Income Not Part of Total Income
Income Not Part of Total Income
Income Not Part of Total Income
Learning Objectives
Various Income Categories Exempt from Total
Income.
Incomes not Included in Total Income (Section
10)
Exemption on Interest on Small Scale Savings
Schemes.
Exemption on Certain Payments to Employees.
Exemption on Incomes of Research or
Charitable Institutes.
Chapter 3 : Income which do not form part
of Total Income
Agriculture Income
We can still consider India as the country
mostly depending on Agriculture and income
generated from the activities of Agriculture.
Agricultural income shall be excluded from the
Assessees total income (Section 10(1))
However, It shall be taken for considering rate
to tax non-agricultural income
Contd
If an assessee has not availed travel concession or
assistance during any of the specified four-year block
periods on one of the two permitted occasions, or on
both occasions, exemption can be claimed provided he
avails the concession or assistance in the calendar year
immediately following that block. This is popularly
known as the 'carry-over' concession.
Quantum of exemptionThe basic rule is that the
quantum of exemption will be limited to the actual
expenses incurred on the journey
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11
Contd
Sec.10(10)(ii): Gratuity received under the Payment of
Gratuity Act, 1972:
The limits of gratuity so exempt shall be to the extent it
does not exceed
one-half month's salary for each year of completed
service,
calculated on the basis of the average salary for 'the ten
months immediately preceding the month in which any
such event occurs,
Subject to such limit [Rs.3,50,000/-] as the Central
Government may, by notification in the Official Gazette
Chapter 3 : Income which do not form part
of Total Income
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Contd
However, in case of other companies, the scheme needs to satisfy the
prescribed conditions. Here the Scheme has to meet the following criteria:
It applies to an employee who has completed ten years of service or
completed 40 years of age.
It applies to all employees, including workers and executives excepting
directors of the company/co-operative society
The scheme of voluntary retirement/separation has been drawn to result
in overall reduction in the existing strength of the employees
The vacancy caused by voluntary retirement/separation is not to be filled
up
The amount receivable on account of voluntary retirement/separation of
the employees, does not exceed the amount equivalent to three months'
salary for each completed year of service or salary at the time of
retirement multiplied by the balance months of service left before the
date of his retirement on superannuation
Chapter 3 : Income which do not form part
of Total Income
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Contd
Quantum of Deduction will be Least of following
Mumbai / Kolkata / Delhi /
Chennai
Other Cities
50 % of Salary
40 % of Salary
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Contd
Any allowance granted to meet the expenditure incurred- on
a helper, where such helper is engaged for the performance of
duties of an office
Any allowance granted for encouraging the academic,
research and training pursuits in educational and research
institutions.
Any allowance granted to meet the expenditure incurred on
the purchase or maintenance of uniform for wear during the
performance of the duties of an office
Any allowance granted to meet the expenditure incurred on
conveyance in performance of duties
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Contd
Some prescribed allowance granted to the assessee
either to meet his personal expenses at the place
where the duties of his office or employment are
ordinarily performed by him or at the place where he
ordinarily resides, or to compensate him for the
increased cost of living, is exempt up to the prescribed
extent. Rule 2BB(2) enumerates these allowances and
the limits up to which they are exempt.
Example of Some of such kind of allowances are as per
below given table
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Contd
Name of allowance/places where exempt
Extent of exemption
Any allowance granted to an employee working in any transport 70 per cent of such allowance up to
system to meet his personal expenditure during his duty performance a maximum of
Rs.10,000 per
from one place to another
month
Children Educational Allowance (whole of India)
Any allowance granted to an employee to meet the hostel Rs.300 per month per child up to
expenditure on his child (whole of India)
maximum of two children
Any special allowance in the nature of counter-insurgency allowance Rs.3,900 per month
granted to the members of the armed forces operating in areas away
from their permanent locations
Transport allowance granted to an employee
Any special allowance granted to the member of the armed forces in Rs.3,250 per month
the nature of Island allowance for Andaman & Nicobar and
Lakshadweep Group of Islands
Chapter 3 : Income which do not form part
of Total Income
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Spices Board
Coir Board
Chapter 3 : Income which do not form part
of Total Income
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Year
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Contd
Quantum of Deduction:
Profits of business of undertaking * Export turnover / Total
turnover of business carried on by undertaking
Period of Deduction:
A period of 10 consecutive assessment years beginning with
the assessment year relevant to the previous year in which
the undertaking begins to manufacture or produce such
articles or things or computer software.
Chapter 3 : Income which do not form part
of Total Income
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Contd
Audit report should be submitted in Form No.56F
along with return of income.
Quantum of Deduction:
Profits of business of undertaking * Export turnover /
Total turnover of business carried on by undertaking
Period of Deduction:
100% of Profit for first 5 years, and
50% of Profit for next 5 years
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Contd
There must be repatriation of sale proceeds into India
Audit report should be submitted in Form No.56G along with
return of income.
Quantum of Deduction:
Profits of business of undertaking * Export turnover /
Total turnover of business carried on by undertaking
Period of Deduction:
A period of 10 consecutive assessment years beginning
with the assessment year relevant to the previous year in
which the undertaking begins to manufacture or produce
such articles or things or computer software.
Chapter 3 : Income which do not form part
of Total Income
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Contd
The trust shall apply for registration with the Commissioner
The accounts of the trust should be audited for such
accounting year in which its income exceeds Rs.50,000.
The funds of the trust should be invested or deposited in
any one or more of modes or form mentioned in section
11(5)
Application of income:
In order to claim full tax exemption, a charitable trust or
institution has to apply at least 85% of the income to
charitable or religious purposes. Exemption under section
11 is 15% of income derived from property held under
charitable purpose.
Chapter 3 : Income which do not form part
of Total Income
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Contd
For claiming exemption under section 13A following conditions
must be satisfied
The political party keeps and maintains such books of account and
other documents as would enable the Assessing Officer to property
deduce its income there from;
The political party keeps and maintains a record of each voluntary
contribution in excess of Rs.20,000 and of the names and addresses
of persons who have made such contributions;
The accounts of political party are audited by a chartered
accountant or other qualified accountants; and
The treasure of political party shall in each financial year prepare a
report in respect of contribution received by the political party in
excess of Rs.20,000 from any person/company in that year and
submit it to the Election Commission.
Chapter 3 : Income which do not form part
of Total Income
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