arise in India) and which
is subject to income-tax or social security tax in foreign
country. shall be fully exempted provided
3. such individual is not a citizen of India ; or
4. if citizen but is not ordinarily resident and
5. the contract of service is approved by the competent
authority.
Conditions laid down for Tax Exemption U/s 10(8B)
A. The individual should be an employee of consultant referred
to in clause 8A above.
B. His contract of service is approved by the prescribed
authority.

C. The remuneration is received in connection with technical

assistance programme referred to in clause 8A.
D. Any other income which accrues or arises outside India
is subjected to any income or social security tax in other
state.
The prescribed authority for clauses 8A & 8B are :
The Additional Secretary, Department of Economic Affairs in
Ministry of Finance, Government of India, in concurrence with
members CBDT
Income of any member of the family of individuals
working in India under co-operative technical assistance
programme [Section 10(9)]
As per section 10(9), the income of any member of the family
of any such individual as is referred to in section 10(8)/(8A)/
(8B) accompanying him to India, which accrues or arises
outside India and is not deemed to accrue or arise in India, in
respect of which such member is required to pay any income
or social security tax to the Government of that foreign State
or country of origin of such member, as the case may be, is
exempt from tax.
Gratuity [Section 10(10)]
Gratuity is a payment made by the employer to an employee
in appreciation of the past services rendered by the employee.
Gratuity can either be received by:
(a) the employee himself at the time of his retirement; or
(b) the legal heir on the event of the death of the employee.
Gratuity received by an employee on his retirement is taxable
under the head “Salary” whereas gratuity received by the
legal heir of the deceased employee shall be taxable under
the head “Income from other sources”. However, in both the
above cases, according to section 10(10) gratuity is exempt
upto a certain limit. Therefore, in case gratuity is received by
employee, salary would include only that part of the gratuity
which is not exempt under section 10(10).

A. Death-cum-retirement gratuity received by Government

servants [Section 10(10)(i)]
Section 10(10)(i) grants exemption to gratuity received by
Government employee (i.e., Central Government or State
Government or local authority).
B. Gratuity Received by a Non-Government Employee covered
by Payment of Gratuity Act, 1972 [Section 10(10)(ii)]
Minimum of the following 3 limits:
(1) Actual gratuity received, or
(2) 15 days salary for every completed year, or part thereof
exceeding six months 7 days salary for each season in
case of employee in seasonal establishment; or
(3) Rs. 10,00,000
Meaning of Salary:
(i) Basic salary plus dearness allowance.
(ii) Last drawn salary. Average salary for preceding 3
months in case of piece rates employees
(iii) No. of days in a month to be taken as 26
C. Any other Employee
Minimum of the following 3 limits:
(1) Actual gratuity received
(2) Half months average salary of each completed year of
service
(3) Rs.10,00,000
Meaning of Salary:
(i) Basic Salary plus D.A. to the extent the terms of
employment so provide Commission, if fixed percentage
of turnover.
(ii) Average salary of last 10 months preceding the month
in which event occurs.
(iii)Only completed year of service is to be taken.

C. Any other Employee

Minimum of the following 3 limits:
(1) Actual gratuity received
(2) Half months average salary of each completed year of
service
(3) Rs. 10,00,000
Meaning of Salary:
(i) Basic Salary plus D.A. to the extent the terms of
employment so provide Commission, if fixed percentage
of turnover.
(ii) Average salary of last 10 months preceding the month
in which event occurs.
(iii) Only completed year of service is to be taken.
1. Where an employee had received gratuity in any earlier
year(s) and had claimed exemptions under section 10(10)
in respect of the gratuity received earlier also, he will
still be entitled to this exemption but the limit which at
present is Rs.10,00,000 shall be reduced by the amount of
exemption(s) availed in the earlier year(s). There will be
no change in the other two limits.
2. The words “completed service” occurring in section 10(10)
should be interpreted to mean an employee’s total service
under different employers including the employer other
than the one from whose service he retired, for the purpose
of calculation of period of years of his completed service,
provided he was not paid gratuity by the former employer.
CIT v P.M. Mehra (1993) 201 ITR 930 (Bom).
3. Any gratuity paid to an employee, while he continues
to remain in service with the same employer is taxable
under the head “Salaries” because gratuity is exempt
only on retirement or on his becoming incapacitated or on
termination of his employment or death of the employee.
In this case, however the assessee can claim relief under
section 89.

4. The CBDT vide its instruction in F. No. 194/0/73-IT, dated

19.6.1973 has clarified that the expression “termination of
employment” would cover an employee who has resigned
from the service.
Commuted value of Pension Received [Section 10(10A)]
Pension received on commutation is fully exempt subject to
the following criteria as enumerated as under.
Segregation
a) Govt. employees, employees of local authorities and
employees of statutory corporations
b) Other Employees
Govt. employees, employees
of local authorities
and employees of statutory
corporations
Any other employee
Fully Exempt (a) If gratuity is not received
Commuted value of half of
pension which he is normally
entitled to receive.
(b) If gratuity is also received
Commuted value of 1/3rd of
pension which he is normally
entitled to receive.
Pension received by the employee is taxable under the head
“Salaries”. However, the family pension received by the legal
heirs after the death of the employee is taxable in the hands
of the legal heir under the head “Income from other sources”
because in this case there is no relationship of employer
and employee. Treatment of family pension is discussed in
detail under the head ‘Income from other sources’.

Amount received as Leave Encashment on Retirement

[Section 10(10AA)]
Govt. employee i.e.
Central and State Govt.
employees
Any other employee
Fully Exempt Minimum of the following four limits:
1. Leave encashment actually received;
or
2. 10 months average salary; or
3. Cash equivalent of un-availed
leave calculated on the basis
of maximum 30 days leave for
every year of actual service
rendered; or
4. Rs.3,00,000
Meaning of salary :
1. Basic salary plus D.A. to the extent the terms of employment
so provide plus Commission, if fixed percentage of
turnover.
2. Average salary of last 10 months immediately proceeding
the date of retirement.
Retrenchment Compensation received by Workmen
[Section 10(10B)]
Any compensation received by a workman at the time of his
retrenchment, under the Industrial Disputes Act, 1947 or
under:
1. any other Act or rules or any order or notification issued
there under; or
2. any standing order; or
3. any award, contract of service or otherwise,
shall be exempt to the extent of minimum of the following
limits:
1. Actual amount received;
2. 15 days’ average pay for every completed year of service
or part thereof in excess of 6 months;

3. Amount specified by the Central Government, i.e. Rs.

5,00,000.
Compensation received in excess of the aforesaid limit is
taxable and would, therefore, form part of Gross Salary.
However, the assessee shall be eligible for relief under section
89 read with rule 21A.
1. Where retirement compensation is received by a workman in
accordance with any scheme which the Central Government
having regard to the need for extending special protection
to the workman in the undertaking to which such scheme
applies, has approved in this behalf, the entire amount of
compensation so received shall be exempt under section
10(10B).
2. Where retrenchment compensation received by a workman
exceeds the amount which qualifies for exemption under
the new clause, he will be entitled to relief under section
89 read with rule 21A of the Income-tax Rules, in respect
of such excess.
Payment received under Bhopal Gas Leak Disaster
(Processing of Claims) Act 1985 [Section 10 (10BB)]
Any amount received under the provision of such Act or any
scheme framed there under shall be fully exempted but in
case payment is received against a loss or damage, for which
deduction has been claimed ealier, it shall be taxable.
Compensation received in case of any disaster [Section
10(10BC) ]
Any amount received from the Central Government or State
Government or a Local Authority by an individual or his legal
heirs as compensation on account of any disaster is exempt
from tax. However, no deduction is available in respect of the
amount received or receivable to the extent such individual or
his legal heirs has been allowed a deduction under the Act on
account of loss or damage caused due to such disaster. Disaster
here means any disaster due to any natural or man-made
causes or by accident/negligence which results in substantial
loss of human life or damage to property or environment and
the magnitude of such disaster is beyond coping capacity of
community of the affected area.
Retirement Compensation from a Public Sector Company
or any other Company [Section 10(10C)]
The compensation received or receivable by the employee of
the following, on voluntary retirement, under the golden hand
shake scheme, is exempt under section 10(10C):
1. a public sector company; or
2. any other company; or
3. an authority established under a Central, State or Provincial
Act; or
4. a local authority; or
5. a co-operative society; or
6. a University established or incorporated by or under a
Central, State or Provincial Act and an institution declared
to be a University under section 3 of the University Grants
Commission Act, 1956; or
7. an Indian Institute of Technology within the meaning of
clause (g) of section 3 of the Institutes of Technology Act,
1961; or
8. such institute of management as the Central Government
may, by notification in the Official Gazette, specify in this
behalf;
9. State Government;
10. Central Government;
11. Institutions having importance throughout India or in any
State or States as may be notified.
Exemption shall be available, subject to the following
conditions:
1. The compensation is received only at the time of voluntary
retirement or termination of his services in accordance
with any scheme or schemes of voluntary retirement or in
the case of public sector company, a scheme of voluntary
separation. Even if the compensation is received in
instalments, the exemption shall be allowed.

2. Further, the scheme of the said companies or authorities

or societies or universities or the institutes referred to in
clauses (vii) and (viii) above, as the case may be, governing
the payment of such amount, are framed in accordance with
such guidelines (including inter alia criteria of economic
viability) as may be prescribed. In the case of public sector
companies, if there is a scheme of voluntary separation, it
shall also be according to the said prescribed guidelines.
Quantum of Exemption:
1. The amount of exemption is the actual amount of
compensation received
2. or Rs. 5,00,000,
whichever is less.
1. The exemption is available to an employee only once and
if it has been availed for an assessment year it shall not be
allowed to him for any other assessment year.
2. The assessee shall not be eligible for relief under section 89
in case he has claimed exemption under section 10(10C).
On the other hand, if he claims relief under section 89, he
cannot claim exemption under section 10(10C).
Tax on Non-monetary Perquisites paid by Employer
[Section 10(10CC)]
The income-tax actually paid by the employer himself on a
non-monetary perquisite provided to the employee shall be
exempt in the hands of the employee..
Any sum received under a Life Insurance Policy [Section
10(10D)]
Any sum received under a life insurance policy, including
the sum allocated by way of bonus on such policy, is wholly
exempt from tax. However, the following sum received are not
exempt under this section:
1. any sum received from a policy under section 80DD(3) or
section 80DDA(3); or
2. any sum received under a Keyman Insurance Policy; or

3. any sum received, under an insurance policy issued on or

after 1.4.2003 but on or before 31.3.2012 in respect of
which the premium payable for any of the years during the
terms of the policy exceeds 20% of the actual capital sum
assured. However, such sum received on the death of a
person shall be exempt; or
4. any sum received under an insurance policy issued on or
after 1.4.2012 in respect of which the premium payable
for any of the years during the terms of the policy exceeds
10% of actual capital sum assumed; or
5. any sum received under an insurance policy issued on or
after 1.4.2013 for insurance on the life of any person, who
is
● a person with disability or a person with severe disability
as referred to in section 80U; or
● suffering from disease or ailment as specified in the
rules made under section 80DDB in respect of which
the premium payable for any of the years during the
terms of policy exceeds 15% of the actual capital sum
assumed.
Keyman insurance policy means a life insurance policy taken
by a person on the life of another person who is or was the
employee of the first mentioned person or is or was connected
in any manner whatsoever with the business of the first
mentioned person and includes such policy which has been
assigned to a person, at any time during the term of the policy,
with or without any consideration.