Direct Taxes- 1 ( Income exempted from Tax (Section 10)

   Income  exempted  from  Tax  (Section  10)  
       Exempted income is that income on which income tax is not chargeable . Some incomes are not even included in total income and some are included in total income but are exempt from income tax.

Section 10(1) :  Agricultural income is exempt under section 10(1).However, agricultural income has to be aggregated with non-agricultural income for determining the rate at which non-agricultural income would be subject to tax, in case of individuals, HUFs, AOP & BOIs etc., 
where the –
•agricultural income exceeds 5,000 p.a. and 
•non-agricultural income exceeds basic exemption limit.

The following are the steps to be followed in computation of tax -
Step 1: Tax on non-agricultural income plus agricultural income
Step 2: Tax on agricultural income plus basic exemption limit
Step 3: Tax payable by the assessee = Step 1 – Step 2
Step 4: Add Surcharge/Deduct Rebate under section 87A, if applicable.
Step 5: Add Education cess@2% and SHEC@1%.

Section 10(2):  Since the HUF is taxed in respect of its income, the share income is exempt from tax in the hands of the member.

Section 10(2A) : The partner’s share in the total income of the firm is exempt from tax.

Section 10(4) : Income by way of interest on moneys standing to his credit in a Non-resident (External) Account (NRE A/c), is exempt in the hands of an individual, being a person resident outside India as per the FEMA, 1999 or in the hands of an individual who has been permitted by the RBI to maintain such account.

Section 10(6) : Remuneration received by a person for services as an official of an high commission, legation, consulate or the trade representation of a foreign State or as a member of the staff of any of these officials would be exempt.

Section 10(10BB) : Payment to Bhopal Gas Victims is exempt.

Section 10(10BC) : Compensation received by an individual or his legal heir on account of any disaster is exempt, if the same has been granted by the Central Government, State Government or a local authority.

Section 10(16) : The value of scholarship granted to meet the cost of education would be exempt from tax in the hands of the recipient irrespective of the 
amount or source of scholarship.

Section10(17)  Daily allowance received by any Member of Parliament or of State Leg￾islatures or any Committee thereof are exempt.

Section 10(17A) :  Awards for literary, scientific and artistic works and other awards by the Government are exempt.

Section 10(18):  Pension received by individual who has been awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” such other gallantry award as the Central Government notifies is exempt from tax.

Section 10(26):  Income from any source in the specified areas or States in which member of a Scheduled Tribe is residing or income by way of dividend or interest on securities is exempt in the hands of member of the Schedule Tribe.

Section 10(26AAA) : Income from any source in the state of Sikkim, dividend income and interest on securities is exempt in the hands of a Sikkimese individual. This exemption is not available to a Sikkimese woman who, on or after 1st April, 2008, marries a non-Sikkimese individual.

Section 10(30) : The amount of any subsidy received by any assessee engaged in the business of growing and manufacturing tea in India through or from 
the Tea Board will be wholly exempt from tax.

Section 10(31) : The amount of any subsidy received by an assessee engaged in the business of growing and manufacturing rubber, coffee, cardamom or 
other specified commodity in India from or through the Rubber Board,Coffee Board, Spices Board or any other will be exempt.

Section 10(35) : Any income received in respect of units from the Administrator of the specified undertaking/ specified company /Mutual Fund shall be exempt. However, income arising from transfer of such units would not be exempt.

Note : There are certain other exempted incomes are there which we have discussed in under 5  heads of income'