DEPARTMENT OF

MANAGEMENT
STUDIES (BBA)

Subject Name : INCOME TAX

Module No. and Name : UNIT-2

Title of the Sub-topic : Exempted Incomes and Incidence

of Tax
Class & Section (Optional) : VI SEM A & B SEC

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 DEPARTMENT OF
MANAGEMENT

Exempted Income sec 10

STUDIES (BBA)

 The word exempt means free from an obligation form doing

something. In the case of income tax, Exempt income refers to
income which through is earned and received during the financial
year is not taxable. Certain type income can be exempted from tax
provided certain conditions are met which are defined in Income tax
Act.
 Exempt income includes tax free sources of income, such as the
interest on ppf, tax free bonds and dividends, the Long term capital
gains from stocks and equity funds, the agricultural income and gifts
from specified relatives.
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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 Section 10(1) Agricultural Income- earned in India

 Section 10(2) Amount received by a member of the HUF from the
income of the HUF
 Section 10(2A) Share of profit received by a partner from the firm.
 Section 10(4) Certain interest to Non-Residents.
 Section 10(5) Leave travel concession
 Section 10(6) Tax paid by Government or Indian concern on Income
of a foreign Company.

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 Section 10(6A) (6B) (6BB) perquisites and allowances paid by

Government to its employees serving outside India.
 Section 10(8) Employees of Foreign countries working in India under
Cooperative Technical Assistance programme.
 Section 10 (8A) Income of a Consultant
 Section 10 (8B) Income of employees of Consultant
 Section 10(9) Income of any member of the family of individuals
working in India under co-operative technical assistance programme.
 Section10 (10) Gratuity (STATE OR CENTRAL GOVT)
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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 Section 10 (10A) Commuted Value of pension received.

 Section 10 (10AA) Amount received as leave encashment on
retirement.
 Section 10 (10B) Retrenchment compensation paid to workmen
 Section 10 (10BB) payment received under Bhopal gas leak disaster
Act 1985.
 Section 10 (10BC) compensation received in case of any disaster.
 Section 10(10C) Retirement compensation from a public sector
company or any other company.
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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 Section 10(10CC) Income by way of tax on perks.

 Section 10(10D) any sum received under a life insurance policy
 Section 10 (11) Payment from statutory Provident fund.
 Section 10(12) Payment from Recognised fund
 Section 10 (13) payment from superannuation fund
 Section 10(13) House Rent Allowances

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 Section 10(16) Scholarship

 Section 10(17) Allowance of MP/MLA/or MLC
 Section 10 (17A) Awards Instituted by Government
 Section 10(18) Pension received by certain winners of gallantry
awards
 Section 10(19) Family pension received by family members of armed
forces including para military forces
 Section 10(19A) Income from one palace of former ruler

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 Section 10(23AAA) Income of a fund set-up for the welfare of

employees or their depends
 Section 10 (23AAB) Fund set up by LIC of India under a pension
scheme.
 10(26) Income by way of dividend or interest on securities or any
source of income in specified areas of SC/ST individuals.

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 DEPARTMENT OF
MANAGEMENT

AGRICULTURAL INCOME
STUDIES (BBA)

Agricultural Income:
Agricultural Income means-
1) Any rent or Revenue derived from a land situated in India and used
for agricultural purposes. ( i.e basic operations like tilling of land,
sowing of seeds, planting, harvesting, irrigation should be carried out
on the land).
ii) Any rent or revenue received from a house property situated in the
immediate vicinity of agricultural land and used for residences of the
owner or tenant or for storing agricultural equipments or produces.
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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 Example of Agriculture Income:

1. Income from growing and selling paddy, wheat, flowers, trees.
2. Insurance money received for destruction of agricultural produce.
3. Income from sale of dried tobacco leaves.
4. Income from sale of straw.
5. Income from growing and maintaining nursery, tea leaves.

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 Examples of Non-agricultural Income

• Income from sale of trees, grass of spontaneous growth.
• Income of salt produced by flooding the land with sea water.
• Interest received by money-lender in the form of agricultural produce.
• Income from butter and cheese making.
• Income from poultry farming.
• Income from fishing.
• Income derived from land let-out for storing crops.
• Income from dairy farming.
• Interest on loan given to a farmer.
• Dividend received from a company engaged in agricultural operations.
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 DEPARTMENT OF
MANAGEMENT

Taxation of Agricultural Income

STUDIES (BBA)

It is totally exempted from tax U/S 10(1). But, in case of agricultural

income from land situated outside India, it will be fully taxable under
the head other sources.

Partly Agricultural Income and Partly Business Income

If agricultural produce is subjected to any manufacturing process, the
profit from the sale of finished product is partly from agriculture.
Profit attributable to agriculture is exempt, while business profit is
liable to tax.
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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

Ilustration-1
State, the following incomes are agricultural or non-agricultural incomes:
A) Income from growing flowers and creepers-Agricultural Income

B) B) Dividend received from a company engaged in agricultural operations-Non-

Agricultural Income
C) Interest on loan given to a farmer- Non-agricultural Income
D) Income from agricultural activities in Srilanka-Non-agricultural Income
E) Income from conversion of sugarcane into jaggary by the farmer himself-
Difference between market price and cost price of sugarcane is agricultural Income

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

Illustration -2
State whether the following are agricultural income or not.
A) Income from sale of forest trees of spontaneous growth- Non-agricultural
Income
B) Income from agricultural land situated in urban area- agricultural Income
C) Income derived from lease of land for grazing of cattle required for
agricultural operations-agricultural Income
D) Income from the sale of earth for brick making- Non-agricultural Income
E) Income from dairy farming- Non-agricultural income
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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 1. Income from interest on simple mortgage of land used for agriculture-

Non-agricultural Income.
 2. Rent received from house property situated in a village- Non-agricultural
Income
 3. Remuneration received as manager of an agricultural farm House.-Non-
Agricultural Income
 4. Income derived from a land used as stone quarries.-Non-agricultural
Income.
 5.Salary received as a partner from a tea manufacturing firm- Non-
agricultural Income.
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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 6. Lease rent received from lands given to tenants for agricultural

operations.- Agricultural Income.

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