The content outlines the scope and detailed provisions of exempt income under Section 10 of the Income-tax Act, 1961, which specifies categories of income excluded from total taxable income. It begins by establishing that income is generally taxable unless expressly exempted, and Section 10 provides a comprehensive list of such exemptions. Agricultural income is fully exempt, though partially integrated for rate purposes when certain thresholds are exceeded. Receipts from Hindu Undivided Families, partner’s share in firm profits, and specific interest incomes for non-residents, including NRE accounts and notified bonds, are also exempt. Several provisions grant exemptions to non-residents and foreign entities, particularly in relation to interest, royalty, leasing of aircraft or ships, and income from International Financial Services Centres (IFSC). Employee-related exemptions include leave travel allowance, gratuity, commuted pension, leave encashment, retrenchment compensation, voluntary retirement compensation, and employer-paid tax on perquisites, subject to specified conditions and limits. Life insurance proceeds are generally exempt, with exceptions based on premium thresholds and policy types, including ULIPs. Contributions and withdrawals from provident funds, Sukanya Samriddhi accounts, National Pension System, and other specified schemes enjoy exemptions under defined limits. Various allowances such as HRA and special allowances are exempt to the extent of actual expenditure or prescribed limits. Interest from certain savings instruments, bonds, and deposits is also exempt under specific conditions. Additionally, scholarships, awards, pensions to gallantry awardees or their families, and compensation for disasters are exempt. Institutional exemptions cover income of charitable trusts, educational institutions, hospitals, mutual funds, venture capital funds, business trusts, and government or statutory bodies, subject to compliance with conditions. Certain incomes of local authorities, trade unions, welfare funds, and entities promoting public or social objectives are also excluded from taxation. Special provisions grant exemptions to specific communities, funds, and government-backed schemes. Overall, the section provides a broad framework of exemptions covering individuals, non-residents, institutions, and specified transactions, ensuring that only taxable income forms part of total income computation.
Income exempt from tax
Introduction
Under the Income-tax Act, income is generally taxable unless specifically exempted. Section 10 provides a comprehensive list of incomes that are excluded from the total income of the assessee and are, therefore, not chargeable to tax.
List of exempt income
List of exempt income
| Section | Nature of Income |
| Section 10(1) | Agricultural income is exempt from tax, but if it exceeds Rs. 5,000 and non-agricultural income exceeds the exemption limit, the agricultural income is partially integrated into the total income of the assessee for taxation purposes. |
| Section 10(2) | Any sum received by an individual as a member of a Hindu Undivided Family (HUF) from HUF income or an impartible estate’s income is exempt, except for income from personal property converted into HUF property without consideration. |
| Section 10(2A) | A partner’s share of profit from a firm is exempt from tax, as the firm is separately assessed under the Income-tax Act. |
| Section 10(4)(i) | Interest and premium on redemption of 4.25% National Defence Loans, 1968 and 1972, are exempt from tax for non-residents. |
| Section 10(4)(ii) | Interest on money in an NRE account is exempt from tax for NRIs and PIOs.
Note: Joint holders can also claim the exemption if they meet the conditions. [Circular No. 592, dated 04-02-1991] |
| Section 10(4C) | Interest paid to non-residents on Rupee Denominated Bonds issued by Indian companies between 17-09-2018 and 31-03-2019 is exempt from tax, provided the bonds are issued for borrowing from outside India. |
| Section 10(4D) | Exemption is allowed on certain capital gains and income from securities to specified funds like Category-III AIF, retail funds, ETFs in IFSC, and investment divisions of offshore banking units, based on income attributable to non-residents or the unit itself. |
| Section 10(4E) | Any income from transfer of non-deliverable forward contracts or offshore derivative instruments or over-the-counter derivatives, by a non-resident. Income distributed by an IFSC banking unit to a non-resident in respect of offshore derivative instruments or over-the-counter derivatives is also exempt from tax. |
| Section 10(4F) | Any income of a non-resident from royalty or interest on leasing of an aircraft or ship to a unit of an IFSC is exempt from tax if the unit starts operations by 31st March 2030. |
| Section 10(4G) | Exemption is provided for income earned by a non-resident from a portfolio managed by a portfolio manager, subject to conditions such as income being received in an account with an Offshore Banking Unit in an IFSC, and accruing outside India. This also covers income from specified activities like investment in a financial product by a non-resident in an IFSC unit. |
| Section 10(4H) | Capital gains from transfer of equity shares of a domestic co. being an IFSC unit engaged in aircraft/ship leasing are exempt for a non-resident or IFSC unit, if shares are sold within 10 years of commencement, and both seller and company are primarily in the leasing business of aircraft or ship. |
| Section 10(5) | Leave Travel Allowance (LTA) is exempt to the extent of actual travel expenses incurred in India by the employee and his family. |
| Section 10(6)(ii) | Remuneration received by foreign citizen as an official embassy or consulate officials and his staff is exempt from tax in India, subject to reciprocity—i.e., similar exemption must be available to Indian officials in that country, and staff must not engage in other work in India. |
| Section 10(6)(vi) | Remuneration of a foreign citizen working for a foreign enterprise is tax-exempt in India if: (a) the enterprise has no business in India, (b) the employee’s stay doesn’t exceed 90 days in the previous year, and (c) the salary isn’t claimed as a deduction from employer’s income chargeable under the Income-tax Act, 1961. |
| Section 10(6)(viii) | Remuneration of a non-resident foreign citizen for services on a foreign ship is tax-exempt in India if: (a) it’s taxable under ‘salaries’, (b) the individual is non-resident and not an Indian citizen, (c) services are on a foreign ship, and (d) stay in India doesn’t exceed 90 days in the previous year. |
| Section 10(6)(xi) | Remuneration of a non-citizen of India employed by a foreign Government is tax-exempt in India if received during training in a Government-run or Government-funded organisation, company, corporation, or society. |
| Section 10(6A) | Tax paid by the Government or an Indian concern on royalty or FTS earned by a foreign company (under approved agreements between 01-04-1976 and 31-05-2002) is not treated as income of the foreign company. |
| Section 10(6B) | Tax paid by the Government or Indian concern on behalf of a non-resident or foreign company on income (excluding salary, royalty, or FTS) is not treated as income if paid under an agreement entered before 01-06-2002 and approved by the Central Government. |
| Section 10(6BB) | Exemption is available to the foreign Government or enterprise deriving income from an Indian airline company for aircraft lease payments if tax is paid on their behalf under an agreement between 01-04-1997 and 31-03-1999 or after 31-03-2007, and approved by the Central Government, excluding tax on spares or service payments. |
| Section 10(6C) | Income by way of royalty or fees for technical services received by a notified foreign company for services related to India’s security, under an agreement with the Central Government, is exempt from tax. |
| Section 10(6D) | Income arising to a non-resident or foreign company in the form of royalty or fees for technical services, whether rendered within or outside India, to the National Technical Research Organisation is exempt from tax. |
| Section 10(7) | Any allowance or perquisite paid or allowed by Indian Govt. to a citizen of India for render-ing service outside India. |
| Section 10(10) | Gratuity is tax-exempt on retirement, resignation, or death, based on employee type and service length. Government employees get full exemption; for non-government employees, exemption is subject to limits under the Payment of Gratuity Act or general rules, with up to Rs. 20 lakhs or Rs. 10 lakhs exempt, depending on coverage. |
| Section 10(10A) | Monthly pension is taxable, but commuted pension is exempt as follows: fully exempt for government employees; for non-government employees, 1/3rd is exempt if entitled to gratuity, and 50% is exempt if not entitled to gratuity. |
| Section 10(10AA) | Leave encashment is fully exempt on death and for government employees at retirement/resignation. For non-government employees, it’s partly exempt up to Rs. 25 lakhs on retirement/resignation, but fully taxable if encashed during service. |
| Section 10(10B) | Retrenchment compensation is taxable but exempt under certain cases—fully exempt if paid under a Central Govt.-approved scheme; otherwise, exemption is limited to Rs. 5 lakhs or based on service-linked formula, except when the employee continues with a new employer after transfer—then no exemption. |
| Section 10(10BB) | Payments under the Bhopal Gas Leak Disaster Act, 1985, are fully exempt from tax, except where deductions for loss or damage have already been claimed. |
| Section 10(10BC) | Compensation received for disasters from the Government or local authority is exempt from tax, except where deductions for the same loss or damage have already been claimed. |
| Section 10(10C) | Voluntary Retirement Compensation is taxable in the hands of the employees as profit in lieu of salary. Exemption is available up to the lower of actual compensation received, or Rs. 5,00,000. This exemption is a one-time benefit and applies only if paid by a specified employer. |
| Section 10(10CC) | If the employer pays tax on non-monetary perquisites on behalf of the employee, it is exempt in the hands of the employee. |
| Section 10(10D) | ULIP maturity proceeds are exempt under Section 10(10D) only if annual premium does not exceed 10% of sum assured or Rs. 2.5 lakhs (for policies issued on or after 01-02-2021); exemption is allowed only for policies within this limit individually and in aggregate.
Further, life insurance policy proceeds are generally exempt from tax, except for Keyman insurance, excess premium policies (premium exceeds 10% of sum assured), and certain cases with premiums exceeding specific thresholds (Rs. 5,00,000). Policies issued by IFSC insurance intermediaries are exempt from premium threshold limits. |
| Section 10(11) | PPF deposits are tax-exempt under the EEE system, with contributions eligible for deduction under Section 80C. |
| Section 10(11A) | The Sukanya Samriddhi Account Scheme, falling under the EEE category, offers tax exemption on investment, earnings, and withdrawals. Contributions qualify for a deduction under Section 80C, and withdrawals are exempt under Section 10(11A). |
| Section 10(12) | Employee’s EPF contribution qualifies for deduction under Section 80C, and employer’s contribution up to 12% is tax-free. Interest is exempt unless employee’s annual contribution exceeds Rs. 2.5 lakhs (Rs. 5 lakhs if there’s no employer contribution); excess interest is taxable. Withdrawals after 5 years of service are tax-exempt. |
| Section 10(12A) | Contributions to the National Pension System (NPS) are deductible under Section 80CCD. On closure or opting out, up to 60% of the total corpus is exempt from tax under Section 10(12A). |
| Section 10(12B) | Contributions to the NPS are deductible under Section 80CCD. Any amount withdrawn before closure or opting out is exempt from tax under Section 10(12B), limited to 25% of the employee’s contribution. |
| Section 10(12BA) | Contributions to the NPS Vatsalya account are deductible under Section 80CCD(1B). Partial withdrawals for specified circumstances are exempt from tax under Section 10(12BA), limited to 25% of the contributions. |
| Section 10(12C) | Any payment received from the Agniveer Corpus Fund by an Agniveer or their nominee is fully exempt from tax under Section 10(12C). |
| Section 10(13) | Payments from a superannuation fund are exempt from tax if received on the employee’s death, retirement (or incapacitation), or transfer to the National Pension Scheme (NPS). Any other payment is fully taxable. |
| Section 10(13A) | House Rent Allowance (HRA) exemption is allowed up to the minimum of: (a) actual HRA received, (b) actual rent paid minus 10% of salary, or (c) 50% of salary (for metro cities) or 40% (elsewhere). |
| Section 10(14) | Allowances like travelling, conveyance, daily, helper, research, and uniform allowances are exempt to the extent of the actual amount spent for employment duties, or the actual allowance received, whichever is lower.
Further, partial exemptions are allowed for allowances like transport for employees, children’s education and hostel allowances, and transport allowance. |
| Section 10(15) | The following interest are exempt from tax:
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| Section 10(15A) | Any payment made by an Indian company to acquire an aircraft or aircraft engine on lease from a foreign government or non-resident foreign enterprise is exempt from tax, subject to certain conditions like the Indian company being in the business of operating aircraft and not applying the exemption for payments related to spares or services.
Note: This clause shall apply to any such agreement entered into on or after April 01, 2007 |
| Section 10(15B) | Income received by a foreign company from leasing cruise ships in India is exempt from tax if the lease rental is received from a foreign company operating cruise ships in India and opted Section 44BBC, both companies are subsidiaries of the same holding company, and the income is earned during the assessment years 2025-26 to 2030-31. |
| Section 10(16) | Any scholarship received for meeting the cost of education is exempt from tax. |
| Section 10(17) | This provision provides exemption in respect of the following income:
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| Section 10(17A) | Payments made in cash or kind as awards in the public interest by the Central or State Government, or approved by the Central Government, are exempt. This includes awards like the Swatantrata Sainik Samman Pension Scheme and rewards for medal winners in Olympic, Commonwealth, or Asian Games. |
| Section 10(18) | Pension received by individuals awarded specific gallantry medals or their family members is exempt from tax. This includes awards like ParamVir Chakra, Ashok Chakra, and others, as well as pension received by their family (spouse, children, parents, brothers and sisters). |
| Section 10(19) | Family pension received by the widow, children, or nominee of armed/paramilitary personnel is exempt from tax if death occurred during operational duties (e.g., terrorist attacks, war, border skirmishes), subject to certification by the department head where deceased member has last served. |
| Section 10(19A) | The annual value of one palace occupied by an ex-ruler of an Indian State is exempt from tax, provided it was exempt before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971. |
| Section 10(20) | Income earned by a local authority, including house property income, capital gains, income from other sources, business income (excluding water or electricity supply) within its jurisdiction, and income from electricity or water supply is exempt from tax. The term ‘Local Authority’ includes Panchayats, Municipalities, Municipal Committees, District Boards, and Cantonment Boards. |
| Section 10(21) | Income of research associations, universities, colleges, institutions approved for the purpose of Section 35(1)(ii) and Section 35(1)(iii) is exempt from tax, provided the income is used exclusively for their stated objectives and invested according to Section 11(5). |
| Section 10(23A) | Income of an approved association or institution set up in India to regulate professions like law, medicine, accounting, etc., is exempt if income is applied solely to its objectives, excluding income from house property, specific services, or investments. Approval may be withdrawn if conditions are violated, after giving an opportunity of being heard. |
| Section 10(23AA) | Income of a Regimental Fund or Non-public Fund set up by the armed forces for the welfare of its members (past and present) or their dependents is exempt from income tax. |
| Section 10(23AAA) | Income of a fund set up for employee welfare (e.g., superannuation, illness, education, death benefits) is exempt from tax if it is approved by the Pr. Commissioner or Commissioner, used solely for its objectives, and complies with investment norms under Section 11(5). |
| Section 10(23AAB) | Income of a fund set up by LIC or any other insurer under an approved pension scheme is exempt from tax, provided it is approved by the Controller of Insurance or IRDAI. |
| Section 10(23B) | Income of an institution solely for development of khadi or village industries is exempt to the extent attributable to production, sale, or marketing of such products, subject to registration, approval by Khadi and Village Industries Commission, and compliance with prescribed conditions. |
| Section 10(23BB) | Income of any Khadi and Village Industries Board or authority established under a State or Provincial Act for developing khadi or village industries is fully exempt from income tax. |
| Section 10(23BBA) | Any income of a body or authority established under any law for administering public religious or charitable trusts, endowments, or societies is exempt from tax, provided the body itself is constituted under a Central/State/Provincial Act. |
| Section 10(23BBB) | Income earned in India by the European Economic Community from interest, dividends, or capital gains under the notified European Community International Partners Scheme, 1993 is exempt from tax. |
| Section 10(23BBC) | Income earned by the SAARC Fund for Regional Projects, established under the Colombo Declaration issued on 21-12-1991 by SAARC member countries, is exempt from tax in India. |
| Section 10(23BBE) | Any income of the Insurance Regulatory and Development Authority (IRDA), established under Section 3(1) of the Insurance Regulatory Act, 1999, is exempt from income tax. |
| Section 10(23BBG) | Any income of the Central Electricity Regulatory Commission, constituted under Section 76(1) of the Electricity Act, 2003, is exempt from income tax. |
| Section 10(23BBH) | Any income of Prasar Bharati (Broadcasting Corporation of India), established under Section 3(1) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990, is exempt from tax. |
| Section 10(23C)(i) | PM National Relief Fund and PM CARES Fund |
| Section 10(23C)(ii) | PM Fund for promotion of Folk Art |
| Section 10(23C)(iii) | PM Aid to Students Fund |
| Section 10(23C)(iiia) | National Foundation for Communal Harmony |
| Section 10(23C)(iiiaa) | Swachh Bharat Kosh |
| Section 10(23C)(iiiaaa) | Clear Ganga Fund |
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Section 10(23C)(iiiaaaa) |
CM Relief Fund or Lieutenant Governor Relief Fund |
| Section 10(23C)(iiiab) | University or educational institution wholly or substantially financed by the government |
| Section 10(23C)(iiiac) | Hospital or other specified institution wholly or substantially financed by the government |
| Section 10(23C)(iiiad) | University or educational institution whose annual receipts do not exceed Rs. 5 crore |
| Section 10(23C)(iiiae) | Hospital or other specified institution whose annual receipts do not exceed Rs. 5 crore |
| Section 10(23C)(iv) | Charitable Institution approved by the Principal Commissioner or Commissioner |
| Section 10(23C)(v) | Public religious and charitable institution approved by the Principal Commissioner or Commissioner |
| Section 10(23C)(vi) | University or educational institution approved by the Principal Commissioner or Commissioner |
| Section 10(23C)(via) | Hospital or other specified institution approved by the Principal Commissioner or Commissioner |
| Section 10(23D) | Any income of a mutual fund registered under the SEBI Act, 1992, or set up by a public sector bank, financial institution, or authorized by the RBI, is exempt from tax, subject to conditions for non-SEBI registered funds. |
| Section 10(23DA) | Any income of a securitisation trust from its securitisation activities is exempt from tax. However, income received by the investor from the securitisation trust will be taxable in their hands under Section 115TCA, as if the investment in underlying assets had been made directly by the investor. |
| Section 10(23EA)/ 10(23EC)/ 10(23ED) | Income of notified Investor Protection Funds from contributions received is exempt from tax, but any amount shared with the creator is taxable in the year it is shared. |
| Section 10(23EE) | The specified income of a notified ‘Core Settlement Guarantee Fund’ set up by recognized clearing corporations like Multi Commodity Exchange Clearing Corporation Limited, NSCCL, and ICCL Mumbai is exempt from tax. However, if any amount is shared with specified persons, the shared amount is taxable in the year it’s distributed. |
| Section 10(23FB) | Income of a venture capital fund or a venture capital company from investment in a venture capital undertaking |
| Section 10(23FBA) | Income (other than business income) is taxable for unit-holders and exempt for Category-I and II AIFs under Section 10(23FBA) |
| Section 10(23FBB) | Business income is taxed in the hands of Category-I and II AIFs under “Profits and gains from business” and exempt for unit-holders under Section 10(23FBB) |
| Section 10(23FBC) | Income received by a unitholder of specified Category III AIF |
| Section 10(23FC)] | Income of a business trust by way of interest and dividend from a special purpose vehicle, is exempt from tax. |
| Section 10(23FCA) | Rental income of a Real Estate Investment Trust (REIT) from renting or letting real estate assets owned directly by it is exempt from tax. |
| Section 10(23FD) | Distributed Income of a Unit Holder from the Business Trust |
| Section 10(23FE) | Income from dividends, interest, long-term capital gains, or specified sums arising from investments in India by a wholly owned subsidiary of ADIA, Sovereign Wealth Fund, or Foreign Pension Fund is exempt from tax, provided the investment is held for at least 3 years in infrastructure entities between 01-04-2020 and 31-03-2030. |
| Section 10(23FF) | Relocation of a foreign investment fund to an IFSC in India is tax-neutral under Sections 47(viiac) & (viiad). Capital gains on shares of Indian companies received during relocation are exempt under Section 10(23FF), subject to conditions. Exemption applies to non-resident unit-holders (for Category-I/II AIFs) or to the fund (for specified Category-III/ETF/Retail funds), calculated as per Rule 2DD. |
| Section 10(24) | Income under the heads ‘House Property’ and ‘Other Sources’ of registered trade unions and their associations is exempt from tax if formed mainly to regulate relations between workmen and employers or among workmen. |
| Section 10(25) | Specified incomes of employee welfare funds like interest, capital gains, and receipts by trustees of recognised PF, approved superannuation/gratuity funds, and deposit-linked insurance funds under the Coal Mines Provident Funds and Miscellaneous Provisions Act, 1948/the Employees’ Provident Fund and miscellaneous Provisions Act, 1952 are exempt from tax. |
| Section 10(25A) | Income of the Employees’ State Insurance Fund established under the ESI Act, 1948 is fully exempt from income tax. |
| Section 10(26) | Income of a Scheduled Tribe member residing in specified areas is exempt if it arises from sources within those areas or as dividend/interest on securities. |
| Section 10(26AAA) | Income of a Sikkimese individual is exempt if it arises in Sikkim or is dividend/interest on securities. |
| Section 10(26AAB) | Income of an Agricultural Produce Market Committee or Board is exempt from tax if it is constituted under a law for regulating marketing of agricultural produce. |
| Section 10(26B) | Income of a body or institution wholly financed by the Government and formed under law to promote the interest of SCs, STs or backward classes is exempt from tax. |
| Section 10(26BB) | Income of a corporation set up by the Central or State Government to promote interests of minority communities is exempt from tax. |
| Section 10(26BBB) | Income of a corporation established under any Act for the welfare and economic upliftment of ex-servicemen is exempt from tax. |
| Section 10(27) | Income of a co-operative society exclusively formed for promoting the interests of the members of Scheduled Castes or Scheduled Tribes |
| Section 10(29A) | Income of boards/authorities like Coffee Board, Rubber Board, Tea Board, etc., listed under various acts for agricultural and export development, is exempt from tax. |
| Section 10(30) | Subsidy received by an assessee engaged in growing and manufacturing tea in India from the Tea Board for replantation or rejuvenation of tea bushes is exempt from tax, provided the assessee submits a certificate from the Tea Board with the return of income. |
| Section 10(32) | A parent can claim an exemption of up to Rs 1,500 for the income of each minor child included in their total income under Section 64(1A). |
| Section 10(33) | Capital gains from the transfer of units of the Unit Scheme, 1964 on or after 01-04-2002 are fully exempt from tax. |
| Section 10(34A) | Income of a shareholder on account of buyback of shares by the company |
| Section 10(34B) | Dividend income of an IFSC unit engaged in the aircraft or ship leasing business from a company which is also an IFSC Unit engaged in the same business |
| Section 10(35A) | Income of an investor received from a securitisation trust
Note: Exemption not applicable to any income by way of distributed income referred to in the said section, received on or after the 1st day of June, 2016. |
| Section 10(37) | Capital gain on urban agricultural land is exempt if used for agriculture by an individual/HUF or by parents of individual for 2 years before compulsory acquisition, and compensation is received on or after 01-04-2004. |
| Section 10(37A) | Capital gain on transfer of specified capital assets under land pooling scheme of the Andhra Pradesh Government. |
| Section 10(39) | Income arising from a notified international sporting event held in India is exempt from tax if the event is approved by the international body, has participation from more than two countries, and is notified by the Central Government, subject to specified conditions and a threshold limit. |
| Section 10(40) | Income received by a subsidiary company from its Indian holding company for settling dues related to the transfer of its power generation business is exempt from tax, provided the Indian company is notified under Section 80-IA(4)(v)(a). |
| Section 10(42) | Income arising to a notified body or authority is exempt from tax if it is established under a treaty or agreement with two or more countries, is not for profit, and is notified by the Central Government in the Official Gazette. |
| Section 10(43) | Any amount received by an individual as a loan in a reverse mortgage transaction referred to under Section 47(xvi) is exempt from tax. |
| Section 10(44) | Income received by any person for or on behalf of the New Pension System Trust, established under the Indian Trust Act, 1882, is exempt from tax. |
| Section 10(46) | Income arising to a body, authority, board, trust, or commission (other than those under Section 10(46A)) is exempt from tax if it is established by or under an Act, not engaged in commercial activity, and notified by the Central Government. |
| Section 10(46A) | Income of a notified body, authority, board, trust, or commission (not a company) is exempt from tax if it is established under a Central or State Act for public benefit, such as housing, urban development, or public regulation, and is notified by the Central Government. |
| Section 10(46B) | Income of National Credit Guarantee Trustee Company Limited (NCGTC), Credit guarantee funds managed by NCGTC and Credit Guarantee Fund Trust for MSMEs is exempt from tax. |
| Section 10(47) | Income of an infrastructure debt fund is exempt from tax if it meets conditions related to investment in qualified infrastructure projects, fund raising methods, and return filing requirements. |
| Section 10(48) | Income received by a foreign company in India on the sale of crude oil, goods, or rendering of notified services is exempt from tax, subject to conditions such as receiving the income under a Government-approved agreement, being notified by the Government, and not engaging in activities beyond the receipt of such income. |
| Section 10(48A) | Income accruing to a foreign company from the storage and sale of crude oil in India is exempt from tax, provided it is under an agreement approved by the Central Government and the company is notified based on national interest. |
| Section 10(48B) | Income from the sale of leftover stock of crude oil by a foreign company, after the expiration or termination of an agreement referred under Section 10(48A), is exempt from tax, subject to conditions notified by the Central Government. |
| Section 10(48C) | Income earned by the Indian Strategic Petroleum Reserves Limited (ISPRL) from the replenishment of crude oil stored in its facility is exempt from tax, provided ISPRL is a wholly owned subsidiary of the Oil Industry Development Board and the oil is replenished within 3 years. |
| Section 10(48D) | Tax exemption for income of institutions established for financing infrastructure and development, provided they are set up under an Act of Parliament and notified by the Central Government, with the exemption available for 10 consecutive assessment years. |
| Section 10(48E) | Section 10(48E) provides tax exemption on income of a Development Financing Institution (DFI) licensed by the Reserve Bank of India for 5 consecutive assessment years, with a possible extension of up to 5 more years, subject to conditions specified by the Central Government. |
| Section 10(50) | Income which is subject to equalisation levy is exempt from tax. However, equalisation levy has been withdrawn with effect from 01-04-2025. Therefore, this exemption shall not be available for any income pertaining to the assessment year 2026-27 and onwards.
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Section – 10 of Income-tax Act, 1961
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
Incomes not included in total income.
10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—
(1) agricultural income ;
(2) subject to the provisions of sub-section (2) of section 64, any sum received by an individual as a member of a Hindu undivided family, 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 ;
(2A) 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. Explanation.—For the purposes of this clause, the share of a partner in the total income of a firm separately assessed as such shall, notwithstanding anything contained in any other law, be an amount which bears to the total income of the firm the same proportion as the amount of his share in the profits of the firm in accordance with the partnership deed bears to such profits ;
(3) [***]
(4) (i) in the case of a non-resident, any income by way of interest on such securities or bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf, including income by way of premium on the redemption of such bonds :
Provided that the Central Government shall not specify, for the purposes of this sub-clause, such securities or bonds on or after the 1st day of June, 2002;
(ii) in the case of an individual, any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Management Act, 1999 (42 of 1999), and the rules made thereunder :
Provided that such individual is a person resident outside India as defined in clause (w) 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 ;
(4B) in the case of an individual, being a citizen of India or a person of Indian origin, who is a non-resident, any income from interest on such savings certificates issued before the 1st day of June, 2002 by the Central Government as that Government may, by notification in the Official Gazette, specify in this behalf :
Provided that the individual has subscribed to such certificates in convertible foreign exchange remitted from a country outside India in accordance with the provisions of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder. Explanation.—For the purposes of this clause,—
a. a person shall be deemed to be of Indian origin if he, or either of his parents or any of his grandparents, was born in undivided India ;
b. “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder ;
(4C) any income by way of interest payable to a non-resident, not being a company, or to a foreign company, by any Indian company or business trust in respect of monies borrowed from a source outside India by way of issue of rupee denominated bond, as referred to in clause (ia) of sub-section (2) of section 194LC, during the period beginning from the 17th day of September, 2018 and ending on the 31st day of March, 2019;
(4D) any income accrued or arisen to, or received by a specified fund as a result of transfer of capital asset referred to in clause (viiab) of section 47, on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in convertible foreign exchange or as a result of transfer of securities (other than shares in a company resident in India) or any income from securities issued by a non-resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India or any income from a securitisation trust which is chargeable under the head “Profits and gains of business or profession”, to the extent such income accrued or arisen to, or is received, is attributable to units held by non-resident (not being the permanent establishment of a non-resident in India) or is attributable to the investment division of offshore banking unit, as the case may be, computed in the prescribed manner.
Explanation.—For the purposes of this clause, the expression—
(a) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder;
(aa) “investment division of offshore banking unit” means an investment division of a banking unit of a non-resident located in an International Financial Services Centre, as referred to in sub-section (1A) of section 80LA and which has commenced its operations on or before the 31st day of March, 19120301;
(b) “manager” shall have the meaning assigned to it in clause (q) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(ba) “permanent establishment” shall have the same meaning assigned to it in clause (iiia) of section 92F;
(bb) “securities” shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and shall also include such other securities or instruments as may be notified by the Central Government in the Official Gazette in this behalf;
(bc) “securitisation trust” shall have the same meaning assigned to it in clause (d) of the Explanation to section 115TCA;
(c) “specified fund” means,—
(i) a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate,-
20 [(I) (a)] which has been granted a certificate of registration as a Category III Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or 21[regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022, made under the] International Financial Services Centres Authority Act, 2019 (50 of 2019);
22 [(b) which has been granted a certificate as a retail scheme or an Exchange Traded Fund and satisfies the conditions laid down for such schemes or funds under the International Financial Services Centres Authority (Fund Management) Regulations, 2022, made under the International Financial Services Centres Authority Act, 2019 (50 of 2019);]
(I) which is located in any International Financial Services Centre; and
(II) of which all the units other than unit held by a sponsor or manager are held by non-residents :
Provided that the condition specified in this item shall not apply where any unit holder or holders, being nonresident during the previous year when such unit or units were issued, becomes resident under clause (1) or clause (IA) of section 6 in any previous year subsequent to that year, if the aggregate value and number of the units held by such resident unit holder or holders do not exceed five per cent of the total units issued and fulfil such other conditions as may be prescribed; or
(ii) investment division of an offshore banking unit, which has been—
(I) granted a certificate of registration as a Category-I foreign portfolio investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and which has commenced its operations on or before the 31st day of March, 23[2030]; and
(II) fulfils such conditions including maintenance of separate accounts for its investment division, as may be prescribed;
(d) “sponsor” shall have the meaning assigned to it in clause (w) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(e) “trust” means a trust established under the Indian Trusts Act, 1882 (2 of 1882) or under any other law for the time being in force;
(f) “unit” means beneficial interest of an investor in the fund and shall include shares or partnership interests;
24 [(4E) any income accrued or arisen to, or received by a non-resident as a result of—
(i) transfer of non-deliverable forward contracts or offshore derivative instruments or over-the-counter derivatives; or
(ii) distribution of income on offshore derivative instruments 25[or over-the-counter derivatives],
entered into with an offshore banking unit of an International Financial Services Centre referred to in sub-section (1A) of section 80LA 25[or any Foreign Portfolio Investor being a unit of an International Financial Services Centre], which fulfils such conditions as may be prescribed;]
Following Explanation shall be inserted in clause (4E) of section 10 by the Finance Act, 2025, w.e.f. 1-4-2026:
Explanation.—For the purposes of this clause, “Foreign Portfolio Investor” means a person registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(4F) any income of a non-resident by way of royalty or interest , on account of lease of an aircraft or a ship in a previous year, paid by a unit of an International Financial Services Centre as referred to in sub-section (1A) of section 80LA, if the unit has commenced its operations on or before the 31st day of March, 26[2030].
Explanation.—For the purposes of this clause,—
i. “aircraft” means an aircraft or a helicopter, or an engine of an aircraft or a helicopter, or any part thereof;
ii. “ship” means a ship or an ocean vessel, engine of a ship or ocean vessel, or any part thereof;
27[(4G) any income received by a non-resident from,—
i. portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such nonresident; or
ii. such activity carried out by such person, as may be notified by the Central Government in the Official Gazette, in an account maintained with an Offshore Banking Unit in any International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India.
Explanation.—For the purposes of this clause, “portfolio manager” shall have the same meaning as assigned to it in clause (z) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021, made under the International Financial Services Centres Authority Act, 2019 (50 of 2019);
(4H) any income of a non-resident or a Unit of an International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, engaged primarily in the business of leasing of an aircraft 281or a ship], by way of capital gains arising from the transfer of equity shares of domestic company, being a Unit of an International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, engaged primarily in the business of leasing of an aircraft 28[or a ship] which has commenced operations on or before the 31st day of March, 9120301:
Provided that the provisions of this clause shall apply for capital gains arising from the transfer of equity shares of such domestic company in a previous year relevant to an assessment year falling within the—
(i) period of ten assessment years beginning with the assessment year relevant to the previous year in which the domestic company has commenced operations; or
(ii) period of ten assessment years beginning with the assessment year commencing on the 1st day of April, 2024, where the period referred to in clause (a) ends before the 1st day of April, 2034.
30[Explanation.—For the purposes of this clause,—
a. “aircraft” means an aircraft or a helicopter, or an engine of an aircraft or a helicopter, or any part thereof;
b. “ship” means a ship or an ocean vessel, engine of a ship or ocean vessel, or any part thereof,•]]
(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—
a. from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;
b. from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,
subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government :
Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel:
Provided further that for the assessment year beginning on the 1st day of April, 2021, the value in lieu of any travel concession or assistance received by, or due to, such individual shall also be exempt under this clause subject to the fulfilment of such conditions (including the condition of incurring such amount of such expenditure within such period), as may be prescribed.
Explanation 1.—For the purposes of this clause, “family”, in relation to an individual, means—
(i) the spouse and children of the individual ; and
(ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.
Explanation 2.—For the removal of doubts, it is hereby clarified that where an individual claims exemption and the exemption is allowed under the second proviso in connection with the prescribed expenditure, no exemption shall be allowed under this clause in respect of such prescribed expenditure to any other individual;
(5A) [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(5B) [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
(6) in the case of an individual who is not a citizen of India,—
(i) [***]
(ii) the remuneration received by him as an official, by whatever name called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or as a member of the staff of any of these officials, for service in such capacity :
Provided that the remuneration received by him as a trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country :
Provided further that such members of the staff are subjects of the country represented and are not engaged in any business or profession or employment in India otherwise than as members of such staff ;
(iii) [Sub-clause (ii) substituted for sub-clauses (ii) to (v) by the Finance Act, 1988, w.e.f. 1-4-1989;] to (v)
(vi) the remuneration received by him as an employee of a foreign enterprise for services rendered by him during his stay in India, provided the following conditions are fulfilled—
a. the foreign enterprise is not engaged in any trade or business in India ;
b. his stay in India does not exceed in the aggregate a period of ninety days in such previous year ; and
c. such remuneration is not liable to be deducted from the income of the employer chargeable under this Act ; (via) [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(vii) [Omitted by the Finance Act, 1993, w.e.f. 1-4-1993;]
(viia) [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(viii) any income chargeable under the head “Salaries” received by or due to any such individual being a non-resident as remuneration for services rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate a period of ninety days in the previous year ;
(ix) [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(x) [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(xi) the remuneration received by him as an employee of the Government of a foreign State during his stay in India in connection with his training in any establishment or office of, or in any undertaking owned by,—
i. the Government ; or
ii. any company in which the entire paid-up share capital is held by the Central Government, or any State Government or Governments, or partly by the Central Government and partly by one or more State Governments ; or
iii. any company which is a subsidiary of a company referred to in item (ii) ; or
iv. any corporation established by or under a Central, State or Provincial Act ; or
v. any society registered under the Societies Registration Act, 1860 (21 of 1860), or under any other corresponding law for the time being in force and wholly financed by the Central Government, or any State Government or State Governments, or partly by the Central Government and partly by one or more State Governments ;
(6A) where in the case of a foreign company deriving income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976 but before the 1st day of June, 2002 and,—
a. where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, such agreement is in accordance with that policy ; and
b. in any other case, the agreement is approved by the Central Government, the tax on such income is payable, under the terms of the agreement, by Government or the Indian concern to the Central Government, the tax so paid.
Explanation.—For the purposes of this clause and clause (6B),—
a. “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;
b. “foreign company” shall have the same meaning as in section 80B ;
c. “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
(6B) where in the case of a non-resident (not being a company) or of a foreign company deriving income (not being salary, royalty or fees for technical services) from Government or an Indian concern in pursuance of an agreement entered into before the 1st day of June, 2002 by the Central Government with the Government of a foreign State or an international organisation, the tax on such income is payable by Government or the Indian concern to the Central Government under the terms of that agreement or any other related agreement approved before that date by the Central Government, the tax so paid ;
(6BB) where in the case of the Government of a foreign State or a foreign enterprise deriving income from an Indian company engaged in the business of operation of aircraft, as a consideration of acquiring an aircraft or an aircraft engine (other than payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease under an agreement entered into after the 31st day of March, 1997 but before the 1st day of April, 1999, or entered into after the 31st day of March, 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 that agreement to the Central Government, the tax so paid.
Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person who is a non-resident;
(6C) any income arising to such foreign company, as the Central Government may, by notification in the Official Gazette, specify in this behalf, by way of royalty or fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India ;
(6D) any income arising to a non-resident, not being a company, or a foreign company, by way of royalty from, or fees for technical services rendered in or outside India to, the National Technical Research Organisation;
(7) any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India ;
(8) in the case of an individual who is assigned to duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of a foreign State (the terms whereof provide for the exemption given by this clause)—
a. the remuneration received by him directly or indirectly from the Government of that foreign State for such duties, and
b. 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 such individual is required to pay any income or social security tax to the Government of that foreign State :
Provided that nothing contained in this clause shall apply to such remuneration and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;
(8A) in the case of a consultant—
a. any remuneration or fee received by him or it, directly or indirectly, out of the funds made available to an international organisation [hereafter referred to in this clause and clause (8B) as the agency] under a technical assistance grant agreement between the agency and the Government of a foreign State ; and
b. any other income which accrues or arises to him or it outside India, and is not deemed to accrue or arise in India, in respect of which such consultant is required to pay any income or social security tax to the Government of the country of his or its origin:
Provided that nothing contained in this clause shall apply to such remuneration, fee and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023.
Explanation.—In this clause, “consultant” means—
i. any individual, who is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; or
ii. any other person, being a non-resident, engaged by the agency for rendering technical services in India in connection with any technical assistance programme or project, provided the following conditions are fulfilled, namely :—
1. the technical assistance is in accordance with an agreement entered into by the Central Government and the agency ; and
2. the agreement relating to the engagement of the consultant is approved by the prescribed authority for the purposes of this clause ;
(8B) in the case of an individual who is assigned to duties in India in connection with any technical assistance programme and project in accordance with an agreement entered into by the Central Government and the agency—
a. the remuneration received by him, directly or indirectly, for such duties from any consultant referred to in clause (8A) ; and
b. 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 such individual is required to pay any income or social security tax to the country of his origin, provided the following conditions are fulfilled, namely :—
i. the individual is an employee of the consultant referred to in clause (8A) and is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; and
ii. the contract of service of such individual is approved by the prescribed authority before the commencement of his service : Provided that nothing contained in this clause shall apply to such remuneration and income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;
(9) the income of any member of the family of any such individual as is referred to in clause (8) or clause (8A) or, as the case may be, clause (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, as the case may be, country of origin of such member:
Provided that nothing contained in this clause shall apply to such income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2023;
(10) (i) any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services ;
(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 4 of that Act ;
(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, 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 as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government :
Provided that where any gratuities referred to in this clause are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this clause shall not exceed the limit so specified :
Provided further that where any such gratuity or gratuities was or were received in any one or more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause shall not exceed the limit so specified as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
Explanation.—In this clause, and in clause (10AA), “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule ;
(10A) (i) any payment in commutation of pension received under the Civil Pensions (Commutation) Rules of the Central Government or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or a corporation established by a Central, State or Provincial Act ;
(ii) any payment in commutation of pension received under any scheme of any other employer, to the extent it does not exceed—
a. in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and
b. in any other case, the commuted value of one-half of such pension, such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality ;
(iii) any payment in commutation of pension received from a fund under clause (23AAB);
(10AA) (i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise ;
(ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether on superannuation or otherwise, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government :
Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause shall not exceed the limit so specified :
Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was or were not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this sub-clause shall not exceed the limit so specified, as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
Explanation.—For the purposes of sub-clause (ii),—
the entitlement to earned leave of an employee shall not exceed thirty days for every year of actual service rendered by him as an employee of the employer from whose service he has retired ;
(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, at the time of his retrenchment :
Provided that the amount exempt under this clause shall not exceed—
(i) an amount calculated in accordance with the provisions of clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947); or
(ii) such amount, not being less than fifty thousand rupees, as the Central Government may, by notification in the Official Gazette, specify in this behalf, whichever is less :
Provided further that the preceding proviso shall not apply in respect of any compensation received by a workman in accordance with any scheme which the Central Government may, having regard to the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in this behalf.
Explanation.—For the purposes of this clause—
(a) compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment ;
(b) compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of the ownership or management of the undertaking in which he is employed from the employer in relation to that undertaking to a new employer, shall be deemed to be compensation received at the time of his retrenchment if—
i. the service of the workman has been interrupted by such transfer ; or
ii. the terms and conditions of service applicable to the workman after such transfer are in any way less favourable to the workman than those applicable to him immediately before the transfer ; or
iii. the new employer is, under the terms of such transfer or otherwise, legally not liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer ;
(c) the expressions “employer” and “workman” shall have the same meanings as in the Industrial Disputes Act, 1947 (14 of 1947); (10BB) any payments made under the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 (21 of 1985), and any scheme framed thereunder except payment made to any assessee in connection with the Bhopal Gas Leak Disaster to the extent such assessee has been allowed a deduction under this Act on account of any loss or damage caused to him by such disaster ;
(10BC) any amount received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensation on account of any disaster, except the amount received or receivable to the extent such individual or his legal heir has been allowed a deduction under this Act on account of any loss or damage caused by such disaster.
Explanation.—For the purposes of this clause, the expression “disaster” shall have the meaning assigned to it under clause (d) of section 2 of the Disaster Management Act, 2005 (53 of 2005);
(1OC) any amount received or receivable by an employee of—
i. a public sector company ; or
ii. any other company ; or
iii. an authority established under a Central, State or Provincial Act ; or
iv. a local authority ; or
v. a co-operative society ; or
vi. 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 (3 of 1956) ; or
vii. an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961) ; or
viia. any State Government; or
viib. the Central Government; or
viic. an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette, specify in this behalf; or
viii. such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf, on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees :
Provided that the schemes of the said companies or authorities or societies or Universities or the Institutes referred to in sub-clauses (vii) and (viii), 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 :
Provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year :
Provided also that where any relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under this clause shall be allowed to him in relation to such, or any other, assessment year;
(10CC) in the case of an employee, being an individual deriving income in the nature of a perquisite, not provided for by way of monetary payment, within the meaning of clause (2) of section 17, the tax on such income actually paid by his employer, at the option of the employer, on behalf of such employee, notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956);
(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than—
a. any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA; or
b. any sum received under a Keyman insurance policy; or
c. any sum received under an insurance policy issued on or after the 1st day of April, 2003 but on or before the 31st day of March, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured ; or
d. any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured:
Provided that the provisions of sub-clauses (c) and (d) shall not apply to any sum received on the death of a person:
Provided further that for the purpose of calculating the actual capital sum assured under sub-clause (c), effect shall be given to the
Explanation to sub-section (3) of section 80C 31[***] :
Provided also that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—
i. a person with disability or a person with severe disability as referred to in section 80U; or
ii. suffering from disease or ailment as specified in the rules made under section 80DDB,
the provisions of this sub-clause shall have effect as if for the words “ten per cent”, the words “fifteen per cent” had been substituted: Provided also that nothing contained in this clause shall apply with respect to any unit linked insurance policy, issued on or after the 1st day of February, 2021, if the amount of premium payable for any of the previous year during the term of such policy exceeds two lakh and fifty thousand rupees:
Provided also that if the premium is payable, by a person, for more than one unit linked insurance policies, issued on or after the 1st day of February, 2021, the provisions of this clause shall apply only with respect to those unit linked insurance policies, where the aggregate amount of premium does not exceed the amount referred to in fourth proviso in any of the previous year during the term of any of those policies:
32 Provided also that nothing contained in this clause shall apply with respect to any life insurance policy, other than a unit linked insurance policy, issued on or after the 1st day of April, 2023, if the amount of premium payable for any of the previous years during the term of such policy exceeds five lakh rupees:
Provided also that if the premium is payable by a person for more than one life insurance policy, other than unit linked insurance policy, issued on or after the 1st day of April, 2023, the provisions of this clause shall apply only with respect to those life insurance policies, other than unit linked insurance policies, where the aggregate amount of premium does not exceed the amount referred to in the sixth proviso in any of the previous years during the term of any of those policies:
33[Provided also that the provisions of the fourth, fifth, sixth and seventh provisos shall not apply to any sum received—
a. on the death of a person; or
b. under a life insurance policy issued by the International Financial Services Centre Insurance Office, including the sum allocated by way of bonus on such policy.
Explanation.—For the purposes of this proviso, “International Financial Services Centre Insurance Office” shall have the same meaning as assigned to it in clause (k) of sub-regulation (1) of regulation 3 of the International Financial Services Centres Authority (Insurance Intermediary) Regulations, 2021, made under the International Financial Services Centres Authority Act, 2019 (50 of 2019)1]
Provided also that if any difficulty arises in giving effect to the provisions of this clause, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty and every guideline issued by the Board under this proviso shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and the assessee.
Explanation 1.—For the purposes of this clause, “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.
Explanation 2.—For the purposes of sub-clause (d), the expression “actual capital sum assured” shall have the meaning assigned to it in the Explanation to sub-section (3A) of section 80C.
Explanation 3.— For the purposes of this clause, “unit linked insurance policy” means a life insurance policy which has components of both investment and insurance and is linked to a unit as defined in clause (ee) of regulation 3 of the Insurance Regulatory and Development Authority of India (Unit Linked Insurance Products) Regulations, 2019 issued by the Insurance Regulatory and Development Authority under the Insurance Act, 1938 (4 of 1938) and the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(11) any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies or from any other provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette:
Provided that the provisions of this clause shall not apply to the income by way of interest accrued during the previous year in the account of a person to the extent it relates to the amount or the aggregate of amounts of contribution made by that person exceeding two lakh and fifty thousand rupees in any previous year in that fund, on or after the 1st day of April, 2021 and computed in such manner as may be prescribed :
Provided further that if the contribution by such person is in a fund in which there is no contribution by the employer of such person, the provisions of the first proviso shall have the effect as if for the words “two lakh and fifty thousand rupees”, the words “five lakh rupees” had been substituted;
(11A) any payment from an account, opened in accordance with the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Banks Act, 1873 (5 of 1873);
(12) the accumulated balance due and becoming payable to an employee participating in a recognised provident fund, to the extent provided in rule 8 of Part A of the Fourth Schedule :
Provided that the provisions of this clause shall not apply to the income by way of interest accrued during the previous year in the account of a person to the extent it relates to the amount or the aggregate of amounts of contribution made by that person exceeding two lakh and fifty thousand rupees in any previous year in that fund, on or after the 1st day of April, 2021 and computed in such manner as may be prescribed :
Provided further that if the contribution by such person is in a fund in which there is no contribution by the employer of such person, the provisions of the first proviso shall have the effect as if for the words “two lakh and fifty thousand rupees”, the words “five lakh rupees” had been substituted;
(12A) any payment from the National Pension System Trust to an assessee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed sixty per cent of the total amount payable to him at the time of such closure or his opting out of the scheme;
33a[(I2AA) any payment from the National Pension System Trust to an assessee, who is a subscriber to the Unified Pension Scheme, to the extent that it does not exceed sixty per cent. of the individual corpus, as specified in notification number FX-1/3/2024-PR, dated the 24th January, 2025 of the Department of Financial Services, made at the time of his superannuation or voluntary retirement or retirement under clause (j) of rule 56 of the Fundamental Rules (which is not treated as penalty under the Central Civil Services (Classification, Control and Appeal) Rules, 1965] ;
(12AB) any sum received as lump sum amount as per clause (vi) of paragraph 2 of the notification number FX-1/3/2024-PR, dated the 24th January, 2025 of the Department of Financial Services, by an assessee being a subscriber to the Unified Pension Scheme;]
(12B) any payment from the National Pension System Trust to an employee under the pension scheme referred to in section 80CCD, on partial withdrawal made out of his account in accordance with the terms and conditions, specified under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013) and the regulations made thereunder, to the extent it does not exceed twenty-five per cent of the amount of contributions made by him;
Following clause (12BA) shall be inserted after clause (12B) of section 10 by the Finance Act, 2025, w.e.f. 1-4-2026:
(12BA) any payment from the National Pension System Trust to an assessee, being the parent or guardian of a minor, under the pension scheme referred to in section 80CCD, on partial withdrawal made out of the account of the minor, as per the terms and conditions, specified under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013) and the regulations made thereunder, to the extent it does not exceed twenty-five per cent of the amount of contributions made by him;
32 [(12C) any payment from the Agniveer Corpus Fund to a person enrolled under the Agnipath Scheme, or to his nominee.
Explanation.—For the purposes of this clause “Agniveer Corpus Fund” and “Agnipath Scheme” shall have the meanings respectively assigned to them in section 80CCH;]
(13) any payment from an approved superannuation fund made—
i. on the death of a beneficiary; or
ii. to an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement; or
iii. by way of refund of contributions on the death of a beneficiary ; or
iv. by way of refund of contributions to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement, to the extent to which such payment does not exceed the contributions made prior to the commencement of this Act and any interest thereon; or
v. by way of transfer to the account of the employee under a pension scheme referred to in section 80CCD and notified by the Central Government;
(13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant considerations
Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where—
(a) the residential accommodation occupied by the assessee is owned by him ; or
(b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him ;
(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, as may be prescribed, to the extent to which such expenses are actually incurred for that purpose ;
(14A) [*****]
(ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, as may be prescribed and to the extent as may be prescribed :
Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence ;
(14A) [***]
(15) (i) income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits as the Central Government may, by notification in the Official Gazette, specify in this behalf, subject to such conditions and limits as may be specified in the said notification ;
(iib) in the case of an individual or a Hindu undivided family, interest on such Capital Investment Bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf :
Provided that the Central Government shall not specify, for the purposes of this sub-clause, such Capital Investment Bonds on or after the 1st day of June, 2002;
(iic) in the case of an individual or a Hindu undivided family, interest on such Relief Bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf ;
(iid) interest on such bonds, as the Central Government may, by notification in the Official Gazette, specify, arising to—
a. a non-resident Indian, being an individual owning the bonds ; or
b. any individual owning the bonds by virtue of being a nominee or survivor of the non-resident Indian ; or
c. any individual to whom the bonds have been gifted by the non-resident Indian :
Provided that the aforesaid bonds are purchased by a non-resident Indian in foreign exchange and the interest and principal received in respect of such bonds, whether on their maturity or otherwise, is not allowable to be taken out of India :
Provided further that where an individual, who is a non-resident Indian in any previous year in which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of this sub-clause shall continue to apply in relation to such individual :
Provided also that in a case where the bonds are encashed in a previous year prior to their maturity by an individual who is so entitled, the provisions of this sub-clause shall not apply to such individual in relation to the assessment year relevant to such previous year :
Provided also that the Central Government shall not specify, for the purposes of this sub-clause, such bonds on or after the 1st day of June, 2002.
Explanation.—For the purposes of this sub-clause, the expression “non-resident Indian” shall have the meaning assigned to it in clause (e) of section 115C;
(iii) interest on securities held by the Issue Department of the Central Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949;
(iiia) interest payable to any bank incorporated in a country outside India and authorised to perform central banking functions in that country on any deposits made by it, with the approval of the Reserve Bank of India, with any scheduled bank.
Explanation.—For the purposes of this sub-clause, “scheduled bank” shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36;
(iiib) interest payable to the Nordic Investment Bank, being a multilateral financial institution constituted by the Governments of Denmark, Finland, Iceland, Norway and Sweden, on a loan advanced by it to a project approved by the Central Government in terms of the Memorandum of Understanding entered into by the Central Government with that Bank on the 25th day of November, 1986;
(iiic) interest payable to the European Investment Bank, on a loan granted by it in pursuance of the framework-agreement for financial cooperation entered into on the 25th day of November, 1993 by the Central Government with that Bank;
(iv) interest payable—
a. by Government or a local authority on moneys borrowed by it before the 1st day of June, 2001 from, or debts owed by it before the 1st day of June, 2001 to, sources outside India;
b. by an industrial undertaking in India on moneys borrowed by it under a loan agreement entered into before the 1st day of June, 2001 with any such financial institution in a foreign country as may be approved in this behalf by the Central Government by general or special order ;
c. by an industrial undertaking in India on any moneys borrowed or debt incurred by it before the 1st day of June, 2001 in a foreign country in respect of the purchase outside India of raw materials or components or capital plant and machinery, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan or debt and its repayment.
Explanation 1.—For the purposes of this item, “purchase of capital plant and machinery” includes the purchase of such capital plant and machinery under a hire-purchase agreement or a lease agreement with an option to purchase such plant and machinery. Explanation 2.—For the removal of doubts, it is hereby declared that the usance interest payable outside India by an undertaking engaged in the business of ship-breaking in respect of purchase of a ship from outside India shall be deemed to be the interest payable on a debt incurred in a foreign country in respect of the purchase outside India;
d. by the Industrial Finance Corporation of India established by the Industrial Finance Corporation Act, 1948 (15 of 1948), or the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), or the Export-Import Bank of India established under the Export-Import Bank of India Act, 1981 (28 of 1981), or the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987), or the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989), or the Industrial Credit and Investment Corporation of India a company formed and registered under the Indian Companies Act, 1913 (7 of 1913), on any moneys borrowed by it from sources outside India before the 1st day of June, 2001, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;
e. by any other financial institution established in India or a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act), on any moneys borrowed by it from sources outside India before the 1st day of June, 2001 under a loan agreement approved by the Central Government where the moneys are borrowed either for the purpose of advancing loans to industrial undertakings in India for purchase outside India of raw materials or capital plant and machinery or for the purpose of importing any goods which the Central Government may consider necessary to import in the public interest, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;
f. by an industrial undertaking in India on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government before the 1st day of June, 2001 having regard to the need for industrial development in India, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;
fa. by a scheduled bank to a non-resident or to a person who is not ordinarily resident within the meaning of sub-section (6) of section 6 on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the Reserve Bank of India. Explanation.—For the purposes of this item, the expression “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank;
g. by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, being a company eligible for deduction under clause (viii) of sub-section (1) of section 36 on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government before the 1st day of June, 2003, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment.
Explanation.—For the purposes of items (f), (fa) and (g), the expression “foreign currency” shall have the meaning assigned to it in the Foreign Exchange Management Act, 1999 (42 of 1999);
h. by any public sector company in respect of such bonds or debentures and subject to such conditions, including the condition that the holder of such bonds or debentures registers his name and the holding with that company, as the Central Government may, by notification in the Official Gazette, specify in this behalf;
i. by Government on deposits made by an employee of the Central Government or a State Government or a public sector company, in accordance with such scheme as the Central Government may, by notification in the Official Gazette, frame in this behalf, out of the moneys due to him on account of his retirement, whether on superannuation or otherwise.
Explanation 1.—For the purposes of this sub-clause, the expression “industrial undertaking” means any undertaking which is engaged in—
(a) the manufacture or processing of goods; or
(aa) the manufacture of computer software or recording of programme on any disc, tape, perforated media or other information device;
Or
(b) the business of generation or distribution of electricity or any other form of power; or
(ba) the business of providing telecommunication services; or
(c) mining; or
(d) the construction of ships; or
(da) the business of ship-breaking; or
(e) the operation of ships or aircrafts or construction or operation of rail systems.
Explanation 1A.—For the purposes of this sub-clause, the expression “interest” shall not include interest paid on delayed payment of loan or on default if it is in excess of two per cent per annum over the rate of interest payable in terms of such loan.
Explanation 2.—For the purposes of this clause, the expression “interest” includes hedging transaction charges on account of currency fluctuation;
(v) interest on—
a. securities held by the Welfare Commissioner, Bhopal Gas Victims, Bhopal, in the Reserve Bank’s SGL Account No. SL/DH 048;
b. deposits for the benefit of the victims of the Bhopal gas leak disaster held in such account, with the Reserve Bank of India or with a public sector bank, as the Central Government may, by notification in the Official Gazette, specify, whether prospectively or retrospectively but in no case earlier than the 1st day of April, 1994 in this behalf.
Explanation.—For the purposes of this sub-clause, the expression “public sector bank” shall have the meaning assigned to it in the Explanation to clause (23D);
(vi) interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 notified by the Central Government;
(vii) interest on bonds—
a. issued by a local authority or by a State Pooled Finance Entity; and
b. specified by the Central Government by notification in the Official Gazette.
Explanation.—For the purposes of this sub-clause, the expression “State Pooled Finance Entity” shall mean such entity which is set up in accordance with the guidelines for the Pooled Finance Development Scheme notified by the Central Government in the Ministry of Urban Development;
(viii) any income by way of interest received by a non-resident or a person who is not ordinarily resident, in India on a deposit made on or after the 1st day of April, 2005, in an Offshore Banking Unit referred to in clause (u) of section 2 of the Special Economic Zones Act, 2005;
(ix) any income by way of interest payable to a non-resident by a unit located in an International Financial Services Centre in respect of monies borrowed by it on or after the 1st day of September, 2019.
Explanation.—For the purposes of this sub-clause,—
a. “International Financial Services Centre” shall have the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
b. “unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
(15A) any payment made, by an Indian company engaged in the business of operation of aircraft, to acquire an aircraft or an aircraft engine (other than a payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease from the Government of a foreign State or a foreign enterprise under an agreement, not being an agreement entered into between the 1st day of April, 1997 and the 31st day of March, 1999, and approved by the Central Government in this behalf :
Provided that nothing contained in this clause shall apply to any such agreement entered into on or after the 1st day of April, 2007.
Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person who is a non-resident;
35[(15B) any income of a foreign company from lease rentals, by whatever name called, of cruise ships, received from a specified company which operates such ship or ships in India, where such foreign company and the specified company are subsidiaries of the same holding company, and such income is received or accrues or arises in India for any relevant assessment year beginning on or before the 1st day of April, 2030.
Explanation.–For the purposes of this clause,—
a. “specified company” means any company, other than a domestic company which operates cruise ships in India and opts to pay tax in accordance with the provisions of section 44BBC;
b. “holding company”, in relation to a foreign company or a specified company, means a company of which such companies are subsidiary companies;
c. “subsidiary company” or “subsidiary”, in relation to a holding company, means a company in which the holding company exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies;]
(16) scholarships granted to meet the cost of education;
(17) any income by way of—
i. daily allowance received by any person by reason of his membership of Parliament or of any State Legislature or of any Committee thereof;
ii. any allowance received by any person by reason of his membership of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986;
iii. any constituency allowance received by any person by reason of his membership of any State Legislature under any Act or rules made by that State Legislature;
(17A) any payment made, whether in cash or in kind,—
i. in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or
ii. as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest;
(18) any income by way of—
(i) pension received by an individual who has been in the service of the Central Government or State Government and has been awarded “Param Vir Chakra” or “Mafia Vir Chakra” or “Vir Chakra” or such other gallantry award as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(ii) family pension received by any member of the family of an individual referred to in sub-clause (i).
Explanation.—For the purposes of this clause, the expression “family” shall have the meaning assigned to it in the Explanation to clause (5);
(18A) [Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(19) family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including paramilitary forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed;
(19A) the annual value of any one palace in the occupation of a Ruler, being a palace, the annual value whereof was exempt from income-tax before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, by virtue of the provisions of the Merged States (Taxation Concessions) Order, 1949, or the Part B States (Taxation Concessions) Order, 1950, or, as the case may be, the Jammu and Kashmir (Taxation Concessions) Order, 1958:
Provided that for the assessment year commencing on the 1st day of April, 1972, the annual value of every such palace in the occupation of such Ruler during the relevant previous year shall be exempt from income-tax;
(20) the income of a local authority which is chargeable under the head “Income from house property”, “Capital gains” or “Income from other sources” or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area. Explanation.—For the purposes of this clause, the expression “local authority” means—
i. Panchayat as referred to in clause (d) of article 243 of the Constitution; or
ii. Municipality as referred to in clause (e) of article 243P of the Constitution; or
iii. Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or
iv. Cantonment Board as defined in section 3 of the Cantonments Act, 1924 (2 of 1924);
(20A) [***]
(21) any income of a research association for the time being approved for the purpose of clause (ii) or clause (iii) of sub-section (1) of section 35:
Provided that the research association—
(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established, and the provisions of sub-section (2) and sub-section (3) of section 11 shall apply in relation to such accumulation subject to the following modifications, namely :—
(i) in sub-section (2),—
1. the words, brackets, letters and figure “referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section” shall be omitted;
2. for the words “to charitable or religious purposes”, the words “for the purposes of scientific research or research in social science or statistical research” shall be substituted;
3. the reference to “Assessing Officer” in clause (a) thereof shall be construed as a reference to the “prescribed authority” referred to in clause (ii) or clause (iii) of sub-section (1) of section 35;
(ii) in sub-section (3), in clause (a), for the words “charitable or religious purposes”, the words “the purposes of scientific research or research in social science or statistical research” shall be substituted; and
(b) does not invest or deposit its funds, other than—
i. any assets held by the research association where such assets form part of the corpus of the fund of the association as on the 1st day of June, 1973;
ii. any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the research association before the 1st day of March, 1983;
iii. any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause (i), by way of bonus shares allotted to the research association;
iv. voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,
for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11:
Provided further that the exemption under this clause shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the first proviso to this clause, subject to the condition that such voluntary contribution is not held by the research association, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later:
Provided also that nothing contained in this clause shall apply in relation to any income of the research association, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business:
Provided also that where the research association is approved by the Central Government and subsequently that Government is satisfied that—
i. the research association has not applied its income in accordance with the provisions contained in clause (a) of the first proviso; or
ii. the research association has not invested or deposited its funds in accordance with the provisions contained in clause (b) of the first proviso; or
iii. the activities of the research association are not genuine; or
iv. the activities of the research association are not being carried out in accordance with all or any of the conditions subject to which such association was approved,
it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such association and to the Assessing Officer;
(22) [Omitted by the Finance (No. 2) Act, 1998, we.f. 1-4-1999;]
(22A) [Omitted by the Finance (No. 2) Act, 1998, we.f. 1-4-1999;]
(22B) any income of such news agency set up in India solely for collection and distribution of news as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that the news agency applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members:
Provided further that any notification issued by the Central Government under this clause shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:
Provided also that where the news agency has been specified, by notification, by the Central Government and subsequently that Government is satisfied that such news agency has not applied or accumulated or distributed its income in accordance with the provisions contained in the first proviso, it may, at any time after giving a reasonable opportunity of showing cause, rescind the notification and forward a copy of the order rescinding the notification to such agency and to the Assessing Officer:
36[Provided also that nothing contained in this clause shall apply to any income of the news agency of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2024;]
(23) [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
(23A) any income (other than income chargeable under the head “Income from house property” or any income received for rendering any specific services or income by way of interest or dividends derived from its investments) of an association or institution established in India having as its object the control, supervision, regulation or encouragement of the profession of law, medicine, accountancy, engineering or architecture or such other profession as the Central Government may specify in this behalf, from time to time, by notification in the Official Gazette:
Provided that—
i. the association or institution applies its income, or accumulates it for application, solely to the objects for which it is established; and
ii. the association or institution is for the time being approved for the purpose of this clause by the Central Government by general or special order:
Provided further that where the association or institution has been approved by the Central Government and subsequently that Government is satisfied that—
i. such association or institution has not applied or accumulated its income in accordance with the provisions contained in the first proviso; or
ii. the activities of the association or institution are not being carried out in accordance with all or any of the conditions subject to which such association or institution was approved,
it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such association or institution and to the Assessing Officer;
(23AA) any income received by any person on behalf of any Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants;
(23AAA) any income received by any person on behalf of a fund established, for such purposes as may be notified by the Board in the Official Gazette, for the welfare of employees or their dependants and of which fund such employees are members if such fund fulfils the following conditions, namely :—
(a) the fund—
i. applies its income or accumulates it for application, wholly and exclusively to the objects for which it is established; and
ii. invests its funds and contributions and other sums received by it in the forms or modes specified in sub-section (5) of section 11;
(b) the fund is approved by the Principal Commissioner or Commissioner in accordance with the rules made in this behalf:
Provided that any such approval shall at any one time have effect for such assessment year or years not exceeding three assessment years as may be specified in the order of approval;
(23AAB) any income of a fund, by whatever name called, set up by the Life Insurance Corporation of India on or after the 1st day of August, 1996 or any other insurer under a pension scheme,—
i. to which contribution is made by any person for the purpose of receiving pension from such fund;
ii. which is approved by the Controller of Insurance or the Insurance Regulatory and Development Authority established under subsection (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), as the case may be. —For the purposes of this clause, the expression “Controller of Insurance” shall have the meaning assigned to it in clause (5B) of section 2 of the Insurance Act, 1938 (4 of 1938);
(23B) any income of an institution constituted as a public charitable trust or registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India, and existing solely for the development of khadi or village industries or both, and not for purposes of profit, to the extent such income is attributable to the business of production, sale, or marketing, of khadi or products of village industries:
Provided that—
i. the institution applies its income, or accumulates it for application, solely for the development of khadi or village industries or both; and
ii. the institution is, for the time being, approved for the purpose of this clause by the Khadi and Village Industries Commission: Provided further that the Commission shall not, at any one time, grant such approval for more than three assessment years beginning with the assessment year next following the financial year in which it is granted:
Provided also that where the institution has been approved by the Khadi and Village Industries Commission and subsequently that Commission is satisfied that—
i. the institution has not applied or accumulated its income in accordance with the provisions contained in the first proviso; or
ii. the activities of the institution are not being carried out in accordance with all or any of the conditions subject to which such institution was approved,
it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned institution, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such institution and to the Assessing Officer. Explanation.—For the purposes of this clause,—
i. “Khadi and Village Industries Commission” means the Khadi and Village Industries Commission established under the Khadi and Village Industries Commission Act, 1956 (61 of 1956);
ii. “khadi” and “village industries” have the meanings respectively assigned to them in that Act;
(23BB) any income of an authority (whether known as the Khadi and Village Industries Board or by any other name) established in a State by or under a State or Provincial Act for the development of khadi or village industries in the State.
Explanation.—For the purposes of this clause, “khadi” and “village industries” have the meanings respectively assigned to them in the Khadi and Village Industries Commission Act, 1956 (61 of 1956);
(23BBA) any income of any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any Central, State or Provincial Act which provides for the administration of any one or more of the following, that is to say, public religious or charitable trusts or endowments (including maths, temples, gurdwaras, wakfs, churches, synagogues, agiaries or other places of public religious worship) or societies for religious or charitable purposes registered as such under the Societies Registration Act, 1860 (21 of 1860), or any other law for the time being in force:
Provided that nothing in this clause shall be construed to exempt from tax the income of any trust, endowment or society referred to therein;
(23BBB) any income of the European Economic Community derived in India by way of interest, dividends or capital gains from investments made out of its funds under such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf. Explanation.—For the purposes of this clause, “European Economic Community” means the European Economic Community established by the Treaty of Rome of 25th March, 1957;
(23BBC) any income of the SAARC Fund for Regional Projects set up by Colombo Declaration issued on the 21st day of December, 1991 by the Heads of State or Government of the Member Countries of South Asian Association for Regional Cooperation established on the 8th day of December, 1985 by the Charter of the South Asian Association for Regional Cooperation;
(23BBD) any income of the Secretariat of the Asian Organisation of the Supreme Audit Institutions registered as “ASOSAI-SECRETARIAT” under the Societies Registration Act, 1860 (21 of 1860) for ten previous years relevant to the assessment years beginning on the 1st day of April, 2001 and ending on the 31st day of March, 2011;
(23BBE) any income of the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(23BBF) 37[***]
(23BBG) any income of the Central Electricity Regulatory Commission constituted under sub-section (1) of section 76 of the Electricity Act, 2003 (36 of 2003);
(23BBH) any income of the Prasar Bharati (Broadcasting Corporation of India) established under sub-section (1) of section 3 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 (25 of 1990);
(23C) any income received by any person on behalf of—
(i) the Prime Minister’s National Relief Fund or the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND); or
(ii) the Prime Minister’s Fund (Promotion of Folk Art); or
(iii) the Prime Minister’s Aid to Students Fund; or
(iiia) the National Foundation for Communal Harmony; or
(iiiac) the Swachh Bharat Kosh, set up by the Central Government; or
(iiiaaa) the Clean Ganga Fund, set up by the Central Government; or
(iiiaaaa) the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Union territory as referred to in sub-clause (iiihf) of clause (a) of sub-section (2) of section 80G; or
(iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or
(iiiac) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, and which is wholly or substantially financed by the Government.
Explanation.—For the purposes of sub-clauses (iiiab) and (iiiac), any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year; or
(iiiad) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of the person from such university or universities or educational institution or educational institutions do not exceed five crore rupees; or
(iiiae) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, if the aggregate annual receipts of the person from such hospital or hospitals or institution or institutions do not exceed five crore rupees.
Explanation.—For the purposes of sub-clauses (iiiad) and (iiiae), it is hereby clarified that if the person has receipts from university or universities or educational institution or institutions as referred to in sub-clause (iiiad), as well as from hospital or hospitals or institution or institutions as referred to in sub-clause (iiiae), the exemptions under these clauses shall not apply, if the aggregate of annual receipts of the person from such university or universities or educational institution or institutions or hospital or hospitals or institution or institutions, exceed five crore rupees; or
(iv) any other fund or institution established for charitable purposes which may be approved by the Principal Commissioner or Commissioner, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or
(v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be approved by the Principal Commissioner or Commissioner, having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof;
(vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the Principal Commissioner or Commissioner; or
(via) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiac) or sub-clause (iiiae) and which may be approved by the Principal Commissioner or Commissioner :
Provided that the exemption to the fund or trust or institution or university or other educational institution or hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), under the respective sub-clauses, shall not be available to it unless such fund or trust or institution or university or other educational institution or hospital or other medical institution makes an application 38[before the 1st day of October, 2024,] in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,—
(i) where such fund or trust or institution or university or other educational institution or hospital or other medical institution is approved under the second proviso [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020], within three months from the 1st day of April, 2021;
(ii) where such fund or trust or institution or university or other educational institution or hospital or other medical institution is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period;
(iii) where such fund or trust or institution or university or other educational institution or hospital or other medical institution has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier;
39[(iv) in any other case, where activities of the fund or trust or institution or university or other educational institution or hospital or other medical institution have—
(A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought;
(B) commenced and no income or part thereof of the said fund or trust or institution or university or other educational institution or hospital or other medical institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) or section 11 or section 12 for any previous year ending on or before the date of such application, at any time after the commencement of such activities,]
and the said fund or trust or institution or university or other educational institution or hospital or other medical institution is approved under the second proviso:
Provided further that the Principal Commissioner or Commissioner, on receipt of an application made under the first proviso 40[before the 1st day of October, 2024], shall,—
(i) where the application is made under clause (i) of the said proviso, pass an order in writing granting approval to it for a period of five years;
(ii) where the application is made under clause (ii) or clause (iii) 41[or sub-clause (B) of clause (iv)] of the said proviso,—
(a) call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about—
(A) the genuineness of activities of such fund or trust or institution or university or other educational institution or hospital or other medical institution; and
(B) the compliance of such requirements of any other law for the time being in force by it as are material for the purpose of achieving its objects; and
(b) after satisfying himself about the objects and the genuineness of its activities under item (A), and compliance of the requirements under item (B), of sub-clause (a),—
(A) pass an order in writing granting approval to it for a period of five years;
42[(B) if he is not so satisfied, pass an order in writing,—
(I) in a case referred to in clause (ii) or clause (iii) of the first proviso, rejecting such application and also cancelling its approval;
(II) in a case referred to in sub-clause (B) of clause (iv) of the first proviso, rejecting such application, after affording it a reasonable opportunity of being heard;]
2[(iii) where the application is made under sub-clause (A) of clause (iv) of the said proviso or the application made under clause (iv) of the said proviso, as it stood immediately before its amendment by the Finance Act, 2023, pass an order in writing granting approval to it provisionally for a period of three years from the assessment year from which the approval is sought, and send a copy of such order to the fund or trust or institution or university or other educational institution or hospital or other medical institution:]
Provided also that the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via)—
(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years; and
(b) does not invest or deposit its funds, other than—
(i) any assets held by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1973;
(ia) any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998;
(ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution before the 1st day of March, 1983;
(iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) and sub-clause (ia), by way of bonus shares allotted to the fund, trust or institution or any university or other educational institution or any hospital or other medical institution ;
(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,
for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11.
Explanation 1.—For the removal of doubts, it is hereby clarified that for the purposes of this proviso, the income of the funds or trust or institution or any university or other educational institution or any hospital or other medical institution, shall not include income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub-section (5) of section 11 maintained specifically for such corpus.
Explanation IA.—For the purposes of this proviso, where the property held under a trust or institution referred to in clause (v) includes any temple, mosque, gurdwara, church or other place notified under clause (b) of sub-section (2) of section 80G, any sum received by such trust or institution as a voluntary contribution for the purpose of renovation or repair of such temple, mosque, gurdwara, church or other place, may, at its option, be treated by such trust or institution as forming part of the corpus of that trust or institution, subject to the condition that the trust or institution,—
a. applies such corpus only for the purpose for which the voluntary contribution was made;
b. does not apply such corpus for making contribution or donation to any person;
c. maintains such corpus as separately identifiable; and
d. invests or deposits such corpus in the forms and modes specified under sub-section (5) of section 11.
Explanation 1B.—For the purposes of Explanation IA, where any trust or institution referred to in sub-clause (v) has treated any sum received by it as forming part of the corpus, and subsequently any of the conditions specified in clause (a) or clause (b) or clause (c) or clause (d) of the said Explanation is violated, such sum shall be deemed to be the income of such trust or institution of the previous year during which the violation takes place.
Explanation 2.—For the purposes of determining the amount of application under this proviso,—
application for charitable or religious purposes from the corpus as referred to in Explanation 1, shall not be treated as application of income for charitable or religious purposes:
Provided that the amount not so treated as application or part thereof, shall be treated as application for charitable or religious purposes in the previous year in which the amount, or part thereof, is invested or deposited back, into one or more of the forms or modes specified in sub-section (5) of section 11 maintained specifically for such corpus, from the income of that year and to the extent of such investment or deposit: 43[***]
[Provided further that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty-first provisos, and those specified in Explanation 2 and Explanation 3, of this clause, at the time the application was made from the corpus:
Provided also that the amount invested or deposited back shall not be treated as application for charitable or religious purposes under the first proviso unless such investment or deposit is made within a period of five years from the end of the previous year in which such application was made from the corpus:
Provided also that nothing contained in the first proviso shall apply where the application from the corpus is made on or before the 31st day of March, 2021;]
(ii) application for charitable or religious purposes, from any loan or borrowing, shall not be treated as application of income for charitable or religious purposes:
Provided that the amount not so treated as application or part thereof, shall be treated as application for charitable or religious purposes in the previous year in which the loan or borrowing, or part thereof, is repaid from the income of that year and to the extent of such repayment:
[Provided further that the provisions of the first proviso shall apply only if there was no violation of the conditions specified in the twelfth, thirteenth and twenty-first provisos, and those specified in Explanation 2 and Explanation 3, of this clause at the time the application was made from loan or borrowing:
Provided also that the amount repaid shall not be treated as application for charitable or religious purposes under the first proviso unless such repayment is made within a period of five years from the end of the previous year in which such application was made from loan or borrowing:
Provided also that nothing contained in the first proviso shall apply where the application from any loan or borrowing is made on or before the 31st day of March, 2021; and]
45[(iii) any amount credited or paid out of the income of any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), other than the amount referred to in the twelfth proviso, to any other fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), or trust or institution registered under section 12AB, as the case may be, shall be treated as application for charitable or religious purposes only to the extent of eighty-five per cent of such amount credited or paid.]
Explanation 3.—For the purposes of determining the amount of application under this proviso, where eighty-five per cent of the income referred to in clause (a) of this proviso is not applied wholly and exclusively to the objects for which the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) is established, during the previous year but is accumulated or set apart, either in whole or in part, for application to such objects, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, if the following conditions are complied with, namely:—
a. such person furnishes a statement in such form and manner, as may be prescribed, to the Assessing Officer stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years;
b. the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) of section 11; and
c. the statement referred to in clause (a) is 46[furnished at least two months prior to] the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year:
Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded.
Explanation 4.—Any income referred to in Explanation 3, which,—
(a) is applied for purposes other than wholly and exclusively to the objects for which the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) is established or ceases to be accumulated or set apart for application thereto; or
(b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5) of section 11; or
(c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of Explanation 3; or
(d) is credited or paid to any trust or institution registered under section 12AA or section 12AB or to any fund or institution or trust or
any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via),
shall be deemed to be the income of such person of the previous year—
i. in which it is so applied or ceases to be so accumulated or set apart under clause (a); or
ii. in which it ceases to remain so invested or deposited under clause (b); or
iii. being the last previous year of the period, for which the income is accumulated or set apart under clause (a) of Explanation 3, but not utilised for the purpose for which it is so accumulated or set apart under clause (c); or
iv. in which it is credited or paid to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution under clause (d).
Explanation 5.—Notwithstanding anything contained in Explanation 4, where due to circumstances beyond the control of the person in receipt of the income, any income invested or deposited in accordance with the provisions of clause (b) of Explanation 3 cannot be applied for the purpose for which it was accumulated or set apart, the Assessing Officer may, on an application made to him in this behalf, allow such person to apply such income for such other purpose in India as is specified in the application by that person and as is in conformity with the objects for which the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) is established; and thereupon the provisions of Explanation 4 shall apply as if the purpose specified by that person in the application under this Explanation were a purpose specified in the notice given to the Assessing Officer under clause (a) of Explanation 3:
Provided that the Assessing Officer shall not allow application of such income by way of payment or credit made for the purposes referred to in clause (d) of Explanation 4 :
Provided also that the exemption under sub-clause (iv) or sub-clause (v) shall not be denied in relation to any funds invested or deposited before the 1st day of April, 1989, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 1993 :
Provided also that the exemption under sub-clause (vi) or sub-clause (via) shall not be denied in relation to any funds invested or deposited before the 1st day of June, 1998, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 2001:
Provided also that the exemption under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the third proviso to this sub-clause, subject to the condition that such voluntary contribution is not held by the trust or institution or any university or other educational institution or any hospital or other medical institution, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later:
Provided also that nothing contained in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall apply in relation to any income of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business:
Provided also that any approval granted under the second proviso shall apply in relation to the income of the fund or trust or institution or university or other educational institution or hospital or other medical institution,—
i. where the application is made under clause (i) of the first proviso, from the assessment year from which approval was earlier granted to it;
ii. where the application is made under clause (iii) of the first proviso, from the first of the assessment years for which it was provisionally approved;
iii. in any other case, from the assessment year immediately following the financial year in which such application is made:
Provided also that the order under clause (i), sub-clause (b) of clause (ii) and clause (iii) of the second proviso shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received:
Provided also that where the total income of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), without giving effect to the provisions of the said sub-clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall,—
a. keep and maintain books of account and other documents in such form and manner and at such place, as may be prescribed; and
b. get its accounts audited in respect of that year by an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to in section 44AB and furnish by that date, the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed:
Provided also that any amount of donation received by the fund or institution in terms of clause (d) of sub-section (2) of section 80G in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister’s National Relief Fund on or before the 31st day of March, 2004 shall be deemed to be the income of the previous year and shall accordingly be charged to tax:
Provided also that any amount credited or paid out of income of any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), to any other fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) or trust or institution registered under section 12AA or section 12AB, being voluntary contribution made with a specific direction that they shall form part of the corpus, shall not be treated as application of income to the objects for which such fund or trust or institution or university or educational institution or hospital or other medical institution, as the case may be, is established:
Provided also that for the purposes of determining the amount of application under item (a) of the third proviso, the provisions of sub-clause (ia) of clause (a) of section 40 and sub-sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”:
Provided also that where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) does not apply its income during the year of receipt and accumulates it, any payment or credit out of such accumulation to any trust or institution registered under section 12AA or section 12AB or to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall not be treated as application of income to the objects for which such fund or trust or institution or university or educational institution or hospital or other medical institution, as the case may be, is established :
Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) is approved or provisionally approved under the said clause and subsequently—
a. the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year;
Or
b. the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to subsection (3) of section 143 for any previous year; or
c. such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year,
the Principal Commissioner or Commissioner, shall,—
i. call for such documents or information from the fund or institution or trust or any university or other educational institution or any hospital or other medical institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence of any specified violation;
ii. pass an order in writing cancelling the approval of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution, on or before the specified date, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violation has taken place;
iii. pass an order in writing refusing to cancel the approval of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution, on or before the specified date, if he is not satisfied about the occurrence of one or more specified violations;
iv. forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such fund or institution or trust or any university or other educational institution or any hospital or other medical institution.
Explanation 1.—For the purposes of this proviso, “specified date” shall mean the day on which the period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) expires.
Explanation 2.—For the purposes of this proviso, the following shall mean “specified violation”,—
(a) where any income of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has been applied other than for the objects for which it is established; or
(b) the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has income from profits and gains of business, which is not incidental to the attainment of its objectives or separate books of account are not maintained by it in respect of the business which is incidental to the attainment of its objectives; or
(c) any activity of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution,—
A. is not genuine; or
B. is not being carried out in accordance with all or any of the conditions subject to which it was notified or approved; or
(d) the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not complied with the requirement of any other law for the time being in force, and the order direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has 47 [attained finality; or]
48[(e) the application referred to in the first proviso of this clause is not complete or it contains false or incorrect information.]
Explanation 3.—For the purposes of clause (b) of this proviso, where the Assessing Officer has intimated the Central Government or the prescribed authority under the first proviso of sub-section (3) of section 143 about the contravention of the provisions of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of this clause by any fund or institution or trust or university or other educational institution or any hospital or other medical institution in respect of an assessment year, and the approval granted to such fund or institution or trust or university or other educational institution or any hospital or other medical institution has not been withdrawn, or the notification issued in its case has not been rescinded, on or before the 31st day of March, 2022, such intimation shall be deemed to be a reference received by the Principal Commissioner or Commissioner as on the 1st day of April, 2022, and the provisions of clause (b) of the second proviso to sub-section (3) of section 143 shall apply accordingly for such assessment year:
Provided also that any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of the said section shall be included in the total income :
Provided also that all applications made under the first proviso [as it stood before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020] pending before the Principal Commissioner or Commissioner, on which no order has been passed before the 1st day of April, 2021, shall be deemed to be applications made under clause (iv) of the first proviso on that date:
Provided also that the income of a trust or institution referred to in sub-clause (iv) or sub-clause (v) shall be included in its total income of the previous year if the provisions of the first proviso to clause (15) of section 2 become applicable to such trust or institution in the said previous year, whether or not any approval granted or notification issued in respect of such trust or institution has been withdrawn or rescinded :
Provided also that where the fund or institution referred to in sub-clause (iv) or the trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) has been approved by the Principal Commissioner or Commissioner, and the approval is in force for any previous year, then, nothing contained in any other provision of this section, other than clause (1) thereof, shall operate to exclude any income received on behalf of such fund or institution or trust or university or other educational institution or hospital or other medical institution, as the case may be, from the total income of the person in receipt thereof for that previous year.
Explanation.—Where, on or after the 1st day of April, 2022 any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) is notified under clause (46) 49[or (46A)] of section 10, the approval or provisional approval granted to such fund or institution or trust or university or other educational institution or hospital or other medical institution shall become inoperative from the date of notification of such fund or institution or trust or university or other educational institution or hospital or other medical institution, as the case may be, under clause (46) 49[or clause (46A)] of the said section:
Provided also that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139, 50[within the time allowed under sub-section (1) or subsection (4) of that section] :
Provided also that where the income or part of income or property of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), has been applied directly or indirectly for the benefit of any person referred to in sub-section (3) of section 13, such income or part of income or property shall, after taking into account the provisions of sub-sections (2), (4) and (6) of the said section, be deemed to be the income of such fund or institution or trust or university or other educational institution or hospital or other medical institution of the previous year in which it is so applied:
Provided also that where any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) violates the conditions of the tenth proviso or twentieth proviso, or where the provisions of the eighteenth proviso are applicable, its income chargeable to tax shall be computed after allowing deduction for the expenditure (other than capital expenditure) incurred in India, for the objects of the fund or institution or trust or university or other educational institution or hospital or other medical institution, subject to fulfilment of the following conditions, namely:
a. such expenditure is not from the corpus standing to the credit of the fund or institution or trust or university or other educational institution or hospital or other medical institution as on the end of the financial year immediately preceding the previous year relevant to the assessment year for which the income is being computed;
b. such expenditure is not from any loan or borrowing;
c. claim of depreciation is not in respect of an asset, acquisition of which has been claimed as application of income in the same or any other previous year; and
d. such expenditure is not in the form of any contribution or donation to any person.
Explanation.—For the purposes of determining the amount of expenditure under this proviso, the provisions of sub-clause (ia) of clause (a) of section 40 and sub-sections (3) and (3A) of section 40A shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”:
Provided also that for the purposes of computing income chargeable to tax under the twenty-second proviso, no deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed to the assessee under any other provision of this Act:
51[Provided also that no approval under the second proviso shall be granted in relation to any application made on or after the 1st day of October, 2024.]
Explanation 1.—In this clause, where any income is required to be applied or accumulated, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this clause in the same or any other previous year.
Explanation 2.—For the purposes of this clause, it is clarified that the calculation of income required to be applied or accumulated during the previous year shall be made without any set off or deduction or allowance of any excess application of any of the year preceding to the previous year.
Explanation 3.—For the purposes of this clause, any sum payable by any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall be considered as application of income during the previous year in which such sum is actually paid by it (irrespective of the previous year in which the liability to pay such sum was incurred by the fund or institution or trust or any university or other educational institution or any hospital or other medical institution according to the method of accounting regu-larly employed by it):
Provided that where during any previous year any sum has been claimed to have been applied by the fund or institution or trust or any university or other educational institution or any hospital or other medical institution, such sum shall not be allowed as application in any subsequent previous year;
(23D) any income of—
i. a Mutual Fund registered under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made thereunder;
ii. such other Mutual Fund set up by a public sector bank or a public financial institution or authorised by the Reserve Bank of India and subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf.
Explanation. —For the purposes of this clause,—
a. the expression “public sector bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new Bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) and a bank included in the category “other public sector banks” by the Reserve Bank of India;
b. the expression “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);
c. the expression “Securities and Exchange Board of India” shall have the meaning assigned to it in clause (a) of sub-section (1) of section 2 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(23DA) any income of a Securitisation trust from the activity of securitisation.
Explanation.—For the purposes of this clause,—
(a) “securitisation” shall have the same meaning as assigned to it,—
(i) in clause (r) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or
(ia) in clause (z) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); or
(ii) under the guidelines on securitisation of standard assets issued by the Reserve Bank of India;
(b) “securitisation trust” shall have the meaning assigned to it in the Explanation below section 115TCA;
(23E) [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
(23EA) any income, by way of contributions received from recognised stock exchanges and the members thereof, of such Investor Protection Fund set up by recognised stock exchanges in India, either jointly or separately, as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a recognised stock exchange, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax;
(23EB) 2[***]
(23EC) any income, by way of contributions received from commodity exchanges and the members thereof, of such Investor Protection Fund set up by commodity exchanges in India, either jointly or separately, as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that where any amount standing to the credit of the said Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a commodity exchange, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax.
Explanation.—For the purposes of this clause, “commodity exchange” shall mean a “registered association” as defined in clause (ii) of section 2 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952);
(23ED) any income, by way of contributions received from a depository, of such Investor Protection Fund set up in accordance with the regulations by a depository as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with a depository, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall, accordingly, be chargeable to income-tax.
Explanation.—For the purposes of this clause,—
i. “depository” shall have the same meaning as assigned to it in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996);
ii. “regulations” means the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Depositories Act, 1996 (22 of 1996);
(23EE) any specified income of such Core Settlement Guarantee Fund, set up by a recognised clearing corporation in accordance with the regulations, as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall, accordingly, be chargeable to income-tax.
Explanation.—For the purposes of this clause,—
(i) “recognised clearing corporation” shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation 2 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956) 53-54[or clause (n) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019)];
(ii) “regulations” means the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956) 53-54[or the International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019)];
(iii) “specified income” shall mean,—
a. the income by way of contribution received from specified persons;
b. the income by way of penalties imposed by the recognised clearing corporation and credited to the Core Settlement Guarantee Fund; or
c. the income from investment made by the Fund;
(iv) “specified person” shall mean,—
a. any recognised clearing corporation which establishes and maintains the Core Settlement Guarantee Fund;
b. any recognised stock exchange, being a shareholder in such recognised clearing corporation, or a contributor to the Core Settlement Guarantee Fund; and
c. any clearing member contributing to the Core Settlement Guarantee Fund;
(23F) any income by way of dividends or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking :
Provided that such venture capital fund or venture capital company is approved for the purposes of this clause by the prescribed authority in accordance with the rules made in this behalf and satisfies the prescribed conditions :
Provided further that any approval by the prescribed authority shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years, as may be specified in the order of approval :
Provided also that nothing contained in this clause shall apply in respect of any investment made after the 31st day of March, 1999. Explanation.—For the purposes of this clause,—
a. “venture capital fund” means such fund, operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908), established to raise monies by the trustees for investments mainly by way of acquiring equity shares of a venture capital undertaking in accordance with the prescribed guidelines;
b. “venture capital company” means such company as has made investments by way of acquiring equity shares of venture capital undertakings in accordance with the prescribed guidelines;
c. “venture capital undertaking” means such domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the business of generation or generation and distribution of electricity or any other form of power or engaged in the business of providing telecommunication services or in the business of developing, maintaining and operating any infrastructure facility or engaged in the manufacture or production of such articles or things (including computer software) as may be notified by the Central Government in this behalf; and
d. “infrastructure facility” means a road, highway, bridge, airport, port, rail system, a water supply project, irrigation project, sanitation and sewerage system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette and which fulfils the conditions specified in sub-section (4A) of section 80-IA;
(23FA) any income by way of dividends, other than dividends referred to in section 115-0, or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking :
Provided that such venture capital fund or venture capital company is approved, for the purposes of this clause, by the Central Government on an application made to it in accordance with the rules made in this behalf and which satisfies the prescribed conditions :
Provided further that any approval by the Central Government shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years, as may be specified in the order of approval :
Provided also that nothing contained in this clause shall apply in respect of any investment made after the 31st day of March, 2000.
Explanation.—For the purposes of this clause,—
a. “venture capital fund” means such fund, operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908), established to raise monies by the trustees for investments mainly by way of acquiring equity shares of a venture capital undertaking in accordance with the prescribed guidelines;
b. “venture capital company” means such company as has made investments by way of acquiring equity shares of venture capital undertakings in accordance with the prescribed guidelines; and
c. “venture capital undertaking” means such domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the—
(i) business of—
A. software;
B. information technology;
C. production of basic drugs in the pharmaceutical sector;
D. bio-technology;
E. agriculture and allied sectors; or
F. such other sectors as may be notified by the Central Government in this behalf; or
(ii) production or manufacture of any article or substance for which patent has been granted to the National Research Laboratory or any other scientific research institution approved by the Department of Science and Technology;
(23FB) any income of a venture capital company or venture capital fund from investment in a venture capital undertaking :
Provided that nothing contained in this clause shall apply in respect of any income of a venture capital company or venture capital fund, being an investment fund specified in clause (a) of the Explanation I to section 115UB, of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2016.
Explanation.—For the purposes of this clause,—
(a) “venture capital company” means a company which—
(A) has been granted a certificate of registration, before the 21st day of May, 2012, as a Venture Capital Fund and is regulated under the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996 (hereinafter referred to as the Venture Capital Funds Regulations) made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or
(B) has been granted a certificate of registration as Venture Capital Fund as a sub-category of Category I Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 (hereinafter referred to as the Alternative Investment Funds Regulations) made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and which fulfils the following conditions, namely:—
i. it is not listed on a recognised stock exchange;
ii. it has invested not less than two-thirds of its investible funds in unlisted equity shares or equity linked instruments of venture capital undertaking; and
iii. it has not invested in any venture capital undertaking in which its director or a substantial shareholder (being a beneficial owner of equity shares exceeding ten per cent of its equity share capital) holds, either individually or collectively, equity shares in excess of fifteen per cent of the paid-up equity share capital of such venture capital undertaking;
(b) “venture capital fund” means a fund—
(A) operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908), which—
I. has been granted a certificate of registration, before the 21st day of May, 2012, as a Venture Capital Fund and is regulated under the Venture Capital Funds Regulations; or
II. has been granted a certificate of registration as Venture Capital Fund as a sub-category of Category I Alternative Investment Fund under the Alternative Investment Funds Regulations 55[or as referred to in sub-regulation (2) of regulation 18 of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019),] and which fulfils the follow-ing conditions, namely:—
(i) it has invested not less than two-thirds of its investible funds in unlisted equity shares or equity linked instruments of venture capital undertaking;
(ii) it has not invested in any venture capital undertaking in which its trustee or the settler holds, either individually or collectively, equity shares in excess of fifteen per cent of the paid-up equity share capital of such venture capital undertaking; 56[***]
(iii) the units, if any, issued by it are not listed in any recognised stock exchange; 57[and]
58[(iv) any other condition as may be prescribed; or]
(B) operating as a venture capital scheme made by the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963);
(c) “venture capital undertaking” means—
i. a venture capital undertaking as defined in clause (n) of regulation 2 of the Venture Capital Funds Regulations; or
ii. a venture capital undertaking as defined in clause (aa) of sub-regulation (1) of regulation 2 of the Alternative Investment Funds Regulations;
(23FBA) any income of an investment fund other than the income chargeable under the head “Profits and gains of business or profession”;
(23FBB) any income referred to in section 115UB, accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head “Profits and gains of business or profession”. Explanation.—For the purposes of clauses (23FBA) and (23FBB), the expression “investment fund” shall have the meaning assigned to it in clause (a) of the Explanation I to section 115UB;
(23FBC) any income accruing or arising to, or received by, a unit holder from a specified fund or on transfer of units in a specified fund.
Explanation.—For the purposes of this clause, the expressions—
a. “specified fund” shall have the same meaning as assigned to it in clause (c) of the Explanation to clause (4D);
b. “unit” means beneficial interest of an investor in the fund and shall include shares or partnership interests;
(23FC) any income of a business trust by way of—
a. interest received or receivable from a special purpose vehicle; or
b. dividend received or receivable from a special purpose vehicle.
Explanation.—For the purposes of this clause, the expression “special purpose vehicle” means an Indian company in which the business trust holds controlling interest and any specific percentage of shareholding or interest, as may be required by the regulations under which such trust is granted registration;
(23FCA) any income of a business trust, being a real estate investment trust, by way of renting or leasing or letting out any real estate asset owned directly by such business trust.
Explanation.—For the purposes of this clause, the expression “real estate asset” shall have the same meaning as assigned to it in clause (zj) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(23FD) any distributed income, referred to in section 115UA, received by a unit holder from the business trust, not being that proportion of the income which is of the same nature as the income referred to in sub-clause (a) of clause (23FC) or sub-clause (b) of said clause (in a case where the special purpose vehicle has exercised the option under section 115BAA) or clause (23FCA);
(23FE) any income of a specified person in the nature of dividend, interest 59[, any sum referred to in clause (xii) of sub-section (2) of section 561 or long-term capital gains ‘9[(whether or not such capital gains are deemed as short-term capital gains under section 50AA)] arising from an investment made by it in India, whether in the form of debt or share capital or unit, if the investment—
i. is made on or after the 1st day of April, 2020 but on or before the 31st day of March, 61120301;
ii. is held for at least three years; and
iii. is in—
a. a business trust referred to in sub-clause (i) of clause (13A) of section 2; or
b. a company or enterprise or an entity carrying on the business of developing, or operating and maintaining, or developing, operating and maintaining any infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA or such other business as the Central Government may, by notification in the Official Gazette, specify in this behalf; or
c. a Category-I or Category-II Alternative Investment Fund regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), having not less than fifty per cent investment in one or more of the company or enterprise or entity referred to in item (b) or item (d) or item (e) or in an Infrastructure Investment Trust referred to in sub-clause (i) of clause (13A) of section 2; or
d. a domestic company, set up and registered on or after the 1st day of April, 2021, having minimum seventy-five per cent investments in one or more of the companies or enterprises or entities referred to in item (b); or
e. a non-banking financial company registered as an Infrastructure Finance Company as referred to in notification number RBI/2009-10/316 issued by the Reserve Bank of India or in an Infrastructure Debt Fund, a non-banking finance company, as referred to in the Infrastructure Debt Fund – Non-Banking Financial Companies (Reserve Bank) Directions, 2011, issued by the Reserve Bank of India, having minimum ninety per cent lending to one or more of the companies or enterprises or entities referred to in item (b):
Provided that if any difficulty arises regarding interpretation or implementation of the provisions of this clause, the Board may, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty:
Provided further that every guideline issued under the first proviso, shall be laid before each House of Parliament and shall be binding on the income-tax authority and the specified person:
Provided also that where any income has not been included in the total income of the specified person due to the provisions of this clause, and subsequently during any previous year the specified person fails to satisfy any of the conditions of this clause so that the said income would not have been eligible for such non-inclusion, such income shall be chargeable to income-tax as the income of the specified person of that previous year:
Provided also that in case a Category-I or Category-II Alternative Investment Fund referred to in item (c) of sub-clause (iii) has investment of less than one hundred per cent in one or more of the companies or enterprises or entities referred to in item (b) or item (d) or item (e) of the said sub-clause or in an Infrastructure Investment Trust referred to in item (c) of the said sub-clause, income accrued or arisen or received or attributable to such investment, directly or indirectly, which is exempt under this clause shall be calculated proportionately to that investment made in one or more of the companies or enterprises or entities referred to in item (b) or item (d) or item (e) of the said sub-clause or in the Infrastructure Investment Trust referred to in item (c) of the said sub-clause, in such manner as may be prescribed:
Provided also that in case a domestic company referred to in item (d) of sub-clause (iii) has investment of less than one hundred per cent in one or more of the companies or enterprises or entities referred to in item (b) of the said sub-clause, income accrued or arisen or received or attributable to such investments, directly or indirectly, which is exempt under this clause shall be calculated proportionately to the investment made in one or more of the companies or enterprises or entities referred to in item (b) of the said sub-clause, in such manner as may be prescribed:
Provided also that in case a non-banking finance company registered as an Infrastructure Finance Company or Infrastructure Debt Fund, referred to in item (e) of sub-clause (iii), has lending of less than one hundred per cent in one or more of the companies or enterprises or entities referred to in item (b) of the said sub-clause, income accrued or arisen or received or attributable to such lending, directly or indirectly, which is exempt under this clause shall be calculated proportionately to the lending made in one or more of the companies or enterprises or entities referred to in item (b) of the said sub-clause, in such manner as may be prescribed:
Provided also that in case a sovereign wealth fund or pension fund has loans or borrowings, directly or indirectly, for the purposes of making investment in India, such fund shall be deemed to be not eligible for exemption under this clause.
Explanation 1.—For the purposes of this clause, “specified person” means—
(a) a wholly owned subsidiary of the Abu Dhabi Investment Authority which—
i. is a resident of the United Arab Emirates; and
ii. makes investment, directly or indirectly, out of the fund owned by the Government of the Abu Dhabi;
(b) a sovereign wealth fund which satisfies the following conditions, namely:—
i. it is wholly owned and controlled, directly or indirectly, by the Government of a foreign country;
ii. it is set up and regulated under the law of such foreign country;
iii. the earnings of the said fund are credited either to the account of the Government of that foreign country or to any other account designated by that Government so that no portion of the earnings inures any benefit to any private person;
iv. the asset of the said fund vests in the Government of such foreign country upon dissolution:
Provided that the provisions of sub-clauses (iii) and (iv) shall not apply to any payment made to creditors or depositors for loan taken or borrowing for the purposes other than for making investment in India;
v. it does not participate in the day to day operations of investee but the monitoring mechanism to protect the investment with the investee including the right to appoint directors or executive director shall not be considered as participation in the day to day operations of the investee; and
vi. it is specified by the Central Government, by notification in the Official Gazette, for this purpose and fulfils conditions specified in such notification;
(c) a pension fund, which—
i. is created or established under the law of a foreign country including the laws made by any of its political constituents being a province, State or local body, by whatever name called;
ii. is not liable to tax in such foreign country or if liable to tax, exemption from taxation for all its income has been provided by such foreign country;
iii. satisfies such other conditions as may be prescribed;
iiia. it does not participate in the day to day operations of investee but the monitoring mechanism to protect the investment with the investee including the right to appoint directors or executive director shall not be considered as participation in day to day operations of the investee; and
iv. is specified by the Central Government, by notification in the Official Gazette, for this purpose and fulfils conditions specified in such notification.
33a[(d) (i) the Public Investment Fund of the Government of the Kingdom of Saudi Arabia; and
(ii) a wholly owned subsidiary of the Public Investment Fund of the Government of the Kingdom of Saudi Arabia, which—
A. is a resident of Saudi Arabia; and
B. makes investment, directly or indirectly, out of the fund owned by the said Government.] Explanation 2.— For the purposes of this clause,—
(i) “investee” means a business trust, or a company, or an enterprise, or an entity, or a Category I or Category II Alternative Investment Fund, or an Infrastructure Investment Trust or a domestic company, or an Infrastructure Finance Company or an Infrastructure Debt Fund referred to in item (e) of sub-clause (iii), in which the sovereign wealth fund or the pension fund, as the case may be, has made the investment, directly or indirectly, under the provisions of this clause;
(ii) “loan and borrowing” means—
a. any loan taken or borrowing by a sovereign wealth fund from, or any deposit or investment made in a sovereign wealth fund by, any person other than the Government of the country in which the sovereign wealth fund is set up;
b. any loan taken or borrowing by a pension fund from or any deposit or investment made in a pension fund by, any person but shall not include the deposit or investment which represents statutory obligations and defined contributions of one or more funds or plans established for providing retirement, social security, employment, disability, death benefits or any similar compensation to the participants or beneficiaries of such funds or plans, as the case may be.
Explanation 3.—For the purposes of this clause, the Central Government may prescribe that the method of calculation of “fifty per cent” referred to in item (c) or “seventy-five per cent” referred to in item (d) or “ninety per cent” referred to in item (e), of sub-clause (iii) shall be such as may be prescribed;
(23FF) any income of the nature of capital gains, arising or received by a non-resident or a specified fund, which is on account of transfer of share of a company resident in India, by the resultant fund or a specified fund to the extent attributable to units held by non-resident (not being a permanent establishment of a non-resident in India) in such manner as may be prescribed, and such shares were transferred from the original fund, or from its wholly owned special purpose vehicle, to the resultant fund in relocation, and where capital gains on such shares were not chargeable to tax if that relocation had not taken place.
Explanation.—For the purposes of this clause,—
a. the expressions “original fund”, “relocation” and “resultant fund” shall have the meanings respectively assigned to them in the Explanation to clause (viiac) and clause (viiad) of section 47;
b. the expression “specified fund” shall have the meaning assigned to it in clause (c) of the Explanation to clause (4D) of section 10; (23G) [Omitted by the Finance Act, 2006, w.e.f. 1-4-2007;]
(24) any income chargeable under the heads “Income from house property” and “Income from other sources” of—
a. a registered union within the meaning of the Trade Unions Act, 1926 (16 of 1926), formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen;
b. an association of registered unions referred to in sub-clause (a);
(25) (i) interest on securities which are held by, or are the property of, any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies, and any capital gains of the fund arising from the sale, exchange or transfer of such securities;
(ii) any income received by the trustees on behalf of a recognised provident fund;
(iii) any income received by the trustees on behalf of an approved superannuation fund;
(iv) any income received by the trustees on behalf of an approved gratuity fund;
(v) any income received—
a. by the Board of Trustees constituted under the Coal Mines Provident Funds and Miscellaneous Provisions Act, 1948 (46 of 1948), on behalf of the Deposit-linked Insurance Fund established under section 3G of that Act; or
b. by the Board of Trustees constituted under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), on behalf of the Deposit-linked Insurance Fund established under section 6C of that Act;
(25A) any income of the Employees’ State Insurance Fund set up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948);
(26) in the case of a member of a Scheduled Tribe as defined in clause (25) of article 366 of the Constitution, residing in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura or in the areas covered by notification No. TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said paragraph 20 [as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971 (81 of 1971)] or in the Ladakh region of the State of Jammu and Kashmir, any income which accrues or arises to him,—
(a) from any source in the areas or States aforesaid, or
(b) by way of dividend or interest on securities;
(26A) 62[******]
(26AA) [***]
63[(26AAA) in case of an individual, being a Sikkimese, any income which accrues or arises to him—
(a) from any source in the State of Sikkim; or
(b) by way of dividend or interest on securities.
Explanation.—For the purposes of this clause “Siklcimese” shall mean—
i. an individual, whose name is recorded in the register maintained under the Sikkim Subjects Regulation, 1961 read with the Sikkim Subject Rules, 1961 (hereinafter referred to as the “Register of Sikkim Subjects”), immediately before the 26th day of April, 1975;
Or
ii. an individual, whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No. 26030/36/90-I.C.I., dated the 7th August, 1990 and Order of even number dated the 8th April, 1991; or
iii. any other individual, whose name does not appear in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual’s father or husband or paternal grand-father or brother from the same father has been recorded in that register; or
iv. any other individual, whose name does not appear in the Register of Sikkim Subjects but it is established that such individual was domiciled in Sikkim on or before the 26th day of April, 1975; or
v. any other individual, who was not domiciled in Sikkim on or before the 26th day of April, 1975, but it is established beyond doubt that such individual’s father or husband or paternal grand-father or brother from the same father was domiciled in Sikkim on or before the 26th day of April, 1975;]
(26AAB) any income of an agricultural produce market committee or board constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce;
(26B) any income of a corporation established by a Central, State or Provincial Act or of any other body, institution or association (being a body, institution or association wholly financed by Government) where such corporation or other body or institution or association has been established or formed for promoting the interests of the members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them.
Explanation.—For the purposes of this clause,—
a. “Scheduled Castes” and “Scheduled Tribes” shall have the meanings respectively assigned to them in clauses (24) and (25) of article 366 of the Constitution;
b. “backward classes” means such classes of citizens, other than the Scheduled Castes and the Scheduled Tribes, as may be notified—
i. by the Central Government; or
ii. by any State Government, as the case may be, from time to time;
(26BB) any income of a corporation established by the Central Government or any State Government for promoting the interests of the members of a minority community.
Explanation.—For the purposes of this clause, “minority community” means a community notified as such by the Central Government in the Official Gazette in this behalf;
(26BBB) any income of a corporation established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen being the citizens of India.
Explanation.—For the purposes of this clause, “ex-serviceman” means a person who has served in any rank, whether as combatant or noncombatant, in the armed forces of the Union or armed forces of the Indian States before the commencement of the Constitution (but excluding the Assam Rifles, Defence Security Corps, General Reserve Engineering Force, Lok Sahayak Sena, Jammu and Kashmir Militia and Territorial Army) for a continuous period of not less than six months after attestation and has been released, otherwise than by way of dismissal or discharge on account of misconduct or inefficiency, and in the case of a deceased or incapacitated ex-serviceman includes his wife, children, father, mother, minor brother, widowed daughter and widowed sister, wholly dependant upon such ex-serviceman immediately before his death or incapacitation;
(27) any income of a co-operative society formed for promoting the interests of the members of either the Scheduled Castes or Scheduled Tribes or both referred to in clause (26B):
Provided that the membership of the co-operative society consists of only other co-operative societies formed for similar purposes and the finances of the society are provided by the Government and such other societies;
(28) [***]
(29) [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
(29A) any income accruing or arising to—
a. the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;
b. the Rubber Board constituted under sub-section (1) of section 4 of the Rubber Board Act, 1947 (24 of 1947) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;
c. the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;
d. the Tobacco Board constituted under the Tobacco Board Act, 1975 (4 of 1975) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1975 or the previous year in which such Board was constituted, whichever is later;
e. the Marine Products Export Development Authority established under section 4 of the Marine Products Export Development Authority Act, 1972 (13 of 1972) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1972 or the previous year in which such Authority was constituted, whichever is later;
f. the Agricultural and Processed Food Products Export Development Authority established under section 4 of the Agricultural and Processed Food Products Export Development Act, 1985 (2 of 1986) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1985 or the previous year in which such Authority was constituted, whichever is later;
g. the Spices Board constituted under sub-section (1) of section 3 of the Spices Board Act, 1986 (10 of 1986) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1986 or the previous year in which such Board was constituted, whichever is later;
h. the Coir Board established under section 4 of the Coir Industry Act, 1953 (45 of 1953);
(30) in the case of an assessee who carries on the business of growing and manufacturing tea in India, the amount of any subsidy received from or through the Tea Board under any such scheme for replantation or replacement of tea bushes or for rejuvenation or consolidation of areas used for cultivation of tea as the Central Government may, by notification in the Official Gazette, specify:
Provided that the assessee furnishes to the Assessing Officer, along with his return of income for the assessment year concerned or within such further time as the Assessing Officer may allow, a certificate from the Tea Board as to the amount of such subsidy paid to the assessee during the previous year.
Explanation.—In this clause, “Tea Board” means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953);
(31) in the case of an assessee who carries on the business of growing and manufacturing rubber, coffee, cardamom or such other commodity in India, as the Central Government may, by notification in the Official Gazette, specify in this behalf, the amount of any subsidy received from or through the concerned Board under any such scheme for replantation or replacement of rubber plants, coffee plants, cardamom plants or plants for the growing of such other commodity or for rejuvenation or consolidation of areas used for cultivation of rubber, coffee, cardamom or such other commodity as the Central Government may, by notification in the Official Gazette, specify:
Provided that the assessee furnishes to the Assessing Officer, along with his return of income for the assessment year concerned or within such further time as the Assessing Officer may allow, a certificate from the concerned Board, as to the amount of such subsidy paid to the assessee during the previous year.
Explanation.—In this clause, “concerned Board” means,—
i. in relation to rubber, the Rubber Board constituted under section 4 of the Rubber Act, 1947 (24 of 1947),
ii. in relation to coffee, the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942),
iii. in relation to cardamom, the Spices Board constituted under section 3 of the Spices Board Act, 1986 (10 of 1986),
iv. in relation to any other commodity specified under this clause, any Board or other authority established under any law for the time being in force which the Central Government may, by notification in the Official Gazette, specify in this behalf;
(32) in the case of an assessee referred to in sub-section (1A) of section 64, any income includible in his total income under that sub-section, to the extent such income does not exceed one thousand five hundred rupees in respect of each minor child whose income is so includible;
(33) any income arising from the transfer of a capital asset, being a unit of the Unit Scheme, 1964 referred to in Schedule Ito the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002) and where the transfer of such asset takes place on or after the 1st day of April, 2002;
(34) any income by way of dividends referred to in section 115-0 :
Provided that nothing in this clause shall apply to any income by way of dividend chargeable to tax in accordance with the provisions of section 115BBDA:
Provided further that nothing contained in this clause shall apply to any income by way of dividend received on or after the 1st day of April, 2020 other than the dividend on which tax under section 115-0 and section 115BBDA, wherever applicable, has been paid;
(34A) any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA:
[Provided that this clause shall not apply with respect to any buy back of shares by a company on or after the 1st day of October, 2024;]
65[(34B) any income of a Unit of any International Financial Services Centre, primarily engaged in the business of leasing of an aircraft 66[or a ship], by way of dividends from a company being a Unit of any International Financial Services Centre primarily engaged in the business of leasing of an aircraft 66[or a ship].
67[Explanation.—For the purposes of this clause,—
a. “aircraft” means an aircraft or a helicopter, or an engine of an aircraft or a helicopter, or any part thereof;
b. “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
c. “ship” means a ship or an ocean vessel, engine of a ship or ocean vessel, or any part thereof,•]]
(35) any income by way of,—
a. income received in respect of the units of a Mutual Fund specified under clause (23D); or
b. income received in respect of units from the Administrator of the specified undertaking; or
c. income received in respect of units from the specified company:
Provided that this clause shall not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be:
Provided further that nothing contained in this clause shall apply to any income in respect of units received on or after the 1st day of April, 2020.
Explanation.—For the purposes of this clause,—
a. “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
b. “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(35A) any income by way of distributed income referred to in section 115TA received from a securitisation trust by any person being an investor of the said trust :
Provided that nothing contained in this clause shall apply to any income by way of distributed income referred to in the said section, received on or after the 1st day of June, 2016.
Explanation.—For the purposes of this clause, the expressions “investor” and “securitisation trust” shall have the meanings respectively assigned to them in the Explanation below section 115TCA;
(36) any income arising from the transfer of a long-term capital asset, being an eligible equity share in a company purchased on or after the 1st day of March, 2003 and before the 1st day of March, 2004 and held for a period of twelve months or more.
Explanation.—For the purposes of this clause, “eligible equity share” means,—
i. any equity share in a company being a constituent of BSE-500 Index of the Stock Exchange, Mumbai as on the 1st day of March, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognised stock exchange in India;
ii. any equity share in a company allotted through a public issue on or after the 1st day of March, 2003 and listed in a recognised stock exchange in India before the 1st day of March, 2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India;
(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head “Capital gains” arising from the transfer of agricultural land, where—
(i) 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;
(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;
(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;
(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.
Explanation.—For the purposes of this clause, the expression “compensation or consideration” includes the compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority;
(37A) any income chargeable under the head “Capital gains” in respect of transfer of a specified capital asset arising to an assessee, being an individual or a Hindu undivided family, who was the owner of such specified capital asset as on the 2nd day of June, 2014 and transfers that specified capital asset under the Land Pooling Scheme (herein referred to as “the scheme”) covered under the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 2015 made under the provisions of the Andhra Pradesh Capital Region Development Authority Act, 2014 (Andhra Pradesh Act 11 of 2014) and the rules, regulations and Schemes made under the said Act. Explanation.—For the purposes of this clause, “specified capital asset” means,—
a. the land or building or both owned by the assessee as on the 2nd day of June, 2014 and which has been transferred under the scheme; or
b. the land pooling ownership certificate issued under the scheme to the assessee in respect of land or building or both referred to in clause (a); or
c. the reconstituted plot or land, as the case may be, received by the assessee in lieu of land or building or both referred to in clause (a) in accordance with the scheme, if such plot or land, as the case may be, so received is transferred within two years from the end of the financial year in which the possession of such plot or land was handed over to him;
(38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust where—
a. the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and
b. such transaction is chargeable to securities transaction tax under that Chapter :
Provided that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB :
Provided also that nothing contained in sub-clause (b) shall apply to a transaction undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency:
Provided also that nothing contained in this clause shall apply to any income arising from the transfer of a long-term capital asset, being an equity share in a company, if the transaction of acquisition, other than the acquisition notified by the Central Government in this behalf, of such equity share is entered into on or after the 1st day of October, 2004 and such transaction is not chargeable to securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004):
Provided also that nothing contained in this clause shall apply to any income arising from the transfer of long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, made on or after the 1st day of April, 2018. Explanation.—For the purposes of this clause,—
(a) “equity oriented fund” means a fund—
i. where the investible funds are invested by way of equity shares in domestic companies to the extent of more than sixty-five per cent of the total proceeds of such fund; and
ii. which has been set up under a scheme of a Mutual Fund specified under clause (23D):
Provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;
(b) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
(c) “recognised stock exchange” shall have the meaning assigned to it in clause (ii) of the Explanation 1 to sub-section (5) of section 43;
(39) any specified income, arising from any international sporting event held in India, to the person or persons notified by the Central Government in the Official Gazette, if such international sporting event—
a. is approved by the international body regulating the international sport relating to such event;
b. has participation by more than two countries;
c. is notified by the Central Government in the Official Gazette for the purposes of this clause.
Explanation.—For the purposes of this clause, “the specified income” means the income, of the nature and to the extent, arising from the international sporting event, which the Central Government may notify in this behalf;
(40) any income of any subsidiary company by way of grant or otherwise received from an Indian company, being its holding company engaged in the business of generation or transmission or distribution of power if receipt of such income is for settlement of dues in connection with reconstruction or revival of an existing business of power generation:
Provided that the provisions of this clause shall apply if reconstruction or revival of any existing business of power generation is by way of transfer of such business to the Indian company notified under sub-clause (a) of clause (v) of sub-section (4) of section 80-IA;
(41) 68[***]
(42) any specified income arising to a body or authority which—
a. has been established or constituted or appointed under a treaty or an agreement entered into by the Central Government with two or more countries or a convention signed by the Central Government;
b. is established or constituted or appointed not for the purposes of profit;
c. is notified by the Central Government in the Official Gazette for the purposes of this clause.
Explanation.—For the purposes of this clause, “specified income” means the income, of the nature and to the extent, arising to the body or authority referred to in this clause, which the Central Government may notify in this behalf;
(43) any amount received by an individual as a loan, either in lump sum or in instalment, in a transaction of reverse mortgage referred to in clause (xvi) of section 47;
(44) any income received by any person for, or on behalf of, the New Pension System Trust established on the 27th day of February, 2008 under the provisions of the Indian Trusts Act, 1882 (2 of 1882);
(45) [***]
(46) any specified income arising to a body or authority or Board or Trust or Commission (by whatever name called) b9[other than those covered under clause (46A)] , or a class thereof which—
a. has been established or constituted by or under a Central, State or Provincial Act, or constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public;
b. is not engaged in any commercial activity; and
c. is notified by the Central Government in the Official Gazette for the purposes of this clause.
Explanation.—For the purposes of this clause, “specified income” means the income, of the nature and to the extent arising to a body or authority or Board or Trust or Commission (by whatever name called) 69[other than those covered under clause (46A)], or a class thereof referred to in this clause, which the Central Government may, by notification in the Official Gazette, specify in this behalf;
70[(46A) any income arising to a body or authority or Board or Trust or Commission, not being a company, which—
(a) has been established or constituted by or under a Central Act or State Act with one or more of the following purposes, namely:–
i. dealing with and satisfying the need for housing accommodation;
ii. planning, development or improvement of cities, towns and villages;
iii. regulating, or regulating and developing, any activity for the benefit of the general public; or
iv. regulating any matter, for the benefit of the general public, arising out of the object for which it has been created; and
(b) is notified by the Central Government in the Official Gazette for the purposes of this clause;
(46B) any income accruing or arising to,—
i. National Credit Guarantee Trustee Company Limited, being a company established and wholly financed by the Central Government for the purposes of operating credit guarantee funds established and wholly financed by the Central Government; or
ii. a credit guarantee fund established and wholly financed by the Central Government and managed by the National Credit Guarantee Trustee Company Limited; or
iii. Credit Guarantee Fund Trust for Micro and Small Enterprises, being a trust created by the Government of India and the Small Industries Development Bank of India established under sub-section (1) of section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989);]
(47) any income of an infrastructure debt fund, set up in accordance with the guidelines as may be prescribed, which is notified by the Central Government in the Official Gazette for the purposes of this clause;
(48) any income received in India in Indian currency by a foreign company on account of sale of crude oil, any other goods or rendering of services, as may be notified by the Central Government in this behalf, to any person in India:
Provided that—
i. receipt of such income in India by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by the Central Government;
ii. having regard to the national interest, the foreign company and the agreement or arrangement are notified by the Central Government in this behalf; and
iii. the foreign company is not engaged in any activity, other than receipt of such income, in India;
(48A) any income accruing or arising to a foreign company on account of storage of crude oil in a facility in India and sale of crude oil therefrom to any person resident in India:
Provided that—
i. the storage and sale by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by the Central Government; and
ii. having regard to the national interest, the foreign company and the agreement or arrangement are notified by the Central Government in this behalf;
(48B) any income accruing or arising to a foreign company on account of sale of leftover stock of crude oil, if any, from the facility in India after the expiry of the agreement or the arrangement referred to in clause (48A) or on termination of the said agreement or the arrangement, in accordance with the terms mentioned therein, as the case may be, subject to such conditions as may be notified by the Central Government in this behalf;
(48C) any income accruing or arising to the Indian Strategic Petroleum Reserves Limited, being a wholly owned subsidiary of the Oil Industry Development Board under the Ministry of Petroleum and Natural Gas, as a result of arrangement for replenishment of crude oil stored in its storage facility in pursuance of directions of the Central Government in this behalf:
Provided that nothing contained in this clause shall apply to an arrangement, if the crude oil is not replenished in the storage facility within three years from the end of the financial year in which the crude oil was removed from the storage facility for the first time;
(48D) any income accruing or arising to an institution established for financing the infrastructure and development, set up under an Act of Parliament and notified by the Central Government for the purposes of this clause, for a period of ten consecutive assessment years beginning from the assessment year relevant to the previous year in which such institution is set up;
(48E) any income accruing or arising to a developmental financing institution, licensed by the Reserve Bank of India under an Act of the Parliament referred to in clause (48D) and notified by the Central Government for the purposes of this clause, for a period of five consecutive assessment years beginning from the assessment year relevant to the previous year in which the developmental financing institution is set up :
Provided that the Central Government may, by issuing notification under this clause, extend the period of exemption under this clause for a further period, not exceeding five more consecutive assessment years, subject to fulfilment of such conditions as may be specified in the said notification;
(49) 71[***]
(50) 72[any income arising from any–
i. specified service provided on or after the date on which the provisions of Chapter VIII of the Finance Act, 2016 (28 of 2016) comes into force; or
ii. e-commerce supply or services made or provided or facilitated on or after the 1st day of April, 2020 but before the 1st day of August, 2024, and chargeable to equalisation levy under that Chapter:]
73[Provided that the provisions of this clause shall not apply to any income of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2026.]
Explanation 1.—For the removal of doubts it is hereby clarified that the income referred to in this clause shall not include and shall be deemed never to have been included any income which is chargeable to tax as royalty or fees for technical services in India under this Act read with the agreement notified by the Central Government under section 90 or section 90A.
Explanation 2.-For the purposes of this clause,-
i. “e-commerce supply or services” shall have the meaning assigned to it in clause (6) of section 164 of the Finance Act, 2016 (28 of 2016);
ii. “specified service” shall have the meaning assigned to it in clause (i) of section 164 of the Finance Act, 2016 (28 of 2016).
Notes:
19 Sub. for “2025” by Act No. 7 of 2025, w.e.f. 1-4-2025. Earlier “2025” was sub. for “2024” by Act No. 8 of 2024, w.e.f. 1-4-2024.
20 Item (I) renumbered as item (I)(a) by Act No. 15 of 2024, w.e.f. 1-4-2025.
21 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2023.
22 Sub. by Act No. 7 of 2025, w.e.f. 1-4-2025. Prior to its substitution, sub-item (b), as Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025, read as under : “(b) which has been granted a certificate as a retail scheme or an Exchange Traded Fund, and is regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022, made under the International Financial Services Centres Authority Act, 2019 (50 of 2019) and satisfies such conditions, as may be prescribed;”
23 Sub. for “2025” by Act No. 7 of 2025, w.e.f. 1-4-2025. Earlier “2025” was sub. for “2024” by Act No. 8 of 2024, w.e.f. 1-4-2024.
24 Sub. by Act No. 08 of 2023, w.e.f. 1-4-2024.
25 Italicised words shall be Ins. by Act No. 7 of 2025, w.e.f. 1-4-2026.
26 Sub. for “2025” by Act No. 7 of 2025, w.e.f. 1-4-2025. Earlier “2025” was sub. for “2024” by Act No. 8 of 2024, w.e.f. 1-4-2024.
27 Clauses (4G) and (4H) for clause (4G) by Act No. 08 of 2023, w.e.f. 1-4-2024.
28 Ins. by Act. No. 7 of 2025, w.e.f. 1-4-2025.
29 Sub. for “2026” by Act. No. 7 of 2025, w.e.f. 1-4-2025.
30 Sub. for “2026” by Act. No. 7 of 2025, w.e.f. 1-4-2025. Prior to its substitution, Explanation read as under:
Explanation.-For the purposes of this clause, “aircraft” means an aircraft or a helicopter, or an engine of an aircraft or a helicopter, or any part thereof’
31 Words “or the Explanation to sub-section (2A) of section 88, as the case may be” omtt. by Act No. 08 of 2023, w.e.f. 1-4-2023.
33 Sub. for the sixth proviso by Act No. 08 of 2023, w.e.f. 1-4-2024.
34 Sub. for the eighth proviso by Act No. 7 of 2025, w.e.f. 1-4-2025. Prior to its substitution, the eighth proviso read as under:
“Provided also that the provisions of the fourth, fifth, sixth and seventh provisos shall not apply to any sum received on the death of a person:”
33a Inserted by the Act No. 29 of 2025, w.r.e.f. 1-4-2025.
34 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2023.
35 Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025.
36 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2024.
37 Omtt. by Act No. 08 of 2023, w.e.f. 1-4-2023.
38 Ins. by Act No. 15 of 2024, w.e.f. 1-10-2024.
39 Sub. by Act No. 08 of 2023, w.e.f. 1-10-2023.
40 Ins. by Act No. 15 of 2024, w.e.f. 1-10-2024.
41 Ins. by Act No. 08 of 2023, w.e.f. 1-10-2023.
42 Sub. by Act No. 08 of 2023, w.e.f. 1-10-2023.
43 Word “and” omtt. by Act No. 08 of 2023, w.e.f. 1-4-2023.
44 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2023.
45 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2024.
46 Sub. for “furnished on or before” by Act No. 08 of 2023, w.e.f. 1-4-2023.
47 Sub. for “attained finality.” by Act No. 08 of 2023, w.e.f. 1-4-2023.
48 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2023.
49 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2024.
50 Sub for “within the time allowed under that section” by Act No. 08 of 2023, w.e.f. 1-4-2023.
51 Ins. by Act No. 15 of 2024, w.e.f. 1-10-2024.
52 Omtt. by Act No. 08 of 2023 w.e.f. 1-4-2023. 53-54. Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025.
53-54 Ins. by Act No. 15 of 2024 w.e.f. 1-4-2025.
56 Word “and” omtt. by Act No. 15 of 2024 w.e.f. 1-4-2025.
57 Sub. for “or” by Act No. 15 of 2024 w.e.f. 1-4-2025.
58 Ins. by Act No. 15 of 2024 w.e.f. 1-4-2025.
59 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2024.
60 Ins. by Act No. 7 of 2025, w.e.f. 1-4-2025.
61 Sub. for “2025” by Act No. 7 of 2025, w.e.f. 1-4-2025. Earlier “2025” was sub. for “2024” by Act No. 08 of 2024, w.e.f. 1-4-2024.
62 Omtt. by Act No. 08 of 2023, w.e.f. 1-4-2023.
63 Sub. by Act No. 08 of 2023, w.r.e.f. 1-4-1990.
64 Ins.by Act No. 15 of 2024, w.e.f. 1-10-2024.
65 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2024.
66 Ins. by Act No. 7 of 2025, w.e.f. 1-4-2025.
67 by Act No. 7 of 2025, w.e.f. 1-4-2025. Prior to its substitution, Explanation read as under:
‘Explanation.—For the purposes of this clause, “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);’
68 Omtt. by Act No. 08 of 2023, w.e.f. 1-4-2023.
69 Ins. by Act No. 08 of 2023, w.e.f. 1-4-2024.
70 Clauses. (46A) and (46B) by Act No. 08 of 2023, w.e.f. 1-4-2024.
71 Omtt. by Act No. 08 of 2023, w.e.f. 1-4-2023.
72 Sub. by Act No. 15 of 2024, w.r.e.f. 1-8-2024.
73 Ins. by Act No. 7 of 2025, w.e.f. 1-4-2025.
Income-tax Rules
Rule – 2A
PART II
DETERMINATION OF INCOME
A.—Salaries
Limits for the purposes of section 10(I3A).
2A. The amount which is not to be included in the total income of an assessee in respect of the special allowance referred to in clause (13A) of section 10 shall be—
(a) the actual amount of such allowance received by the assessee in respect of the relevant period; or
(b) the amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessee in respect of the relevant period; or
(c) an amount equal to—
i. where such accommodation is situate at Bombay, Calcutta, Delhi or Madras, one-half of the amount of salary due to the assessee in respect of the relevant period; and
ii. where such accommodation is situate at any other place, two-fifth of the amount of salary due to the assessee in respect of the relevant period,
(d) [***]
whichever is the least.
Explanation.—In this rule-
(i) “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule;
(ii) “relevant period” means the period during which the said accommodation was occupied by the assessee during the previous year.
(iii) [***]
Rule – 2B
Conditions for the purpose of section 10(5).
2B. (1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual 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
shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely :—
(i) where the journey is performed on or after the 1st day of October, 1997, by air, 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 on or after the 1st day of October, 1997, by any mode of transport other than by air, 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 on or after the 1st day of October, 1997, 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.
1[(1A) For the assessment year beginning on the 1st day of April, 2021, where the individual referred to in sub-rule (1) avails any cash allowance from his employer in lieu of any travel concession or assistance, the amount exempted under the second proviso to clause (5) of section 10 shall be the amount, not exceeding thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less, subject to fulfilment of the following conditions, namely:—
(i) the individual has exercised an option to avail exemption under the second proviso of clause (5) of section 10, in lieu of the exemption under clause (5) of section 10 in respect of one unutilised journey during the block of four calendar years commencing from the calendar year 2018;
(ii) the payment in respect of the specified expenditure is made by the individual or any member of his family to a registered person during the specified period;
(iii) the payment in respect of the specified expenditure is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA; and
(iv) the individual obtains a tax invoice in respect of specified expenditure from the registered person referred to in clause (ii).
Explanation 1.—For the purpose of this sub-rule,—
(i) ‘tax invoice’ means an invoice issued by the registered person under section 31 of the Central Goods and Services Tax Act, 2017 (12 of 2017);
(ii) ‘registered person’ shall have the meaning assigned to it in clause (94) of section 2 of the Central Goods and Services Tax Act, 2017 (12 of 2017);
(iii) ‘specified expenditure’ means expenditure incurred by an individual or a member of his family during specified period on goods or services, which are liable to tax at an aggregate rate of twelve per cent or above under various Goods and Services Tax (GST) laws and goods are purchased or services procured from GST registered vendors or service providers;
(iv) ‘specified period’ means the period commencing from the 12th day of October, 2020 and ending on the 31st day of March, 2021.
Explanation 2.—For the removal of doubt, it is hereby clarified that if the amount received by or due to an individual, as per the terms of his employment, from his employer in relation to himself and member of his family, in connection with the specified expenditure is in excess of the thirty six thousand rupees per person, for the individual and the member of his family, the exemption under this sub-rule would be restricted to thirty-six thousand rupees per person, for the individual and the member of his family, or one-third of the specified expenditure, whichever is less.
Explanation 3.—It is hereby clarified that the clarification issued by the Department of Expenditure, Ministry of Finance, vide OM F. No. 12(2)/2020-EII (A) dated 12th October, 2020 and any subsequent clarifications, if any, issued in this regard shall apply mutatis mutandis to the exemption under this sub-rule.
(1B) Where an exemption under the second proviso to clause (5) of section 10 is claimed and allowed, sub-rule (2) shall have effect as if for the words “two journeys”, the words “one journey” has been substituted.]
(2) The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986 :
Provided that nothing contained in this sub-rule shall apply to the benefit already availed of by the assessee in respect of any number of journeys performed before the 1st day of April, 1989 except to the extent that the journey or journeys so performed shall be taken into account for computing the limit of two journeys specified in this sub-rule.
(3) Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first calendar year of the immediately succeeding block of four calendar years shall be eligible for exemption.
Explanation.— The amount in respect of the value of the travel concession or assistance referred to in this sub-rule shall not be taken into account in deter-mining the eligibility of the amount in respect of the value of the travel concession or assistance in relation to the number of journeys under sub-rule (2).
(4) The exemption referred to in sub-rule (1) shall not be available to more than two surviving children of an individual after 1st October, 1998 :
Provided that this sub-rule shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child.
*******
Rule – 2BA
Guidelines for the purposes of section 10(10C).
2BA. The amount received by an employee of—
(i) a public sector company; or
(ii) any other company; or
(iii) an authority established under a Central, State or Provincial Act; or
(iv) a local authority; or
(v) a co-operative society; or
(vi) 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 (3 of 1956); or
(vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961); or
(viia) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette, specify in this behalf; or
(viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf, at the time of his voluntary retirement or voluntary separation shall be exempt under clause (10C) of section 10 only if the scheme of voluntary retirement framed by the aforesaid company or authority or co-operative society or University or institute, as the case may be or if the scheme of voluntary separation framed by a public sector company, is in accordance with the following requirements, namely :—
(i) it applies to an employee who has completed 10 years of service or completed 40 years of age;
(ii) it applies to all employees (by whatever name called) including workers and executives of a company or of an authority or of a co-operative society, as the case may be, excepting directors of a company or of a co-operative society;
(iii) the scheme of voluntary retirement or voluntary separation has been drawn to result in overall reduction in the existing strength of the employees;
(iv) the vacancy caused by the voluntary retirement or voluntary separation is not to be filled up;
(v) the retiring employee of a company shall not be employed in another company or concern belonging to the same management;
(vi) the amount receivable on account of voluntary retirement or voluntary separation of the employee 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
Provided that requirement of (i) above would not be applicable in case of amount received by an employee of a public sector company under the scheme of voluntary separation framed by such public sector company.
Explanation.—In this rule, the expression “salary” shall have the same meaning as is assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule.
********
Rule – 2BB
Prescribed allowances for the purposes of clause (14) of section 10.
2BB. (1) For the purposes of sub-clause (i) of clause (14) of section 10, prescribed allowances, by whatever name called, shall be the following, namely :—
(a) any allowance granted to meet the cost of travel on tour or on transfer;
(b) any allowance, whether granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;
(c) any allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit :
Provided that free conveyance is not provided by the employer;
(d) any allowance granted to meet the expenditure incurred on a helper where such helper is engaged for the performance of the duties of an office or employment of profit;
(e) any allowance granted for encouraging the academic, research and training pursuits in educational and research institutions;
(f) 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 or employment of profit.
Explanation.—For the purpose of clause (a), “allowance granted to meet the cost of travel on transfer” includes any sum paid in connection with transfer, packing and transportation of personal effects on such transfer.
(2) For the purposes of sub-clause (ii) of clause (14) of section 10, the prescribed allowances, by whatever name called, and the extent thereof shall be the following, namely :—
| Sl. No. | Name of allowance | Place at which allowance is exempt | Extent to which allowance is exempt |
| (1) | (2) | (3) | (4) |
| 1 | Any Special Compensatory Allowance in the nature of Special Compensatory (Hilly Areas) Allowance or High Altitude Allowance or Uncongenial Climate Allowance or Snow Bound Area Allowance or Avalanche Allowance | I. (a) Manipur Mollan/RH-2365.
(b) Arunachal Pradesh (i) Kameng; (ii) North Eastern Arunachal Pradesh where heights are 9,000 ft. and above; (iii) Areas east or west of Siang and Subansiri sectors (c) Sikkim (i) Area North-NE-East of line Chhaten LR 0105, Launchung LR 1902, pt. 4326 LW 1790, pt. 4549 LW 1479, pt. 3601 LW 1471 to mile 13 LW 1367 to Berluk LW 2253. (ii) All other areas at 9,000 ft. and above. (d) Uttar Pradesh Areas of Harsil, Mana and Malari Sub-divisions and other areas of heights at 9,000 ft. and above. (e) Himachal Pradesh (i) All areas at 9,000 ft. and above ahead of line joining Puhkaja-kunzomla towards the bower. (ii) Area ahead of line joining Karchham and Shigrila to—wards the bower. (iii) All areas in Kalpa, Spiti, Lahaul and Tisa. (f) Jammu and Kashmir (i) All areas from NR 396950 to NR 350850, NR 370790, NR 311776 North of Shaikhra Village, North of Pindi Village to NR 240800. (ii) Areas of Doda, Sank and other posts located in areas at a height of 9,000 ft. and above. (iii) North of line Kud-Dudu and Bastt-garh, Bilwar, Batote and Patnitop. (iv) All areas ahead of Zojila served by Road Srinagar-Zojila-Leh in Leh District. (v) Gulmarg – All areas forward of line joining Anita Linyan 3309 – Kaunrali – 2407. (vi) Uri South – All areas forward of Kaunrali – Kandi 1810 Kustam 1505 – Sebasantra 1006 Changez 0507 – Jak 19904 Keekar 9704 Jamun 9607 Neeta 9508. (vii) BAAZ Kaiyan Bowl – All areas forward of Dulurja 9712-BAAZ 0317 – Shamsher 0416 including New Shamsher 0615 – Zorawar 1017 – Malaugan Base 1027 – Radha 0836 to Nastachun Pass 9847. (viii) Tangdhar – All areas west of Nastachun Pass Tangdhar Bowl and on Shamshabari Range and forward of it. (ix) Karan and Machhal sub-sectors – All areas along the line Pharkiangali 0869 to Z Gali 4376 and forward of Sham-Sabari Range. (x) Panzgam, Tregay and Drumful. II. Siachen area of Jammu and Kashmir III. All places located at a height of 1,000 metros or more above the sea level, other than places specified at (I) and (II) above. |
Rs. 800 per month
Rs. 7,000 per month Rs. 300 per month |
| 2. | Any Special Compensatory Allowance in the nature of Border Area Allowance, Remote Locality Allowance or Difficult Area Allowance or Disturbed Area Allowance | I. (a) Little Andaman, Nicobar Rs. 1,300 per and Narcondum Islands;
(b) North and Middle Andamans; (c) Throughout Lakshadweep and Minicoy Islands; (d) All places on or north of the following demarcation line: Point 14600 (2881) to Sala MS 2686-Matau MS 6777 – Sakong MT 1379-BamongKhonawa MO 2803 – Nyapin MO 7525 – River Khru to its junction with the river Kamla MP – 2226 – Taliha – Yapuik MK 7410 – Gshong MK 9749 – Yinki Yong NF 4324-Damoroh MF 6208 – Ahinkolin NF 8811 – Kronli MG 2407 – Hanli NM 4096 – Gurongon NM 4592-Loon NM 7579 – Mayuliang NM 0169-Chawah NM 9943 – Kamphu NM 1125 – Point 6490 (NM 1493) Vijayanagar NSA 486; (e) Following areas in Himachal Pradesh : (i) Pangi Tehsil of Chamba District; (ii) Following Panchayats and villages of Bharmour Tehsil of Chamba District : (A) Panchayat : Badgaun, Bajol, Deol Kugti Nayagam and Tundah. (B) Villages : Ghatu of Gram Panchayat Jagat Kanarsi of Gram Panchayat, Cauhata. (iii) Lahaul and Spiti District; (iv) Kinnaur district: (A) Asrang, Chitkul and Hango Kuno Charang Panchayats; (B) 15/20 Area comprising the Gram Panchayats of Chhota Khamba, Nathpa and Rupi; (C) Pooh Sub-Division excluding the Panchayat Areas specified above. (v) 15/20 Area of Rampur Tehsil comprising of Panchayats of Koot, Labana-Sadana, Sarpara and Chandi Branda of Shimla District. (vi) 15/20 Area of Nirmand Tehsil, comprising the Gram Panchayats of Kharga, Kushwar and Sarga of Kullu District. (f) Chimptuipui District of Mizoram and areas beyond 25 km. from Lunglei town in Lunglei District of Mizoram. (g) Following areas in Jammu and Kashmir: (i) Niabat Bani, Lohi, Malhar and Macchodi of Kathua District; (ii) Dudu Basantgarh Lander Bhamag Illaqa, Thakrakote and Nagote of Udhampur District; (iii) All areas in Tehsil Mahore except those specified at III(f )(i)below in Udhampur District; (iv) Illaqas of Padder and Niabat Nowgaon in Kishtwar Tehsil of Doda District; (v) Leh District; (vi) Entire Gurez – Niabat, Tangdhar Sub-Division and Keran Illaqa of Baramulla District. (h) Following areas of Uttar Pradesh :— (i) Chamoli District; (ii) Pithoragarh District; (iii) Uttarkashi District. (i) Throughout Sikkim State. Rs. 1,300 per month II. Installations in the Continent Shelf of India and the Exclusive Economic Zone of India. III. (a) Throughout Arunachal Pradesh other than areas covered by those specified at I(d) above. (b) Throughout Nagaland State. (c) South Andaman (including Port Blair). (d) Throughout Lunglei District (excluding areas beyond 25 km. from Lunglei town) of Mizoram. (e) Dharmanagar, Kailasahar, Amarpur and Khowai in Tripura. (f) Following areas in Jammu and Kashmir : (i) Areas up to Goel from Kamban side and areas upto Arnas from Keasi side in Tehsil Mahore of Udhampur District; (ii) Matchill in Baramulla District. (g) Following areas in Himachal Pradesh : (i) Bharmour Tehsil, excluding Panchayats and villages covered by those specified at I(e)(ii) above of Chamba District; (ii) Chhota Bhangal and Bara Bhangal area of Kangra District; (iii) Kinnaur District other than areas specified at I(e)(iv); (iv) Dodra – Kawar Tehsil, Gram Panchayats of Darkali in Rampur, Kashapath Tehsil and Munish, Ghori Chaibis of Pargana Sarahan of Shimla District. IV. (a) Throughout Aizawal District of Mizoram; (b) Throughout Tripura except areas those specified at III(e); (c) Throughout Manipur; (d) Following areas of Himachal Pradesh : (i) Jhandru Panchayat in Bhatiyat Tehsil, Churah Tehsil, Dalhousie Town (including Banikhet proper) of Chamba District; (ii) Outer Seraj (excluding Village of Jakat Khana and Burow in Nirmand Tehsil of Kullu District); (iii) Following areas of Mandi District : (A) Chhuhar Valley (Jogindernagar Tehsil); (B) Bagram, Chhatri, Choudhary, Garagushain, Gatos, Gharials, Janjehli, Jaryar, Johar Kalhani Kalwan, Kholanal, Loth, Silibagi, Somachan, Thachdhar, Tachi and Thana Panchayats of Thunag Tehsil; (C) Binga, Kamlah, Saklana, Tanyar and Tarakholah, Panchayats of Dharampur Block; (D) Baridhara, Bagram, Gopalpur, Kholo, Mahog, Mehudi, Manj, Pekhi, Sainj, Sarahan and Teban, Panchayats of Karsog Tehsil; (E) Bohi, Batwara, Dhanyara, Paura-Kothi, Seri and Shoja, Panchayats of Sundernagar Tehsil. (iv) Following areas and offices of Kangra District: (A) Dharamshala town and Women’s ITI; Dari, Mechanical Workshop, Ramnagar; Child Welfare and Town Country Planning Offices, Sakoh; CRSF Office at lower Sakoh; Kangra Milk Supply Scheme, Shamnagar; Tea Factory, Dari; Forest Corporation Office, Shamnagar; Tea Factory, Dari; Settlement Office, Shamnagar and Binwa Project, Shamnagar. Offices located outside the Municipal limit of Dharamshala town but included in Dharamshala town for purposes of eligibility to special Compensatory (Remote Locality) Allowance; (B) Palampur town, including HPKVV Campus at Palampur and H.P. Krishi Vishvavidyalaya Campus; Cattle Development Office/ Jersy Farm, Banuri; Sericulture Office/Indo-German Agriculture Workshop/HPPWD Division, Bundla; Electrical Sub-Division, Lohna; D.P.O. Corporation, Bundla and Electrical HPSEE Division, Ghuggar offices located outside the Municipal limits of Palampur town but included in Palampur town for the purpose of above allowance; (v) Chopal Tehsil; Ghoris, Panjgaon, Patsnu, Naubis and Teen Koti of Pargana Sarahan; Deothi Gram Panchayat of Taklesh Area; Pargana Barabis; Kasba Rampur and Ghori Nog of Pargana Rampur of Rampur Tehsil of Shimla District and Shimla Town and its suburbs (Dhalli, Jatog, Kasumpti, Mashobra, Taradevi and Tutu); (vi) Panchayats of Bani, Bakhali (Pachhad Tehsil), Bharog Bheneri (Paonata Tehsil), Birla (Nahan Tehsil), Dibber (Pachhad Tehsil) of Thanan Kasoga (Nahan Tehsil) in Sirmour District and Transgiri Tract of Sirmour District; (vii) Mangal Panchayat of Solan District; (e) Following areas in Jammu and Kashmir : (i) Areas in Poonch and Rajouri Districts excluding the towns of Poonch and Rajouri and Sunderbani and other Urban areas in the two districts; (f) Following areas in Jammu and Kashmir : Areas not included in I(g), III(f) and IV(e) above, but which are within a distance of 8 km. from the line of actual control or at places which may be declared as qualifying for Border Allowance from time to time by the State Government for their own staff. Rs. 750 per month V. Jog Falls in Shimoga District in Karnataka. VI. (a) Throughout the State of Himachal Pradesh other than areas covered by those specified in I(e), III(g) and IV(d) (b) Throughout the State of Assam and Meghalaya |
RRs. 1,300 per months. 1,300 per month
Rs. 1,100 per Rs. 1,050 per |
| 3 | Special Compensatory (Tribal Areas/Schedule Areas/Agency Areas) Allowance | (a) Madhya Pradesh
(b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa |
Rs. 200 per month. |
| 4 | Any allowance granted to an employee working in any transport system to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place, provided that such employee is not in receipt of daily allowance | Whole of India | 70 per cent of such allowance up to a maximum of Rs.
10,000 per month. |
| 5 | Children Education Allowance | Whole of India | Rs. 100 per month per child up to a maximum of two children. |
| 6 | Any allowance granted to an employee to meet the hostel expenditure on his child | Whole of India | Rs. 300 per month per child up to a maximum of two children. |
| 7 | Compensatory Field Area Allowance | (a) Following areas in Arunachal Pradesh :—
(i) Tirap and Changeling Districts; (ii) All areas North of line joining point 4448 in LZ 4179-Nukme Dong MS 3272-Sepla MT 2969-Palin MO 9213-Daporijo NR 5841-Along NL 1273-Hunli NM 3196- Tidding Tuwi MT 6369-Hayuliang NN 0170-Tawaken MT 8136-Champai Bun NM 8814, all inclusive. (b) Throughout Manipur and Nagaland. (c) Following areas in Sikkim :— All areas North and North East of line joining Phalut LV 4750-Gezing LV 7059-Mangkha LV 6160-Penlang La LW 0666-Rangli LW 1448-BP 1 in LW 2453 on Indo-Bhutan Border, all inclusive. (d) Following areas in Himachal Pradesh : All areas East of line joining Umasila NV 3951-Udaipur NY 8663-Manikaran SB 2300-Pir Parbati Pass TA 1459-Taranda TA 2335-Barasua Pass TA 8801, all inclusive. (e) Following areas in Uttar Pradesh :— All areas North and North-East of line joining Barasua Pass Gangnani TG 1362-Govind Ghat TG 0937-Tapovan TH 1822-Musiari TN 8982-Relagad TO 2466, all inclusive. (f) Following areas in Jammu and Kashmir :— (i) Areas North and East of line joining Zojila MU 3036-Baralachala NE 6672 along the Great Himalayan Range, all inclusive; (ii) All areas West of line joining point 1556 in NR 5470-Gulmarg MT 3105-Naushara MY 3105-Ringapat MT 2133-Handwara MT 2043-Laingyal MT 2339-Point 8405 in NG 4565-North of line joining point 8403-Bunakut MT 5453-Razan NN 2239- Zojila, all inclusive; (iii) All areas West of line joining tip of Chicken Neck RD 7073-Canal junction RD 6364-Mawa Brahmana RD 6183-Chauki RD 6393-Road junction RD 6499- Baramgala MY 3854-Point 1556 in NR 5470, allinclusive. |
Rs. 2,600 per month. |
| 8 | Compensatory Modified Field Area Allowance | a) Following areas in Punjab and Rajasthan :—
Areas West of line joining Jessai, Barmer, Jaisalmer, Pokhran, Udasar, Mahajan Ranges, Suratgarh, Lalgarh, Jattan, Abohar, Govindgarh, Fazilka, Jandiala Guru, Moga, Dholewal,Deas, Bir Sarangwal, Hussainiwala, Dera Baba Nanak, Aliasing pulge upto the international border, all inclusive. (b) Following area in Haryana :— Satrod (Hissar). (c) Following areas in Himachal Pradesh :— (i) Cachar and North Cachar Districts of Assam including Silchar; (ii) All areas of Arunachal Pradesh and Assam North of river Brahmaputra except Tejpur- Misamari and Field Areas. (e) Throughout Mizoram and Tripura. (f) Following areas in Sikkim and West Bengal :— (g) Following areas in Uttar Pradesh :— i) Areas West of line joining Pattan, Baramulla, Kupwara, Drugmula, Panges, Mankes,Buniyar, Pantha Chowk, Khanabal, Anantnag, Khundru and Khru up to the existing High altitude line, all inclusive; (ii) Areas West of line joining – BP-19, Brahmanadi- Bari, Jindra, Dhansal, Katra, Sanjhi Chatt, Batote, Patnitop, Ramban and Banihal up to the existing High altitude line, all inclusive. |
Rs. 1,000 per month |
| 9 | Any special allowance in the nature of counter-insurgency allowance granted to the members of armed forces operating in areas away from their permanent locations | Any special allowance in the nature of counter-insurgency allowance granted to the members of armed forces operating in areas away from their permanent locations | Rs. 3,900 per month. |
| 10 | [***] 1a | [Rs. 3,200 per month]3 | |
| 11 | Transport allowance granted to an employee, who is blind [or deaf and dumb]or orthopedically handicapped with disability of lower extremities, to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty | Whole of India | Rs. 800 per month. |
| 12 | Underground allowance granted to an employee who is working in uncongenial, unnatural climate in underground mines | Whole of India | Rs. 1,060 per month. |
| 13 | Any special allowance in the nature of high altitude(uncongenial climate) allowance granted to the member of the armed forces operating in high-altitude areas | (a) For altitude of 9,000 to 15,000 feet
(b) For altitude above 15,000 feet |
Rs. 1,600 per month. |
| 14 | Any special allowance granted to the members of the armed forces in the nature of special compensatory highly active field area allowance | Whole of India | Rs. 4,200 per month. |
| 15 | Any special allowance granted to the member of the armed forces in the nature of Island (duty)allowance | Andaman & Nicobar and Lakshadweep Group of Islands | Rs. 3,250 per month: |
Provided further that any assessee claiming exemption in respect of the allowance mentioned at serial number 9 shall not be entitled to the exemption in respect of disturbed area allowance referred to at serial number 2.
4[(3) Notwithstanding anything contained in sub-rules (1) and (2), an employee, being an assessee,—
(i) who has exercised option under sub-section (5) of section 115BAC; or
(ii) whose income is chargeable to tax under sub-section (1A) of section 115BAC,
shall be entitled to exemption only in respect of the allowances mentioned in sub-clauses (a) to (c) of sub-rule (1) and at serial No. 11 of the Table below sub rule (2) to the extent and subject to the conditions, if any, specified therein.]
Notes:
21a. Omitted by the IT (Third Amdt.) Rules, 2018, w.e.f. 1-4-2019 and shall apply to the assessment year 2019-2020 and subsequent assessment years.
2. Inserted by the IT (Thirteenth Amdt.) Rules, 2015, w.e.f. 23-9-2015.
3. Substituted for “Rs. 1,600 per month” by the IT (Sixth Amd.) Rules, 2015, w.e.f. 1-4-2015.
4. Substituted by the IT (Tenth Amd.) Rules, 2023, w.e.f. 21-6-2023.
Rule – 2BBA
Circumstances and conditions for the purposes of clause (19) of section 10.
2BBA. (1) For the purposes of clause (19) of section 10, the circumstances of death of a member of the armed forces (including para-military forces) of the Union in the course of operational duties shall be the following, namely :—
i. acts of violence or kidnapping or attacks by terrorists or anti-social elements;
ii. action against extremists or anti-social elements;
iii. enemy action in international war;
iv. action during deployment with a peace keeping mission abroad;
v. border skirmishes;
vi. laying or clearance of mines including enemy mines as also mine sweeping operations;
vii. explosions of mines while laying operationally oriented mine-fields or lifting or negotiation mine-fields laid by the enemy or own forces in operational areas near international borders or the line of control;
viii. in the aid of civil power in dealing with natural calamities and rescue operations;
ix. in the aid of civil power in quelling agitation or riots or revolts by demonstrators.
(2) It shall be certified by the Head of the Department where the deceased member of the armed forces (including para-military forces) last served, or the service headquarters, as the case may be, that the death of such member has occurred in the course of operational duties in circumstances mentioned in sub- rule (1).
Rule – 2BBB
5[Percentage of Government Grant for considering university, hospital, etc., as substantially financed by the Government for the purposes of clause (23C) of section 10.
2BBB. For the purposes of sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10, any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.]
Rule – 2BC
Amount of annual receipts for the purposes of sub-clauses (iiiad) and (iiiae) of clause (23C) of section 10.
2BC. (1) For the purposes of sub-clause (iiiad) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any university or other educational institution, existing solely for educational purposes and not for purposes of profit, shall be one crore rupees.
(2) For the purposes of sub-clause (iiiae) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, shall be one crore rupees.
Rule – 2C
6[Application for the purpose of grant of approval of a fund or trust or institution or university or any hospital or other medical institution under clause (i) or clause (ii) or clause (iii) or dause (iv) of first proviso to clause (23C) of section 10.
2C. (1) An application under dause (i) or clause (ii) or clause (iii) or clause (iv) of first proviso to clause (23C) of section 10 for the grant of approval of a fund or trust or institution, or university or other educational institution or any hospital or other medical institution (hereinafter referred to as ‘the applicant’) shall be made in the following Form, namely:—
(i) Form No. 10A in case of application under 7[clause (1) or sub-clause (A) of] dause (iv) of first proviso to clause (23C) of section 10 to the Principal Commissioner or Commissioner authorised by the Board; or
(ii) Form No. 10AB in case of application under clause (ii) or 81clause (tii) or sub-clause (B) of clause (iv)] of first proviso to clause (23C) of section 10 to the Principal Commissioner or Commissioner under the said proviso.
(2) The application under sub-rule (1) shall be accompanied by the following documents, as required by Form No. 10A or 10AB, as the case may be, namely:
a. where the applicant is created or established, under an instrument, self-certified copy of such instrument creating or establishing the applicant;
b. where the applicant is created or established, otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;
c. self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;
d. self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act;
e. self-certified copy of existing order granting approval under clause (23C) of section 10;
f. self-certified copy of order of rejection of application for grant of approval under dause (23C) of section 10, if any;
g. where the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the applicant relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;
h. where a business undertaking is held by the applicant as per the provisions of sub-section (4) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business undertaking relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;
i. where the income of the applicant includes profits and gains of business as per the provisions of sub-section (4A) of section 11 and the applicant has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of such business relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up and self-certified copy of the report of audit as per the provisions of section 44AB for such period;
j. note on the activities of the applicant.
(3) Form No. 10A or 10AB, as the case may be, shall be furnished electronically,—
(i) under digital signature, if the return of income is required to be furnished under digital signature;
(ii) through electronic verification code in a case not covered under clause (i).
(4) Form No. 10A or 10AB, as the case may be, shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.
(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting approval under clause (i) or (iii) of the second proviso read with the ninth proviso to clause (23C) of section 10 in Form No. 10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (i) of sub-rule (1).
(6) If, at any point of time, it is noticed that Form No. 10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, as referred to in sub-rule (5) after giving an opportunity of being heard, may cancel the approval granted in Form No. 10AC and Unique Registration Number (URN) issued under sub-rule (5), and such approval in Form No. 10AC or such Unique Registration Number (URN) shall be deemed to have never been granted or issued.
(7) In case of an application made under dause (iv) of first proviso to clause (23C) of Isection 10 as it stood immediately before its amendment by the Finance Act, 20233 during previous year beginning on 1st day of April, 2021, the provisional approval shall be effective from the assessment year beginning on 1st day of April, 2022.
(8) In case of an application made in Form No. 10AB under clause (ii) of sub-rule (1), the order of approval or rejection or cancellation under second proviso read with the ninth proviso to clause (23C) of section 10 shall be in Form No. LOAD and in case if the approval is granted, sixteen digit alphanumeric number Unique Registration Number (URN) shall be issued, by the Principal Commissioner or Commissioner referred to in second proviso to clause (23C) of section 10.
(9) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:
(i) lay down the form, data structure, standards and procedure of:
(a) furnishing and verification of Form No. 10A or 10AB, as the case may be;
(b) passing the order under second proviso to clause (23C) of section 10;
(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the form so furnished or the order so passed.
Notes
6 Substituted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.
7 Substituted for “clause (i) or” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.
8 Substituted for “clause (Hi)” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.
9 Substituted for “section 10” by the IT (Eleventh Amdt.) Rules, 2023, w.e.f. 1-10-2023.
Rule – 2DB
10[Other conditions to be satisfied by the pension fund.
2DB. For the purposes of clause (23FE) of section 10, the pension fund shall be required to satisfy the following other conditions, namely:—
(i) it is regulated under the law of a foreign country including the laws made by any of its political constituents being a province, State or local body, by whatever name called, under which it is created or established, as the case may be;
(ii) it is responsible for administering or investing the assets for meeting the statutory obligations and defined contributions of one or more funds or plans established for providing retirement, social security, employment, disability, death benefits or any similar compensation to the participants or beneficiaries of such funds or plans, as the case may be:
11[Provided that the condition in clause (ii) shall be deemed to have been satisfied with respect to assets being administered or invested, if the following conditions are satisfied; namely:—
(a) value of such assets is not more than ten per cent of the total value of the assets administered or invested by such fund;
(b) such assets are wholly owned directly or indirectly by the Government of a foreign country; and
(c) such assets vests in the Government of such foreign country upon dissolution;
(iii) the earnings and assets of the pension fund are used only for meeting statutory obligations and defined contributions for participants or bene-ficiaries of funds or plans referred to in clause (ii) and no portion of the earnings or assets of the pension fund inures any benefit to any other private person:
12[Provided that the provisions of clause (iii) shall not apply to any payment made to creditors or depositors for loan taken or borrowing for the purposes other than for making investment in India:]
11[Provided further that the provisions of clause (iii) shall not apply to earning from the assets referred to in the proviso of clause (ii), if the said earning are credited either to the account of the Government of that foreign country or to any other account designated by such Government so that no portion of the earnings inures any benefit to any private person;]
(iv) 13[***]
(v) it shall intimate the details in respect of each investment made by it in India during the quarter within one month from the end of the quarter in Form No. 10BBB;
(vi) it shall file return of income on or before the due date specified under sub-section (1) of section 139 and furnish along with such return a certificate in Form No. 10BBC in respect of compliance to the provisions of clause (23FE) of section 10, during the financial year, from an accountant as defined in the Explanation below sub-section (2) of section 288.
14[Explanation.—For the purposes of this rule, “loan and borrowing” shall have the same meaning as assigned to it in sub-clause (b) of clause (ii) of Explanation 2 to clause (23FE) of section 10.]
Notes:
10 Rules 2DB and 2DC inserted by the IT (Twentieth Amdt.) Rules, 2020, w.e.f. 17-8-2020.
11 Inserted by the IT (Eleventh Amdt.) Rules, 2021, w.e.f. 26-4-2021.
12 Inserted by the IT (Tenth Amdt.) Rules, 2021, w.e.f. 15-4-2021.
13 Omitted by the IT (Tenth Amdt.) Rules, 2021, w.e.f. 15-4-2021.
14 Inserted by the IT (Tenth Amdt.) Rules, 2021, w.e.f. 15-4-2021
Rule – 2DC
Guidelines for notification under clause (23FE) of section 10.
2DC. (1) For the purposes of notification under sub-clause (iv) of clause (c) of [Explanation 1] to the clause (23FE) of section 10, the pension fund shall make an application in Form No. 10BBA enclosing therewith relevant documents and evidence, to the,—
(i) Member (Legislation), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, North Block, New Delhi during the financial year 2020-2021;
(ii) Member, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, North Block, New Delhi having supervision and control over the work of Foreign Tax and Tax Research Division during the other financial years.
(2) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall lay down the data structure, standards and procedure of furnishing and verification of Form No. 10BBB and Form No. 10BBC, and shall be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said forms so furnished under this sub-rule.]
Note:
15 Substituted for “Explanation” by the IT (Tenth Amdt.) Rules, 2021, w.e.f. 15-4-2021.
Income Tax Forms
Form No. : 1
1[Appendix IV
FORM NO. 1
[See rule 11UE (1)]
Undertaking under sub-rule (1) of rule 11UE of the Income-tax Rules, 1962
To,
Principal Commissioner/Commissione
………………….. ………………………. ……………………
Sir/Madam,
I …………………………………….. (name in block letters) son/daughter of …………………………………………. designation ………………………………….. and nationality …………………………………. and related passport number………………………………….. (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) …………………………………………………………………. on behalf of ………………………………………… (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ……………………………………….. and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be ,hereby declare as follows:
a. That specified orders have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May, 2012 and particulars of such specified orders are provided in Part A of the Annexure.
b. The declarant has (strike off the options that are not applicable),
i. not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings constituted under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part B of the Annexure;
ii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and has irrevocably withdrawn, on a with prejudice basis, all such appeals or applications or petitions or proceeding and evidence thereof is furnished herewith and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the declarant, are provided in Part C of the Annexure;
iii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the declarant have been disposed of and no further appeal or application or petition or proceeding has been filed by the declarant and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part C of the Annexure;
iv. filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The declarant further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the declarant and their status as on the date of this undertaking, are provided in Part D of the Annexure;
c. The declarant has (strike off the options that are not applicable),
i. not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part B of the Annexure;
ii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the declarant, are provided in Part E of the Annexure;
iii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the declarant have been disposed of and no further proceeding has been initiated by the declarant and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part E of the Annexure;
iv. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. Particulars of such pending proceeding and notices filed by the declarant are provided in Part F of the Annexure. The declarant hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders;
v. received or got any awards, orders, judgments or any other reliefs issued in favour of the declarant, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the declarant or by India and any Indian affiliate. The declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs or relief in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment or any other relief issued in favour of the declarant. The declarant hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part G of the Annexure;
.d. The declarant has (strike off the options that are not applicable),
i. not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part B of the Annexure;
ii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The declarant has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments and evidence thereof is furnished herewith. Particulars of such proceeding, initiated and withdrawn or discontinued by the declarant, are provided in Part H of the Annexure;
iii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the declarant have been disposed of and no further proceeding has been filed by the declarant and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part H of the Annexure;
iv. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, the declarant has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian Affiliate. The declarant hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding are provided in Part I of the Annexure. The declarant also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e).
e. The declarant hereby undertakes as follows:
i. to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c), and (d) above, and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, declarant shall act in accordance with this undertaking and in full cooperation with the Republic of India;
ii. to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the declarant or by Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For the avoidance of doubt, the declarant’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d) above. For further avoidance of doubt, the declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian affiliate to set aside such award, order or judgement ordered, issued or passed in favour of the declarant. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order;
iii. to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the declarant.
f. The declarant specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.
g. The declarant hereby undertakes to irrevocably terminate, release, discharge and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the declarant under any law for the time being in force, in equity, under any statute or under any agreement entered into by Republic of India with any country or territory outside Republic of India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the declarant or by Republic of India and any Indian affiliate. For the avoidance of doubt, the declarant’s above waiver includes an irrevocable waiver of any claim against India and any Indian Affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the declarant hereby undertakes (for itself and on behalf of all related parties) to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.
h. The declarant further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking. Where any such claim or right is transferred, the declarant confirms that it has provided the particulars of all the interested parties in Part L, and the undertakings from each of such interested parties is attached with this undertaking in accordance with Part M of the Annexure.
i. In the event that, notwithstanding the foregoing, any person asserts, brings, files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”) at any time on or after the date of furnishing this undertaking, the declarant shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney’s fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The declarant specifically represents that, to the best of its knowledge, after—
i. the execution of this undertaking;
ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and
iii. irrevocable withdrawal of all pending proceeding as outlined in this undertaking, no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliates. To avoid any doubt, the declarant’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained the declarant’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.
j. For the removal of any doubt, the declarant fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant fails to obtain any release from such person, the declarant warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.
k. The declarant further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any person (including but not limited to any related party or interested party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The declarant shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where this Form is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice or press release shall include, among other things, confirmation that,—
i. the declarant (and its related parties) forever irrevocably forgo any reliance on any right and provisions under any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders;
ii. the declarant has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliates with respect to any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;
iii. the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate, including by related parties or interested parties, contrary to the release; and
iv. the declarant confirms it will treat any such award, judgment or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.
l. The declarant confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.
m. The declarant represents and warrants that:
i. it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j)under applicable law;
ii. the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);
iii. this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against the declarant in accordance with its terms;
iv. such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law.
n. The declarant confirms that by submitting the present undertaking, it fulfills the conditions specified in the Explanation below the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9.
o. The details of the bank account in which the refund may be credited are provided in Part J of the Annexure.
p. The details of all the interested parties are provided in Part K and Part L of the Annexure. The undertaking in Part M of the Annexure by each of such persons is attached with this undertaking. The declarant represents and warrants that:
i. all such undertakings have been executed and delivered by the person who has full legal power and authority to execute and deliver such undertakings;
ii. the execution, delivery and performance of this undertaking has been duly authorised by all necessary corporate action; and
iii. this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against such person in accordance with its terms. Such separate, related undertakings may take the same form as this undertaking.
q. The declarant is or is not covered under sub-rule (6) of rule 11UF and in case if the declarant is not covered under said sub-rule all the conditions provided under sub-rule (2) of rule 11UE have been fulfilled.
r. This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant income-tax authorities, tribunals or courts in Republic of India, as the case may be, which are empowered to decide disputes under the Act.
I also confirm that I am aware of all the consequences and implications of this undertaking.
Place:…………………………………
Signature:………………………………….
Date: …………………………………………………………………………………………………………………………….
Attachments
1. The Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking
2. An indemnity bond to the effect of clause (i) and clause (j) of the undertaking attached in Part N of the undertaking.
3. Copy of the public notice referred to in clause (k) of the undertaking, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.
4. Attachments as required in different parts of the Annexure to this undertaking.
Notes
1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.
2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant are not available.
3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:
a. record the signatory’s power and authority to give the undertaking on behalf of the declarant; and
b. record the declarant’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.
VERIFICATION
Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.
Verified at________________ place_______________ on this the_________ day________________ of ______ month_______________ , year .
Place: ……………………
Date:……………………..
Signature…………………………
Annexure
Part A– Particulars of the relevant order or orders:
| Sl. No. | Assessment Year or Financial year | Income-tax Authority passing the order | Details of the order under consideration |
Taxes or penalty determined |
Interest | Total demand |
Relief, provided in any appeal proceeding , if any |
Demand recovered from the declarant |
Pending demand or refund due as on date | Details of the attachments made by any Income-tax Authority | |
| Section and sub-section of the Income-tax Act, 1961 |
Date of order | ||||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) |
Part B– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:
| Sl. No. | Sl. No. in Part A where the relevant order is mentioned | No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking). |
No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking). |
No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking). |
| (1) | (2) | (3) | (4) | (5) |
| Applicable or Not applicable | Applicable or Not applicable | Applicable or Not applicable |
Part C: Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:
| Sl. No. | Sl. No. in Part A where the relevant order is mentioned
|
Nature of appeals or applications or petitions or proceeding
|
Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed |
Date of filing the appeals or applications or petitions or proceeding
|
Date of disposing of or withdrawal such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of) |
| (1) | (2) | (3) | (4) | (5) | (6) |
Part D – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clauses (b) of the undertaking:
| Sl. No. | Sl. No. in Part A where the relevant order is mentioned | Nature of appeals or applications or petitions or proceeding | Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed | Date of filing the appeals or applications or petitions or proceeding |
| (1) | (2) | (3) | (4) | (5) |
Part E – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (ii) and (iii) of clause (c) of the undertaking:
Sr. No. |
Sl. No in Part A where the
|
Nature of proceeding for arbitration,
|
Particulars (including the name of the country) where such proceeding for
|
Date of initiating the proceeding for arbitration, conciliation or
|
Name of the agreement entered into
|
Status of the proceeding for arbitration,
|
Date of disposing of or withdrawal of such proceeding
|
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
(8) |
Part F – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:
| Sl. No. | Sl. No in Part A where the relevant order is mentioned | Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given | Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued) | Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice | Name of the agreement entered into by India under which proceeding for arbitration, conciliation or mediation are pending | Status of the proceeding for arbitration, conciliation or mediation |
| (1) | (2) | (3) | (4) | (5) | (6) | (7) |
Part G – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:
| Sl. No. | Sl. No. in Part A where the relevant order is mentioned |
Nature of such award, order or judgment or any other relief |
Particulars (including the name of the country) where proceeding related to such award, order, judgment or any other relief were held |
Date of such award, order, judgment or any other relief along with reference number |
Status of the award, order, judgment or any other relief |
| (1) | (2) | (3) | (4) | (5) | (6) |
Part H – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:
Sl. No. |
Sl. No. in Part A where the relevant order is mentioned |
Nature of proceeding to enforce such award, order or judgment or any other relief |
Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place) |
Date of filing proceeding to enforce any award, order or judgment or any other relief |
Nature of such award, order or judgment or any other relief (Attach copy thereof) |
Status of the proceeding to enforce such award, order or judgment or any other relief |
Date of disposing of or withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of/withdrawal, including order of the Court or other judicial authority) |
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
(8) |
Part I – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clause (iv) of clause (d) of the undertaking:
| Sl. No. | Sl. No in Part A where the relevant order is mentioned | Nature of proceeding to enforce such award, order or judgment or any other relief | Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place) | Date of filing proceeding to enforce any award, order or judgment or any other relief | Nature of such award, order or judgment or any other relief (Attach copy thereof) | Status of the proceeding to enforce such award, order or judgment or any other relief |
| (1) | (2) | (3) | (4) | (5) | (6) | (7) |
Part J – Details of bank account in Republic of India to which the refund is to be remitted
| Sl. No. | Bank Name and Address | Account Number and other required details for remittance |
| (1) | (2) | (3) |
Part K– Details of all the companies or entities in the entire chain of holding of the declarant till the ultimate holding company or entity of the declarant:
| Sl. No. |
Name of holding company |
Percentage of the ownership by such holding company in the declarant as on the date of undertaking |
If the ownership in the declarant is not held directly by such holding company, the chain of ownership with the names of all the companies in the chain of ownership |
| (1) | (2) | (3) | (4) |
Part L- Details of all the interested parties other than the interested parties covered under Part K
| Sl. No. |
Name of such persons whose interest may be affected directly or indirectly by this undertaking |
Nature of interest of such person | Amount of interest of such person (Rs), if available |
| (1) | (2) | (3) | (4) |
PART M Undertaking by person(s) declared in Part K and Part L of the Undertaking
To,
Principal Commissioner/Commissioner
……………….. ……………………… ………….
Sir/Madam,
I………………….. (name in block letters) son/daughter of…………………………………………….. designation ……………….. .and nationality …………………………. .and related passport number……………………………… (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) ………………………………. on behalf of …………………………………. . (name of the interested party) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) …………………………………………. . and being duly authorised and competent to represent the interested party in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be , hereby declare as follows:
(a) The particulars of specified orders that have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside Republic of India made before the 28th day of May, 2012 in the case of declarant and the nature of interest of the interested party in such specified orders are provided in Part MA of the Annexure.
(b) The interested party has (strike off options that are not applicable):
i. not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part MB of the Annexure;
ii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn all such appeals or applications or petitions or proceeding or such appeals or applications or petitions or proceeding have been disposed at any time before the date of filing Form No. 1, and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the interested party, are provided in Part MC of the Annexure.
iii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the interested party have been disposed of and no further appeal or application or petition or proceeding has been filed by the interested party and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part MC of the Annexure.
iv. filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The interested party further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the interested party and their status as on the date of this undertaking, are provided in Part D of the Annexure. Particulars of any appeals or applications or petitions or proceeding as described in this clause (b) which are not covered by the sub-clauses (i) and (ii) are also provided in Part MD of the Annexure.
(c) The interested party has (strike off options that are not applicable):
i. not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part MB of the Annexure;
ii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the interested party, are provided in Part ME of the Annexure.
iii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the interested party have been disposed of and no further proceeding has been initiated by the interested party and evidence thereof is furnished herewith. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part ME of the Annexure.
iv. has initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside Republic of India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e). Particulars of such pending proceeding and notices filed by the interested party are provided in Part F of the Annexure. The interested party hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of any proceeding for arbitration, conciliation or mediation, or notices thereof, which are not covered by the sub-clause (i) and sub- clause (ii), are also provided in Part MF of the Annexure.
v. received or got any awards, orders, judgements or any other reliefs issued in favour of the interested party, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. The interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic to set aside such award, order or judgment issued in favour of the interested party. The interested party hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part MG of the Annexure.
(d) The interested party has (strike off options that are not applicable):
i. not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part MB of the Annexure.
ii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The interested party has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and withdrawn or discontinued by the interested party, are provided in Part MH of the Annexure.
iii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the interested party have been disposed of and no further proceeding has been filed by the interested party and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part MH of the Annexure.
iv. initiated proceeding to enforce or pursue attachments in respect of any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, interested party has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding, are provided in Part MI of the Annexure. Particulars of any such proceeding, to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief, which are not covered by the sub-clauses (i) and (ii), are also provided in Part MI of the Annexure. The interested party also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e) below.
(e) The interested party hereby undertakes as follows: –
i. to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against Republic of India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c) and (d) and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, interested party shall act in accordance with this undertaking and in full cooperation with the Republic of India.
ii. to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order, judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d). The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For further avoidance of doubt, the interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian Affiliate to set aside such award, order or judgment ordered, issued or passed in favour of the interested party. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order.
iii. to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the interested party.
(f) The interested party specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.
(g) The interested party hereby undertakes to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the interested party under any law for the time being in force, in equity, under any statute or under any agreement entered into by India with any country or territory outside India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s above waiver includes an irrevocable waiver of any claim against India and any Indian affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the interested party hereby undertakes to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.
(h) The interested party further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking.
(i) In the event that, notwithstanding the foregoing, any person asserts, brings , files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”)at any time on or after the date of furnishing this undertaking, the interested party shall indemnify, defend and hold harmless such releasee from and against any and all costs, expenses (including attorneys’ fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The interested party specifically represents that, to the best of its knowledge, after
i. the execution of this undertaking;
ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and
iii. irrevocable withdrawal of all pending proceeding as outlined in this undertaking.
no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliate. To avoid any doubt, the interested party’s indemnity of releasees shall include any claim brought by any third party alleging that it has obtained the interested party’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.
(j) For the avoidance of any doubt, the interested party fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the interested party fails to obtain any release from such person, the interested party warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.
(k) The interested party further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any party (including but not limited to any related party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The interested party shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where Form No. 3 is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice shall include, among other things, confirmation that,-
i. the interested party forever irrevocably forgoes any reliance on any right and provisions under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders;
ii. the interested party has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliate with respect to any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;
iii. the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate contrary to the release; and
iv. the interested party confirms it will treat any such award, judgment, or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.
(l) The interested party confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.
(m) The interested party represents and warrants that:
i. it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) under applicable law;
ii. the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);
iii. this undertaking constitutes the legal, valid and binding obligation of the interested party, enforceable against the interested party in accordance with its terms;
iv. such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law; and
(n) This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant Income-tax authorities, tribunals or courts in India, as the case may be, which are empowered to decide disputes under the Act.
I also confirm that, I am aware of all the consequences and implications of this undertaking.
Place: ……………….. .
Date: ……………………….. .
Signature………………………………………….
Attachments
1. The Board Resolution and legal authorisation, as referred to in clause (m) of Part M.
2. An indemnity bond to the effect of clauses (i) and (j) of Part M in Part N of the undertaking in Form No. 1;
3. Copy of the public notice referred to in clause (k) of Part M, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.
4. Attachments as required in different parts of the Annexure to Part M of this undertaking
Notes:
1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.
2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number/Aadhaar Number or Tax Deduction Account Number of the interested party are not available.
3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:
a. record the Signatory’s power and authority to give the undertaking on behalf of the interested party; and
b. record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.
VERIFICATION
Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.
Verified at ___________place_________ on this the ___day ____of ___month ______ ,_year ________ .
Place: ……………..
Date: ……………….
Signature…………….
Annexure
Part MA– Particulars of the relevant order or orders:
| Sl. No. |
Assessment Year or Financial year | Income-tax Authority passing the order |
Details of the order under consideration | Nature of interest of the interested party | |
| Section and sub-section of the Income-tax Act, 1961 | Date of order |
||||
| (1) | (2) | (3) | (4) | (5) | (6) |
Part MB– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:
| Sl. No. | Sl. No. in Part MA where the relevant order is mentioned | No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking). |
No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking). |
No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking). |
| (1) | (2) | (3) | (4) | (6) |
| Applicable or Not applicable | Applicable or Not applicable | Applicable or Not applicable |
Part MC – Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:
| Sl. No. | Sl. No. in Part MA where the relevant order is mentioned | Nature of appeals or applications or petitions or proceeding | Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed | Date of filing the appeals or applications or petitions or proceeding | Date of disposing of or withdrawal of such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of) |
| (1) | (2) | (3) | (4) | (5) | (6) |
Part MD – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clause (b) of the undertaking:
| Sl. No. | Sl. No. in Part MA where the relevant order is mentioned | Nature of appeals or applications or petitions or proceeding | Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed | Date of filing the appeals or applications or petitions or proceeding |
| (1) | (2) | (3) | (4) | (5) |
Part ME – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clauses (ii) and (iii) of clause (c) of the undertaking:
Sl. No. |
Sl. No. in Part MA where the relevant order is mentioned |
Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given |
Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued) |
Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice |
Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending |
Status of the proceeding for arbitration, conciliation or mediation |
Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority) |
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
(8) |
Part MF – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:
Sl. No. |
Sl. No. in Part MA where the relevant order is mentioned |
Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given |
Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued) |
Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice |
Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending |
Status of the proceeding for arbitration, conciliation or mediation |
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
Part MG – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:
| Sl. No. | Sl. No. in Part MA where the relevant order is mentioned | Nature of such award, order or judgment or any other relief |
Particulars (Including the name of the country) where proceeding related to such award, order, judgment or any other relief were held |
Date of such award, order, judgment or any other relief along with reference number |
Status of the award, order, judgment or any other relief |
| (1) | (2) | (3) | (4) | (5) | (6) |
Part MH – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:
Sl. No. |
Sl. No. in Part MA where the relevant order is mentioned |
Nature of proceeding to enforce such award, order or judgment or any other relief |
Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place) |
Date of filing proceeding to enforce any award, order or judgment or any other relief |
Nature of such award, order or judgment or any other relief (Attach copy thereof) |
Status of the proceeding to enforce such award, order or judgment or any other relief |
Date of disposing of or withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of/withdrawal, including order of the Court or other judicial authority) |
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
(8) |
Part MI – Particulars of the proceeding under sub-clause (iv) of clause (d) of the undertaking:
| Sl. No. | Sl. No. in Part MA where the relevant order is mentioned | Nature of proceeding to enforce such award, order or judgment or any other relief | Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place) | Date of filing proceeding to enforce any award, order or judgment or any other relief | Nature of such award, order or judgment or any other relief (Attach copy thereof) | Status of the proceeding to enforce such award, order or judgment or any other relief |
| (1) | (2) | (3) | (4) | (5) | (6) | (7) |
Part N
INDEMNITY BOND
This Indemnity Bond (“Bond”) is made on this………….. day of……….. , 2021 by………….. (name in block letters) son/daughter of………………….. designation and nationality……………………… and related passport number…………….. (hereinafter referred to as “Signatory”) having Permanent Account Number/Aadhaar Number/Tax Deduction Account Number (See Note 1)………………. on behalf of……………. (name of the declarant or interested party, as the case may be) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number………………………… (See Note 2) and being duly authorised and competent to represent the declarant or interested party, as the case may be, in this regard pursuant to Board Resolution or legal authorisation (See Note 3), of the FIRST PART.
And
The Republic of India and any Indian affiliate (hereinafter collectively referred to as “releasees”) of the OTHER PART WHEREAS:
A. The Income-tax Rules, 1962 have been amended and the Income-tax (31st Amendment) Rules, 2021 have come into force from the date of their publication in the Official Gazette.
B. The declarant or interested party, as the case may be, has filed an undertaking under sub-rule (1) of rule 11UE of the Income -tax Rules, 1962, to which this indemnity bond is annexed. Any defined terms not defined herein shall have the same meaning as the definitions given under rule 11UE and the undertaking.
C. Pursuant to the above, the declarant or interested party, as the case may be, has agreed to indemnify, defend and hold harmless the Republic of India and Indian affiliates from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of any claim at any time after the date of furnishing the undertaking in Form No. 1 by any person, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, and the declarant or interested party, as the case may be, has agreed to furnish an indemnity bond to this effect, such that the declarant or interested party, as the case may be, fully assumes the risk of any omission or mistake with respect to identification and procurement of authorisations and undertakings from any related parties or interested parties as provided in the undertaking, and securing the Republic of India and Indian affiliates from any claim related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief or to the dispute underlying the award against the Republic of India or Indian affiliates in connection with the relevant order or orders.
D. Accordingly the declarant or interested party, as the case may be, is executing this Indemnity Bond in favour of the Republic of India on the terms appearing hereunder.
NOW THIS INDEMINTY BOND WITNESSETH AS FOLLOWS:
1. In the event that any person or entity asserts, brings, files or maintains any claim against any releasee at any time on or after the date of furnishing this undertaking, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, against the Republic of India or Indian affiliates in connection with the relevant order or orders, the declarant or interested party, as the case may be, shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim.
2. The declarant or interested party, as the case may be, specifically represents that, to the best of
its knowledge, after—
i. the execution of this undertaking;
ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and
iii. withdrawal of all pending proceeding as outlined in this undertaking,
that no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, or any aspect of the dispute underlying the award shall remain outstanding against the Republic of India or other releasee.
Explanation I.-For the removal of any doubt, the declarant’s or interested party’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained declarant’s or interested party’s, as the case may be, claims under an award, judgment or court order or the relevant order or orders.
Explanation II.- the declarant or interested party, as the case may be, fully assumes the risk through this indemnity of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant or interested party, as the case may be, fails to obtain any release from such person, the declarant or interested party, as the case may be, indemnifies through this document the releasees from any defense costs, court costs, and damages.
3. This Indemnity Bond shall be governed by the relevant laws of India and the Delhi High Court
shall have sole jurisdiction to entertain and try any dispute or difference arising out of or in connection with the terms of this Bond.
IN WITNESS WHEREOF the undersigned herein has signed and set his hands on this ………………. day of………… , 2021.
For and on behalf of the declarant or interested party, as the case may be,
Name and address of Witness
Signature of the Witness
1.
2.
Place:
Date:
Notes
1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.
2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant or interested party, as the case may be, are not available.
3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:
(a) record the signatory’s power and authority to give the undertaking on behalf of the declarant or interested party, as the case may be; and
(b) record the declarant or interested party’s power and authority, as the case may be, to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking).]
Form No. : 2
1[FORM NO. 2
[See rule 11UF]
Form for Certificate Under sub-rule (2) of rule 11UF
<Name of the declarant>
Address of the declarant
Sir/Madam
1. The……………………… (name of the declarant) (hereinafter referred to as the declarant) with Permanent Account Number/Aadhaar number/Tax Deduction Account Number/Company Identification Number and Taxpayer Identification Number……….. has filed an undertaking in Form No. 1 dated………. under sub-rule (1) of the rule 11UE of the rules.
2. Pursuant to the undertaking filed by the declarant in Form No. 1 under sub-rule (1) of rule 11UE, the provisions of fifth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act shall be applicable to the orders mentioned below, subject to the fulfilment of the conditions specified in said proviso read with relevant rules and fulfilment of the undertakings by the declarant in Form No. 1:
TABLE
Sl. No. |
Sl. No. of the Table in Part A of Form No. 1 where the relevant order is mentioned |
Assessment
|
Income-tax Authority passing the order |
Details of the
|
Taxes or
|
Interest |
Total demand |
Relief, provided in any appeal proceeding,if any |
Demand recovered from the declarant |
Pending demand or refund due as on date |
Details of
|
|
Section
|
Date
|
|||||||||||
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
(8) |
(9) |
(10) |
(11) |
(12) |
(13) |
3. Demand recovered, as per the column (11) of the Table above, shall be refunded to the declarant, subject to the conditions under sub-rule (2) of the rule 11UE and the provisions of the Act, without any interest as per the provisions of the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act, attachments, if any, the details whereof are provided in column (13) of the Table, shall be revoked and appeals or applications or petitions or proceeding, if any, filed by any income-tax authority or any other person representing the Republic of India with respect to the specified orders, as per column (2) of the Table, shall be withdrawn or intimation shall be sent to the concerned person, on the issue of Form No. 4, as per the procedure provided in sub-rule (16) of rule 11UF. Further, no interest under section 244A of the Act will be payable to the declarant as per the provisions of sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act.
Certificate No…….
Place…..
Date………..
………………………….
(Principal Commissioner/Commissioner of Income-tax) ]
Form No. : 2A
FORM NO. 2A [Omitted by the IT (Tenth Amdt.) Rules, 2001, w.e.f. 2-7-2001. Earlier, existing Form No. 2A was inserted by the IT (Third Amdt.) Rules, 1994, w.e.f. 1-6-1994; substituted by the IT (Fourth Amdt.) Rules, 1995, w.e.f. 1-6-1995; amended by the IT (Fourth Amdt.) Rules, 1998, w.e.f. 1-4- 1998 and later on substituted by the IT (Fifth Amdt.) Rules, 2000, w.e.f. 11-5-2000.]
Form No. : 2B
FORM NO. 2B [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2B was inserted by the IT (Sixteenth Amdt.) Rules, 1995, w.e.f. 23-8-1995; amended by the IT (Eighth Amdt.) Rules, 1999, w.e.f. 18-5-1999, IT (Sixth Amdt.) Rules, 2000, w.e.f. 11-5-2000 and later on substituted by the IT (Fifteenth Amdt.) Rules, 2001, w.e.f. 27-7-2001.]
Form No. : 2C
FORM NO. 2C [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2C was inserted by the IT (Eighth Amdt.) Rules, 1997, w.e.f. 27-6-1997; substituted by the IT (Eleventh Amdt.) Rules, 1998, w.e.f. 25-8-1998; amended by the IT (Seventh Amdt.) Rules, 2000, w.e.f. 11-5-2000 and IT (Eighteenth Amdt.) Rules, 2002, w.e.f. 29-7-2002 and later on substituted IT (Sixteenth Amdt.) Rules, 2001, w.e.f. 27-7-2001.]
Form No. : 2E
FORM NO. 2E [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2E was inserted by the IT (Sixth Amdt.) Rules, 2003, w.e.f. 14-5-2003 and later on amended by the IT (Ninth Amdt.) Rules, 2004, w.e.f. 14-7-2004 and IT (Sixteenth Amdt.) Rules, 2005, w.e.f. 20-6-2005.]
Form No. : 3
1 [FORM NO. 3
[See rule 11UF]
Intimation for Withdrawal under sub-rule (3) of rule 11UF of the Income- tax Rules, 1962
To,
The Principal Commissioner/Commissioner
………………………………………. ……………………………….
Sir/Madam,
I……………… (name in block letters) son/daughter of ………………… designation ……………..and nationality ………………..and related passport number………………. (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number ………………………(see Note 1) on behalf of …………………….. (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ……………………………….. and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be, hereby confirm that the declarant has received an order in Form No. 2 dated________
Pursuant thereto, I confirm that the pending appeals or applications or petitions, arbitration, conciliation, mediation, claims or other proceeding, if any, as referred in Part D, Part F, Part G, Part I and Part M of the undertaking in Form No. 1 dated…… have been irrevocably, on a with prejudice basis, withdrawn or discontinued and are not being pursued. The evidence of action taken in this regard are enclosed herewith.
Place…………….
Date…………….
………………..
Signature/Verification
Attachments
1. Attach the Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking.
2. Attach the evidence of action taken as referred above.
VERIFICATION
Verified that the contents of this intimation are true to the best of my knowledge and belief. No part of the intimation is false and nothing has been concealed or misstated therein.
Verified at……place………. on this the ……. day …………. of…. month……….,…year………..
Place: ……………..
Date: …………….
Signature
………………………………..
Notes
1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.
2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the interested party are not available.
3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking and such Board resolution or legal authorisation shall, among other things:
(a) record the signatory’s power and authority to give the undertaking on behalf of the interested party; and
(b) record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.]
Form No. : 3AA
FORM NO. 3AA [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AA was inserted by the IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003 and later on amended by the IT (Fifteenth Amdt.) Rules, 2004, w.e.f. 1-4-2005.]
Form No. : 3AAA
FORM NO. 3AAA [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AAA was inserted by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987 and later on amended by the IT (Ninth Amdt.) Rules, 1987 and IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003.]
Form No. : 3AB
FORM NO. 3AB [Omitted by the IT (Thirty-second Amdt.) Rules, 1999, w.e.f. 19-11-1999. Earlier, Form No. 3AB was inserted by the IT (Amdt.) Rules, 1978 and amended by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987.]
Tutorials
Tax free incomes
Disclaimer:
The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.
Viewers are advised to verify the content from Government Acts/Rules/Notifications etc.
TAX-FREE INCOMES
Agricultural Income [Section 10(1)]
As per section 10(1), agricultural income earned by the taxpayer in India is exempt from tax. Agricultural income is defined under section 2(1A) of the
Income-tax Act. As per section 2(1A), agricultural income generally means:
a. Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.
b. Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.
c. Any income attributable to a farm house subject to satisfaction of certain conditions specified in this regard in section 2(1A).
Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.
Amount received by a member of the HUF from the income of the HUF, or in case of impartible estate out of income of family estate [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.
Share of profit received by a partner 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.
Certain interest to non-residents [Section 10(4)]
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)(ll) is available only if such individual is a person resident outside India as defined in clause (w) of section 2 of the Foreign
Exchange Management Act, 1999 or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account.
Interest on notified savings certificates [Section 10(4B)]
As per section 10(4B), in the case of an individual, being a citizen of India or a person of Indian origin, who is a non-resident, any income by way of interest on notified savings certificates (subscribed in convertible foreign exchange) issued before the 1st day of June, 2002 by the Central Government is exempt from tax.
Interest on Rupee Denominated bonds [(Section 10(4C)]
Any interest received or receivable by a non-resident or foreign company in respect of Rupee Denominated Bond (as referred to in Section 194LC) issued outside India during the period 17- 09-2018 to 31-03-2019 by an Indian company/business trust shall be exempt from tax.
Income from transfer of GDRs, Rupee Denominated Bonds or Derivatives by Category-HI AIFs [(Section 10(4D)]
Specified funds shall be eligible to claim exemption with respect to income accrued or arisen or received by it which is attributable to units held by a non- resident (not being a PE in India) or to the investment division of offshore banking unit. Such exemption is allowed in respect of the following incomes:
a. Income from transfer of a capital asset as referred to in Section 47(vllab) on a recognised stock exchange located in IFSC and consideration is paid or payable in ‘convertible foreign exchange;
b. Income arising from transfer of securities (other than shares in a company resident in India);
c. Income from securities issued by a non-resident (not being a PE of a non-resident in India) and where such income otherwise does not accrue or arise in India;
d. Income from a securitization trust which is chargeable under the head ‘Profits and gains from business or profession; or
e. Income attributable to the investment division of offshore banking unit1.
‘Specified Fund’ mean the following funds:-
(a) Investment Division of an Offshore Banking Unit
An investment division of an offshore banking unit, being an investment division of a banking unit of a non-resident located in International Financial Services Centre (IFSC) as referred under Section 80LA(1A), shall be treated as specified fund if it satisfies the following conditions:-
-
-
- It should be granted a certificate of registration as a Category-I Foreign Portfolio Investor under the SEBI (Foreign Portfolio Investors) Regulations, 2019;
- It’s operations must be commenced on or before 31-03-2030; and
- It must fulfil prescribed conditions including maintenance of separate books of accounts for investment division.
-
(b) Alternative Investment Fund
An Alternative Investment Fund (AIF) shall be treated as specified fund if it satisfies the following conditions:-
-
-
- It should be established or incorporated in India in the form of a trust, company, LLP or body corporate;
- It should be granted a certificate of registration as Category-III AIF and is regulated under the SEBI (AIF) Regulations, 2012 or International Financial Services Centres Authority Act, 2019.
- An entity who is granted a certificate as a retail scheme or an Exchange Traded Fund and satisfies the conditions laid down for such schemes or funds under the International Financial Services Centres Authority (Fund Management) Regulations, 2022 made under International Financial Services Centres Authority Act, 2019. (w.e.f AY 2025-26)
- It should be located in an International Financial Services Centre (IFSC);
- It’s all the units must be held by non-residents except units held by sponsor or manager. (subject to certain conditions)
-
Income of a non-resident from transfer of non-deliverable forward contracts, offshore derivative instrument, over-the-counter derivatives or income distributed on the offshore derivative instruments [Section 10(4E)]
Any income accrued or arisen to, or received by a non-resident as a result of:
a. The transfer of non- deliverable forward contracts or offshore derivative instruments or over — the counter derivative; or
b. Distribution of income on offshore derivative instruments or over-the-counter derivatives2,
entered into with an offshore banking unit of an IFSC referred to in Section 80LA(1A) or any Foreign Portfolio Investor being unit of an IFSC 3 shall be exempt from tax.
Note : “Foreign Portfolio Investor” means, a person registered under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019 made under the Securities and Exchange Board of India Act, 1922.
Royalty income of non-resident on leasing of aircraft to an IFSC unit [Section 10(4F)]
Royalty income of a non-resident on account of leasing of aircraft or ship in a previous year to an IFSC unit shall be exempt from tax if such unit is eligible for deduction under section 80LA in that year and has commenced its operations on or before the 31st March 2030.
Income of non-resident from Portfolio Services and specified activities [Section 10(4G)]
Any income received by a non-resident from portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such non-resident. This exemption will be available only if income arises in an account maintained with an Offshore Banking Unit in any
International Financial Services Centre. The CBDT may also notify specified activity carried out by specified person that will fall under scope of section 10(4G) exemption.
However, the exemption will be limited to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India.
Exemption to non-residents or IFSC units on transfer of shares of domestic company engaged in aircraft leasing business in IFSC [Section 10(411)]
An exemption is allowed to income earned by a non-resident or Unit of an IFSC as referred to in Section 80LA(1A). The exemption shall be allowed subject to the following conditions:
a. Non-resident or Unit of an IFSC must be engaged primarily in the business of leasing of an aircraft or ship4;
b. Income should be in the nature of capital gains arising from the transfer of equity shares of a domestic company;
c. Domestic company must be a Unit of an IFSC as referred to in Section 80LA(1A);
d. Domestic company must be engaged primarily in the business of leasing of an aircraft;
e. Domestic company must commence its operations on or before 31-03-2030;
f. Equity shares of the domestic company must be transferred within 10 years of commencing of its operations. However, if the domestic company commenced its operations before 01-04-2024, the 10-year time limit shall be counted from 01-04-2024.
For the above purposes “aircraft” means an aircraft, helicopter, an engine or part of an aircraft or a helicopter or any part thereof and “ship” means a ship or an ocean vessel, an engine of a ship or ocean vessel, or any part thereof.
Leave travel concession [Section 10(5)]
An employee can claim exemption under section 10(5) in respect of Leave Travel Concession. Exemption under section 10(5) is available to all employees (i.e. Indian as well as foreign citizens).
Exemption is available in respect of value of any travel concession or assistance received or due to the employee from his employer (including former employer) for himself and his family members in connection with his proceeding on leave to any place in India. Other provisions to be kept in mind in this regard are as follows:
Where journey is performed by air: Amount of exemption will be lower of amount of economy class air fare of the National Carrier by the shortest route or actual amount spent.
Where journey is performed by rail: Amount of exemption will be lower of amount of air- conditioned first class rail fare by the shortest route or actual amount spent. The same rule will apply where journey is performed by any other mode and the place of origin of journey and destination are connected by rail.
Where the place of origin and destination are not connected by rail and journey is performed by any mode of transport other than by air:
The exemption will be as follows:
a. If recognised public transport exists: Exemption will be lower of first class or deluxe class fare by the shortest route or actual amount spent.
b. If no recognised public transport exists: Exemption will be lower of amount of air- conditioned first class rail fare by the shortest route (considering as if journey is performed by rail) or actual amount spent.
Block: Exemption is available for 2 journeys in a block of 4 years. The block applicable for current period is calendar year 2014-17. The previous block was of calendar year 2010-2013.
Carry over: If an employee has not availed of travel concession or assistance in respect of one or two permitted journeys in a particular block of 4 years, then he is entitled to carry over one journey to the next block. In this situation, exemption will be available for 3 journeys in the next block. However, to avail of this benefit, exemption in respect of journey should be utilised in the first calendar year of the next block. In other words, in case of carry over, exemption is available in respect of 3 journeys in a block, provided exemption in respect of at least 1 journey is claimed in the first year of the next block. Exemption is in respect of actual expenditure on fare, hence, if no journey is performed, then no exemption is available.
Family: Family will include spouse and children of the individual, whether dependent or not and parents, brothers, sisters of the individual or any of them who are wholly or mainly dependent on him.
Exemption is restricted to only 2 surviving children born after October 1, 1998 (multiple births after first single child will be considered as one child only), however, such restriction is not applicable to children born before October 1, 1998.
Remuneration received by specified diplomats and their staff [Section 10(6)(ii)]
As per section 10(6)(ii), in case of an individual who is not a citizen of India, remuneration received by him as an official (by whatever name called) of an embassy, high Commission, legation, Commission, consulate or trade representative of a foreign State, or member of the staff of any of that official is exempt from tax, if corresponding Indian official in that foreign country enjoys a similar exemption.
Salary of a foreign employee and non-resident member of crew [Section 10(6)(vi)(viii), ]
As per section 10(6)(vi), the remuneration received by a foreign national as an employee of a foreign enterprise for services rendered by him during his stay in India is exempt from tax, provided the following conditions are fulfilled—
(a) the foreign enterprise is not engaged in any trade or business in India ;
(b) his stay in India does not exceed in the aggregate a period of 90 days in such year ; and
(c) such remuneration is not liable to be deducted from the income of the employer.
As per section 10(6)(viii), any salaries received by or due to a non-resident foreign national for services rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate a period of 90 days in the year is exempt from tax.
Remuneration of a foreign trainee [Section 10(6)(xi)]
As per section 10(6)(xi), the remuneration received by a foreign trainee as an employee of foreign Government during his stay in India in connection with his training in any establishment or office of, or in any undertaking owned by,—
i. the Government ; or
ii. any company owned by the Central Government, or any State Government
iii. any company which is a subsidiary of a company referred to in item (ii) ; or
iv. any corporation established by or under a Central, State or Provincial Act ; or
v. any co-operative society wholly financed by the Central Government, or any State Government
Tax paid on behalf of foreign company deriving income by way of royalty or fees for technical services [Section 10(6A)]
Tax paid by Central Government, State Government or an Indian concern on behalf of a foreign company deriving income by way of royalty or fees for technical services in pursuance of an agreement made after March 31, 1976 but before June 1, 2002 will be exempt from tax in the hands of such foreign company provided such agreement is in accordance with the industrial policy of the Indian Government or it is approved by the Central Government.
Tax paid on behalf of foreign company or non-resident in respect of other income [Section 10(6B)]
Tax paid by Central Government, State Government or an Indian concern on behalf of a foreign company or non-resident in respect of any income (not being salary, royalty or fees for technical services) will be exempt from tax in the hands of such foreign company or non-resident if such income is received in pursuance of an agreement entered into before June 1, 2002 by the Central Government with the Government of a foreign State or international organisation or any other related agreement approved by the Central Government.
Tax paid on behalf of foreign Government or foreign enterprise deriving income by way of lease of aircraft or aircraft engine [Section 10(6BB)]
Tax paid by an Indian company, engaged in the business of operation of aircraft, on behalf of foreign Government or foreign enterprise deriving income by way of lease of aircraft or aircraft engine will be exempt from tax in the hands of such foreign Government or foreign enterprise if such lease rental is received under an agreement which is approved by Central Government and entered during the period between 31-3-1997 to 1-4-1999, or after 31-3-2007.
Technical fees received by a notified foreign company [Section 10(6C)]
Section 10(6C) grants exemption from tax in respect of income arising to notified foreign company by way of royalty or fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India.
Royalty/Fees received by non-resident from National Technical Research Organisation [Section 10(6D)]
As per section 10(6D), income arising to non-resident by way of royalty or fees for technical services from services rendered to National Technical Research Organization (‘NTRO’) will be exempt from tax in India.
Allowance/perquisites to Government employee outside India [Section 10(7)]
As per section 10(7), any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India is exempt from tax.
Income of foreign Government employee under co-operative technical assistance programme [Section 10(8)]
As per section 10(8), remuneration received directly or indirectly by an individual, from the foreign Government in connection with a co-operative technical assistance programme and projects in accordance with an agreement entered into by the Central Government and such foreign Government, is exempt from tax. Further, exemption is available in respect of any other income of such an individual which accrues or arises outside India and is not deemed to accrue or arise in India, provided such individual is required to pay income-tax/ social security tax to the foreign Government.
Remuneration or fees received by a non-resident consultant/its foreign employees [Section 10(8A)(8B), ]
Under section 10(8A), (a) remuneration or fees received by a consultant* directly or indirectly out of the funds made available to an international organisation, under a technical assistance agreement between such organisation and the Government of a foreign State and (b) any other income which accrues or arises to him outside India and is not deemed to accrue or arise in India, in respect of which such consultant is required to pay income-tax/social security tax to the foreign Government of the country of his origin, is exempt from tax.
*Consultant means any individual who is either not a citizen of India, or being a citizen of India, is not ordinarily resident in India or any other person who is a non-resident and is engaged by the international organization for rendering technical services in India in accordance with an agreement entered into by the Central Government and the said international organization and the agreement relating to engagement of consultant is approved by the prescribed authority.
Section 10(8B) grants similar exemption to the employee of the above discussed consultant, if such employee is either not a citizen of India or being a citizen of India, is not ordinarily resident in India and the contract of his service is approved by prescribed authority before the commencement of his service.
Note: The provisions of sections 10(8A) and (8B) shall not be applicable with effect from Assessment Year 2023-24. [Amendment by the Finance Act, 2022]
Income of a family member of an employee serving 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.
Note: The provisions of section 10(9A) shall not be applicable with effect from Assessment Year 2023-24. [Amendment by the Finance Act, 2022]
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).
Gratuity received by a non-Government employee covered by Payment of Gratuity Act, 1972 [Section 10(10)(ii)]
As per section 10(10)(ii), exemption in respect of gratuity in case of employees covered by the Payment of Gratuity Act, 1972 will be lower of following :
- 15 days’ salary × years of service.
- Maximum amount specified, i.e., Rs. 20,00,000*.
- Gratuity actually received.
*Limit increased from Rs. 10 lakhs to Rs. 20 lakhs vide Notification No. 1420(E), dated 29-3- 2018.
Note:
1) Instead of 15 days’ salary, only 7 days salary will be taken into consideration in case of employees of seasonal establishment.
2) 15 days’ salary = Salary last drawn × 15/26
3) Salary for this purpose will include basic salary and dearness allowance only. Items other than basic salary and dearness allowance are not to be considered.
4) In case of piece rated employee, 15 days’ salary will be computed on the basis of average of total wages (excluding overtime wages) received for a period of three months immediately preceding the termination of his service.
5) Part of the year, in excess of 6 months, shall be taken as one full year.
Gratuity received by a non-Government employee not covered by Payment of Gratuity Act, 1972 [Section 10(10)(iii)]
As per section 10(10)(iii), exemption in respect of gratuity in case of employees not covered by the Payment of Gratuity Act, 1972 will be lower of following :
Half month’s salary for each completed year of service, i.e.,
[Average monthly salary × ½] × Completed years of service. .
Rs. 10,00,000.
Gratuity actually received.
Note:
1) Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month of retirement.
2) Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.
3) While computing years of service, any fraction of a year is to be ignored.
Pension [Section 10(10A)]:
As per section 10(10A), any commuted pension, i.e., accumulated pension in lieu of monthly pension received by a Government employee is fully exempt from tax. Exemption is available only in respect of commuted pension and not in respect of un-commuted, i.e., monthly pension.
Exemption in respect of commuted pension in case of a non-Government employee will be as follows:
- If the employee receives gratuity, one third of full value of commuted pension will be exempt from tax under section 10(10A).
- If the employee does not receive gratuity, one half of full value of commuted pension will be exempt from tax under section 10(10A).
Leave salary [Section 10(10AA)]
As per section 10(10AA), leave encashment by a Government employee at the time of retirement (whether on superannuation or otherwise) is exempt from tax. In the hands of non-Government employee exemption will be least of the following:
1. Period of earned leave standing to the credit in the employee’s account at the time of retirement (*) × Average monthly salary ($).
2. Average monthly salary ($) × 10 (i.e., 10 months’ average salary).
3. Maximum amount as specified by the Government, i.e., Rs. 3,00,000.
4. Leave encashment actually received at the time of retirement.
(*)Leave credit to the account of the employee at the time of retirement should be restricted to 30 days per year of service if leave entitlement as per service rules exceeds 30 days per year of actual service.
($) Salary for the above purpose means average salary drawn in the past ten months immediately preceding the retirement (i.e., preceding the day of retirement) and will include basic salary, dearness allowance (if considered for computing all the retirement benefits) and commission based on fixed percentage of turnover achieved by the employee.
Apart from the above items, salary for this purpose does not include any other allowances or perquisites.
Retrenchment compensation [Section 10(10B)]
As per section 10(10B), compensation received at the time of retrenchment is exempt from tax to the extent of lower of the following:
(a) An amount calculated in accordance with the provisions of section 25F(b) of the Industrial Dispute Act, 1947; or
(b) Maximum amount specified by the Central Government (Rs. 5,00,000);
(c) Actual amount received.
Under the Industrial Dispute Act, a workman is entitled to retrenchment compensation, equal to 15 days’ average pay for each completed year of continuous service or any part in excess of six months.
Compensation in excess of aforesaid limits is taxable as salary. However, the aforesaid limit is not applicable in cases where compensation is paid under any scheme approved by the Central Government.
Compensation for Bhopal Gas Leak Disaster [Section 10(10BB)]
Compensation [in accordance with Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985] received by victims of Bhopal gas leak disaster is exempt from tax. However, compensation received for any expenditure which is allowed as deduction from taxable income is not exempt.
Compensation on account 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.
Payment at the time of voluntary retirement [Section 10(10C)]
As per section 10(10C), any compensation received at the time of voluntary retirement or termination of service is exempt from tax, if the following conditions are satisfied:
- Compensation is received at the time of voluntary retirement or termination (or in the case of an employee of public sector Company, at the time of voluntary separation).
- Compensation is received by an employee of following undertakings-
a) public sector company; or
b) any other company; or
c) an authority established under a Central, State or Provincial Act ; or
d) a local authority; or
e) a co-operative society; or
f) 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 (3 of 1956); or
g) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961); or
h) any State Government; or
i) the Central Government; or
j) Notified institutes having importance throughout India or in any State or States,
k) Notified institute of management
- Compensation is received in accordance with the scheme of voluntary retirement/separation, which is framed in accordance with guidelines prescribed under Rule 2BAof Income-tax Rules, 1962*.
- Maximum amount of exemption is Rs. 5,00,000.
- Where exemption is allowed to an employee under section 10(10C)for any assessment year, no exemption under this section shall be allowed to him for any other assessment year.
- With effect from assessment year 2010-11, section 10(10C)has been amended to provide that where any relief has been allowed to an assessee under section 89for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under section 10(10C) shall be allowed to him in relation to such or any other assessment year.
*Guidelines prescribed under Rule 2BA of Income -tax Rules. 1962
Voluntary retirement scheme should be framed in accordance with the following guidelines:
i. it should apply to an employee who has completed 10 years of service or completed 40 years of age. This requirement would not be in case of amount received by an employee of a public sector company under the scheme of voluntary separation framed by such public sector company.
ii. it should apply to all employees (by whatever name called) including workers and executives of a company or of an authority or of a co-operative society, as the case may be, excepting directors of a company or of a co-operative society;]
iii. the scheme of voluntary retirement or voluntary separation should be drawn to result in overall reduction in the existing strength of the employees;
iv. the vacancy caused by the voluntary retirement or voluntary separation is not to be filled up;
v. the retiring employee of a company shall not be employed in another company or concern belonging to the same management
vi. the amount receivable on account of voluntary retirement or voluntary separation of the employee does not exceed the amount equivalent to
– 3 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
*Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.
Tax on perquisites paid by the employer [Section 10(10CC)]
Perquisites to employees mean any facility provided by the employer to the employees. There are two types of perquisites, viz., monetary and non-monetary. Value of perquisite is charged to tax in the hands of the employees, however, the employer may at his will pay tax (on behalf of employees) on such perquisites. In such a case, the amount of tax paid on such perquisites by the employer on behalf of the employees will be treated as income of the employees and is charged to tax in his (i.e., in employee’s) hands. However, by virtue of section 10(10CC) tax paid by employer (on behalf of employee) on non-monetary perquisites will be exempt from tax in the hands of employees.
Such tax paid by the employer shall not be allowed as a deductible expenditure in the hands of employer under section 40. Section 10(10CC) provides exemption only in respect of tax on non- monetary perquisites. In other words, this section does not provide exemption in respect of perquisites or tax paid on monetary perquisites.
Amount paid on life insurance policy [Section 10(10D)]
As per section 10(10D), any amount received under a life insurance policy, including bonus is exempt from tax. Following points should be noted in this regard:
- Exemption is available only in respect of amount received from life insurance policy.
- Exemption under section 10(10D)is unconditionally available in respect of sum received for a policy which is issued on or before March 31, 2003. However, in respect of policies issued on or after April 1st, 2003, the exemption is available only if the amount of premium paid on such policy in any financial year does not exceed 20% (10% in respect of policy taken on or after 1st April, 2012) of the actual capital sum assured. With effect from 1-4- 2013, in respect of policy taken in the name of a person suffering from diseases specified under section 80DDBor in the name of a person suffering from disability specified under section 80U, the limit will be increased to 15% of capital sum assured.
- Value of premium agreed to be returned or of any benefit by way of bonus (or otherwise), over and above the sum actually assured, which is received under the policy by any person, shall not be taken into account while calculating the actual capital sum assured.
- Amount received on death of the person will continue to be exempt without any condition.
Note 1: No exemption would be available in case of any sum received under section 80DD(3) or under Keyman insurance policy.
Note 2: w.e.f. Assessment Year 2021-22, any sum received from Unit Linked Insurance Plan (ULIP) is not entitled for exemption if such ULIP is issued on or after the 01-02-2021 and the amount of premium payable for any of the previous year during the term of such policy exceeds 2,50,000. Further, if premium is payable by a person for more than one ULIP, issued on or after 01-02- 2021, the exemption under Section 10(10D) shall be available in respect to those ULIPs, where the aggregate amount of premium does not exceed Rs. 2,50,000 in any of the previous year during the term of any of those policies.
Note 3: w.e.f. Assessment Year 2024-25, no exemption shall be available in respect of life insurance policies (excluding ULIP) issued on or after 01-04-2023 if the premium payable for any year during the term of policy exceeds Rs. 5 lakhs. Further, if the premium is payable by a person for more than one life insurance policy, the exemption shall be available only for those life insurance policies (other than ULIPs), where the aggregate amount of premium does not exceed Rs. 5 lakhs in any of the previous years during the term of any of those policies.
Note 4: The above shall not apply where the sum is received on the death of a person or under a life insurance policy issued by International Financial Services Centre insurance office, including the sum allocated by way of bonus on such policy5.
For the above purpose, “International Financial Services Centre insurance office” shall have the same meaning as assigned to it in clause (k) of sub-regulation (1) of regulation 3 of International Financial Services Centres Authority (Insurance Intermediary) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019.
Exemption in respect of amount received from public provident fund/statutory provident fund/ recognised provident fund/ un-recognised provident fund [Section 10(11)/(12)]
The tax treatment of various items in case of different provident funds is as follows:
Statutory Provident Fund
| Employer’s Contribution | Employer’s contribution to such fund is not treated as income of the employee. |
| Interest | Interest credited to such fund is exempt in the hands of the employee. [see note 4] |
| Amount received at the time of termination | Lump sum amount received from such fund, at the time of termination of service is exempt in the hands of employees. |
Recognised Provident Fund
| Employer’s Contribution | Employer’s contribution to such fund, up to 12% of salary is not treated as income of the employee (see Note 1). |
| Interest | Interest credited to such fund up to 9.5% per annum is exempt in the hands of the employee, interest in excess of 9.5% is charged to tax in the hands of the employee. [see note 4] |
| Amount received at the time of termination | If certain conditions are satisfied, then lump sum amount received from such fund, at the time of termination of service, is exempt in the hands of employees. (see Note 2) |
Un-recognised Provident Fund
| Employer’s Contribution | Employer’s contribution to such fund is not treated as income of the employee. |
| Interest | Interest credited to such fund is exempt in the hands of the employees. [see note 4] |
| Amount received at the time of termination | (See note 3) |
Public Provident Fund
| Employer’s Contribution | Employers do not contribute to such fund. |
| Interest | Interest credited to such fund is exempt. |
| Amount received at the time of termination | Lump sum amount received from such fund at the time of termination of service is exempt from tax. |
Notes:
1. Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.
2. Accumulated balance paid from a recognised provident fund will be exempt from tax in following cases:
(a) If the employee has rendered a continuous service of 5 years or more. If the accumulated balance includes amount transferred from other recognised provident fund maintained by previous employer, then the period for which the employee rendered service to such previous employer shall also be included in computing the aforesaid period of 5 years.
(b) If the service of employee is terminated before the period of 5 years, due to his ill health or discontinuation of business of the employer or other reason beyond his control.
(c) If on retirement, the employee takes employment with any other employer and the balance due and payable to him is transferred to his individual account in any recognised fund maintained by such other employer, then the amount so transferred will not be charged to tax.
Except above situations, payment from a recognised provident fund will be charged to tax considering such fund as un-recognised from the beginning (See note 3 given below for tax treatment of un-recognised provident fund).
3. Treatment of payment (at the time of termination) from un-recognised provident fund:
Payment on termination will include 4 things, viz., employee’s contribution and interest thereto and employer’s contribution and interest thereto, the tax treatment of such payment is as follows:
-
- Employee’s contribution is not chargeable to tax; interest on employee contribution is taxed under the head “Income from other sources”.
- Employer’s contribution and interest thereon are taxed as salary income, however, an employee can claim relief under section 89in respect of such payment.
4. No exemption shall be available for the interest income accrued during the previous year in the recognized and statutory provident fund to the extent it relates to the contribution made by the employees over Rs. 2,50,000 in the previous year. However, if an employee is contributing to the fund but there is no contribution to such fund by the employer, then the interest income accrued during the previous year shall be taxable to the extent it relates to the contribution made by the employee to that fund in excess of Rs. 5,00,000 in a financial year.
Payment from account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 [Section 10(11A)]
As per section 10(11A), any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873 is exempt from tax. In other words, interest and withdrawals from such account will be exempt from tax under section 10(11A).
Payment from the National Pension System Trust to an employee [Section 10(12A)]
Any payment from the National Pension System Trust to an assessee on closure of account or his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed 40 % of the total amount payable to him at the time of closure or his opting out of the scheme, is exempt from tax.
With effect from April 01, 2020, 60 % of the amount payable shall be exempt from tax.
Partial withdrawal from NPS [Section 10(12B)]
To provide relief to an employee withdrawing partial amount from National Pension System (NPS) Trust. A new clause (12B) is inserted under section 10 with effect from assessment year 2018-19 to provide that the withdrawal from NPS will not be chargeable to tax if the following conditions are satisfied:-
1. Amount of withdrawal should not exceed 25% of total contribution made by an employee in NPS.
2. Partial withdrawal should be made in accordance with the terms and conditions specified under the Pension Fund Regulatory and Development Authority Act, 2013 and the regulations made thereunder.
Partial withdrawal from NPS Vatsalya [Section 10(12BA)]6
The Finance Act, 2025 has inserted a new clause (12BA) in Section 10 of the Act, which provides that any income received on partial withdrawal out of the minor’s account, shall not be included in the total income of the parent/guardian if the following conditions are satisfied:-
1. Amount of withdrawal should not exceed 25% of total contribution made; and
2. Withdrawal should be made in accordance with the terms and conditions specified under the Pension Fund Regulatory and Development Authority Act, 2013 and the regulations made thereunder.
Payment from approved superannuation fund in specified circumstances and subject to certain limits [Section 10(13)]
Approved superannuation fund means superannuation fund which is approved by the Commissioner of Income-tax. Tax treatment of such fund is as follows:
✓ Employer’s contribution is exempt from tax, however, from assessment year 2010-11 employer’s contribution in excess of Rs. 1,50,000 per annum is charged to tax as perquisite. Employee’s contribution qualifies for deduction under section 80C and interest on accumulated balance is not liable to tax.
✓ Payments made from the fund are exempt from tax under section 10(13) in following cases:
✓ Payment on death of beneficiary; or
✓ Payment to employee in lieu of, or in commutation of an annuity on his retirement at or after the specified age or on his becoming incapable prior to such retirement; or
✓ Payment by way of refund of contributions on the death of a beneficiary; or
✓ Payment to employee by way of refund of his contributions on leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement; or
✓ Payment to employee by way of transfer to his account under a pension scheme referred to in section 80CCD.
House rent allowance [Section 10(13A)]
As per section 10(13A), read with rule 2A, the exemption in respect of HRA will be lower of the following amounts:
(1) 50% of salary, when residential house is situated at Mumbai, Kolkata, Delhi or Chennai and 40% of salary where residential house is situated at any other place.
(2) HRA actually received by the employee in respect of the period during which rental accommodation is occupied by the employee during the previous year.
(3) Rent paid in excess of 10% of salary.
Salary will include basic salary, dearness allowance forming part of salary while computing all retirement benefits and commission based on fixed percentage of turnover achieved by the employee. Apart from this, salary for this purpose does not include any other allowances/perquisites.
Salary for this purpose shall be computed on due basis in respect of period during which the accommodation is occupied by the employee in the previous year. Hence, any payments not pertaining to the previous year or not pertaining to the period of occupation of the accommodation shall be excluded.
Prescribed allowances or benefits [Section 10(14)]
As per section 10(14), read with rule 2BB following allowances granted to an employee are exempt from tax subject to certain limit:
| Allowances | Exemption Limit |
| Children Education Allowance | Up to Rs. 100 per month per child up to a maximum of 2 children is exempt |
| Hostel Expenditure Allowance | Up to Rs. 300 per month per child up to a maximum of 2 children is exempt |
| Transport Allowance granted to an employee to (who is a blind and handicap) meet expenditure on commuting between place of residence and place of duty | Rs. 3,200 per month for blind and handicapped employees is exempt |
| Allowance granted to an employee working in any transport business to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided employee is not in receipt of daily allowance. | Amount of exemption shall be lower of following:
a) 70% of such allowance; or b) Rs. 10,000 per month. |
| Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office | Exempt to the extent of expenditure incurred for official purposes |
| Travelling Allowance to meet the cost of travel on tour or on transfer | Exempt to the extent of expenditure incurred for official purposes |
| Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty | Exempt to the extent of expenditure incurred for official purposes |
| Helper/Assistant Allowance | Exempt to the extent of expenditure incurred for official purposes |
| Research Allowance granted for encouraging the academic research and other professional pursuits | Exempt to the extent of expenditure incurred for official purposes |
| Uniform Allowance | Exempt to the extent of expenditure incurred for official purposes |
| Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) | Amount exempt from tax varies from Rs. 300 to Rs. 7,000 per month. |
| Border area, Remote Locality or Disturbed Area or | Amount exempt from tax varies from Rs. |
| Difficult Area Allowance (Subject to certain conditions and locations) | 200 to Rs. 1,300 per month. |
| Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Odisha | Up to Rs. 200 per month |
| Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) | Up to Rs. 2,600 per month |
| Compensatory Modified Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) | Up to Rs. 1,000 per month |
| Counter Insurgency Allowance granted to members of Armed Forces operating in areas away from their permanent locations. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) | Up to Rs. 3,900 per month |
| Underground Allowance to employees working in uncongenial, unnatural climate in under ground mines | Up to Rs. 800 per month |
| High Altitude Allowance granted to armed forces operating in high altitude areas (Subject to certain conditions and locations) | a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet)
b) Up to Rs. 1,600 per month (for altitude above 15,000 feet) |
| Highly active field area allowance granted to members of armed forces (Subject to certain conditions and locations) | Up to Rs. 4,200 per month |
| Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations) | Up to Rs. 3,250 per month |
Interest on securities [Section 10(15)]
Interest incomes which are exempt under section 10(15) could be explained with the help of the following table-
| Section | Income | Exemption to |
| 10(15)(i) | Interest, premium on redemption, or other payment on notified securities, bonds, certificates, and deposits, etc. (subject to notified conditions and limits) | All assessees |
| 10(15)(iib) | Interest on notified Capital Investment Bonds notified prior to 1-6-2002 | Individual/HUF |
| 10(15)(iic) | Interest on notified Relief Bonds | Individual/HUF |
| 10(15)(iid) | Interest on notified bonds (notified prior to 1-6-2002) purchased in foreign exchange (subject to certain conditions) | Individual – NRI/ nominee or survivor of NRI/individual to whom bonds have been gifted by NRI |
| 10(15)(iii) | Interest on securities | Issue Department of Central Bank of Ceylon |
| 10(15)(iiia) | Interest on deposits made with scheduled bank with approval of RBI | Bank incorporated abroad |
| 10(15)(iiib) | Interest payable to Nordic Investment Bank | Nordic Investment Bank |
| 10(15)(iiic) | 10(15)(iiic) Interest payable to the European Investment Bank on loan granted by it in pursuance of framework- agreement dated 25-11-1993 for financial corporation between Central Government and that bank | European Investment Bank |
| 10(15)(iv)(a) | Interest received from Government or from local authority on moneys lent to it before 1-6-2001 or debts owed by it before 1-6-2001, from sources outside India | All assessees who have lent money, etc., from sources outside India |
| 10(15)(iv)(b) | Interest received from industrial undertaking in India on moneys lent to it under a loan agreement entered into before 1-6-2001 | Approved foreign financial institution |
| 10(15)(iv)(c) | Interest at approved rate received from Indian industrial undertaking on moneys lent or debt incurred before 1-6- 2001 in a foreign country in respect of purchase outside India of raw materials, components or capital plant and machinery, subject to certain limits and conditions | All assessees who have lent such money, or in favour of whom such debt has been incurred |
| 10(15)(iv)(d) | Interest received at approved rate from specified financial institutions in India on moneys lent from sources outside India before 1-6-2001 | All assesses who have lent such moneys |
| 10(15)(iv)(e) | Interest received at approved rate from other Indian financial institutions or banks on moneys lent for specified purposes from sources outside India before 1- 6-2001 under approved loan agreement | All assesses who have lent such moneys |
| 10(15)(iv)(f) | Interest received at approved rate from Indian industrial undertaking on moneys lent in foreign currency from sources outside India under loan agreement approved before 1-6-2001 | All assesses who have lent such moneys |
| 10(15)(iv)(fa) | Interest payable by scheduled bank, on deposits in foreign currency when acceptance of such deposits by bank is approved by RBI | Non-resident or individual/HUF who is not ordinarily resident in India |
| 10(15)(iv)(g) | Interest received at approved rate, from Indian public companies eligible for deduction under section 36(1)(viii) and formed with main object of providing long-term housing finance, on moneys lent in foreign currency from sources outside India under loan agreement approved before 1-6-2003 | All assesses who have lent such moneys |
| 10(15)(iv)(h) | Interest received from any public sector company in respect of notified bonds or debentures and subject to certain conditions | All assessees |
| 10(15)( iv)(i) | Interest received from Government on deposits in notified scheme out of moneys due on account of retirement | Individual – Employee of Central Government/State Government/Public sector company |
| 10(15)(v) | Interest on securities held in Reserve Bank’s SGL A/c No. SL/DH-048 and Deposits made after 31-3-1994 for benefit of victims of Bhopal Gas Leak Disaster held in such account with RBI or with notified public sector bank | Welfare Commissioner, Bhopal Gas Victims, Bhopal |
| 10(15)(vi) | Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 | All assessees |
| 10(15)(vii) | 10(15)(vii) Interest on notified bonds issued by a local authority/State Pooled Finance Entity | All assessees |
| 10(15)(viii) | Interest on deposit made on or after 1-4-2005 in an Offshore Banking Unit referred to in section 2(u) of the Special Economic Zones Act, 2005 | Non-resident or person who is not ordinarily resident |
| 10(15)(ix) | Interest payable by a unit located in an International Financial Services Centre in respect of monies borrowed by it on or after the 1st day of September, 2019. | Non-resident |
Lease rent of an aircraft [Section 10(15A)]
Lease rent of an aircraft or an aircraft engine paid to a foreign Government or to a foreign enterprise by an Indian company, engaged in the business of operation of aircraft is not taxable in the hands of such foreign Government or non-resident concern, if such payment is in pursuance of an agreement (approved by the Central Government) made before April 1, 1997 or after March 31, 1999 but before April 1, 2007. If such agreement is entered into during April 1, 1997 and March 31, 1999 or after March 31, 2007, then exemption under section 10(15A) is not available. However, in such a case, if tax on such payments is borne by the payer, then tax so borne by the payer is exempt in the hands of payee under section 10(6BB), provided agreement is approved by the Central Government.
Lease rent of cruise ships [Section 10(15B)]
Any income of a foreign company from lease rentals of cruise ships, received from a specified company which operates such ship or ships in India, where such foreign company and the specified company are subsidiaries of the same holding company is not taxable in hands of such foreign Company.
However, such income is received or accrues or arises in India for any relevant assessment year beginning on or before the 1st day of April, 2030.
Specified Company means any company, other than a domestic company which operates cruise ships in India and opts to pay tax in accordance with the provisions of section 44BBC. This clause is applicable with effect from Assessment Year 2025-26
Educational scholarship [Section 10(16)]
Any amount received as educational scholarship (i.e., scholarship to meet the cost of education is exempt from tax in the hands of recipient).
Daily allowance to a Member of Parliament [Section 10(17)]
Following allowances are exempt from tax in the hands of a Member of Parliament and a Member of State Legislature—
- Daily allowance received by a Member of Parliament or by a Member of State Legislature or by member of any committee thereof.
- Any other allowance received by a Member of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986.
- Any Constituency allowance received by a Member of State Legislature.
Awards [Section 10(17A)]
Any payment received in pursuance of following (whether paid in cash or in kind) is exempt from tax:
Any award instituted in the public interest by the Central Government or State Government or by any other body approved by the Central Government in this behalf.
Any reward by the Central Government or any State Government for such purpose as may be approved by the Central Government in this behalf in the public interest.
Pension to gallantry award winner [Section 10(18)]
Pension received by an individual who was employee of the Central Government or State Government and who has been awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or any other notified gallantry award is exempt from tax.
Family pension received by any member of such individual is also exempt.
Family pension received by the family members of armed forces [Section 10(19)]
From the assessment year 2005-06, family pension received by the widow or children or nominated heirs, of a member of armed forces (including paramilitary forces) of the Union, is exempt from tax in the hands of such family members, if the death of such member of armed forces has occurred in the course of operational duty in prescribed circumstances and subject to such conditions as may be prescribed (see rule 2BBA for prescribed circumstances and conditions).
Annual value of one palace [Section 10(19A)]
Annual value of any one palace in the occupation of a former ruler is exempt from tax under section 10(19A).
Income of local authority [Section 10(20)]
The following income of a local authority is exempt from tax:
a) Income which is chargeable under the head “Income from house property”, “Capital gains” or “Income from other sources” or
b) Income from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or
c) Income from business of supply of water or electricity within or outside its own jurisdictional area.
Income of research association [Section 10(21)]
Any income of a research association, approved under section 35(1)(ii)/(iii) is exempt from tax, if following conditions as specified in section 10(21) are satisfied:
1) Income should be applied or accumulated wholly and exclusively for the objects for it established.
2) Funds should not be invested or deposited for any period during the previous year otherwise than in any one or more of the forms/modes specified in section 11(5). However, this condition is not applicable in respect of the following:-
(i) any assets held by the research association where such assets form part of the corpus of the fund of the association as on the 1st day of June, 1973;
(ii) Debentures of a company acquired by the research association before the 1st day of March, 1983;
(iii) any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause (i), by way of bonus shares allotted to the research association;
(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,
Note:
1. Exemption shall not be denied in relation to voluntary contribution [other than voluntary contribution in cash or voluntary contribution of the nature referred to in (i), (ii), (iii) or (iv) supra]subject to the condition that such voluntary contribution is not held by the research association otherwise than in any one or more of the forms or modes specified in sub- section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired.
2. Exemption is not available in relation to any income of the research association, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business
Income of a news agency [Section 10(22B)]
Any income of a notified news agency, set-up in India solely for collection and distribution of news is exempt from tax provided that the news agency applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members.
However, no exemption shall be available w.e.f. Assessment Year 2024-25.
Income of a professional association [Section 10(23A)]
Any income (other than income from house property and income from rendering any specific service or income by way of interest or dividend on investment) of an professional institution/association is exempt from tax, if the following conditions are satisfied:
1) Professional institution is established in India for the purpose of control, supervision, regulation or encouragement of the profession of law, medicine, accountancy, engineering or architecture or such other notified profession.
2) The institution applies its income, or accumulates it for application, solely to the objects for which it is established.
3) The institution is approved by the Central Government by general or special order.
Income received on behalf of Regimental Fund [Section 10(23AA)]
Any income received by any person on behalf of any Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependents, is exempt from tax.
Income of a fund established for welfare of employees [Section 10(23AAA)]
Any income received by any person on behalf of a fund established, for such purpose as may be notified by the Board in Official Gazette, for the welfare of employees or their dependents and of which fund such employees are members, is exempt from tax, if such fund applies or accumulates its income for exclusive application towards its objects, invests its funds in the modes specified in section 11(5) and such fund is approved by the Principal Commissioner or Commissioner in accordance with rule made in this behalf (see rule 16C and Form No. 9).
Income of pension fund [Section 10(23AAB)]
Any income of a fund set-up by the Life Insurance Corporation of India on or after August 1, 1996 or any other insurer to which contribution is made by any person for receiving pension from such fund, and which is approved by the Controller of Insurance or the Insurance Regulatory and Development Authority, is exempt from tax.
Income from Khadi or village industry [Section 10(23B)]
Income of an institution constituted as a public charitable trust or society which is established for the development of khadi and village industries (not for profit purpose) is exempt from tax, if following conditions are satisfied:
1) Income is attributable to the business of production, sale, or marketing, of khadi or products of village industries.
2) Institution applies its income, or accumulates it for application, solely for the development of khadi or village industries or both
3) Institution is approved by the Khadi and Village Industries Commission.
Income of Khadi and Village Industries Boards [Section 10(23BB)]
Any income of Khadi and Village Industries Boards is exempt from tax under section 10(23BB).
Incomes of statutory bodies for the administration of public charitable trust [Section 10(23BBA)]
Any incomes of bodies or authority established or constituted or appointed under any Central, State or Provincial Act for the administration of public, religious or charitable trust or endowments (including any place of religious worship) or societies for religious or charitable purpose, is exempt from tax. However, this exemption shall not apply to income of any such trust, endowment, or society.
Income of European Economic Community [Section 10(23BBB)]
Any income of European Economic Community derived in India by way of interest, dividends or capital gains, from investments made out of its funds under a notified scheme is exempt from tax.
Income of SAARC fund [Section 10(23BBC)]
Any income of SAARC fund for Regional Projects is exempt from tax under section 10(23BBC).
Income of Secretariat of Asian Organisation of Supreme Audit Institutions [Section 10(23BBD)]
Any income of Secretariat of Asian Organisation of Supreme Audit Institutions is exempt from tax for the assessment years 2001-02 to 2010-11.
Income of Insurance Regulatory and Development Authority [Section 10(23BBE)]
Any income of the Insurance Regulatory and Development Authority established under section 3(1) of the Insurance Regulatory and Development Authority Act, 1999 is exempt from tax.
Income of Central Electricity Regulatory Commission [Section 10(23BBG)]
Income of Central Electricity Regulatory Commission is exempt from tax from the assessment year 2008-09.
Income of the Prasar Bharati [Section 10(23BBH)]
Any income of the Prasar Bharati (Broadcasting Corporation of India) established under section 3(1) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is exempt from tax.
Income of certain national funds [Section 10(23C)(i)/(ii)/(iii)]
Any income received by any person on behalf of the Prime Minister’s National Relief Fund or the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND), the Prime Minister’s Fund (Promotion of Folk Art) or the Prime Minister’s Aid to Students Fund is exempt from tax under clause (i), (ii) and (iii) of section 10(23C) respectively.
Income of National Foundation for Communal Harmony [Section 10(23C)(iiia)]
Any income of National Foundation for Communal Harmony is exempt from tax under section 10(23C)(iiia).
Income of Swachh Bharat Kosh [Section 10(23C)(iiiaa)]
Income of the Swachh Bharat Kosh, set up by the Central Government is exempt under section 10(23C)(iiiaa).
Income of Clear Ganga Fund [Section 10(23C)(iiiaaa)]
Income of the Clear Ganga Fund, set up by the Central Government is exempt under section 10(23C)(iiiaaa).
Income of Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund [Section 10(23C)(iiiaaaa)]
As per section 10(23C)(iiiaaaa) (as inserted by the Finance Act, 2017 with retrospective effect from the assessment year 1998-99), income of the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any state or union territory is exempt from tax.
Income of Educational Institutions [Section 10(23C)(iiiab)/(iiiad)/(vi)] Section 10(23C)(iiiab)
Income of any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government would be exempt under section 10(23C)(iiiab).
Section 10(23C)(iiiad)
Income of any university or other educational institution existing solely for educational purposes and not for purposes of profit would be exempt under section 10(23C)(iiiad) if the aggregate annual receipts of such university or educational institution do not exceed Rs. 5 Crores.
Note:
W.e.f. Assessment Year 2022-23, the Finance Act, 2021 has increased the limit of aggregate annual receipts from Rs. 1 crore to Rs. 5 crores.
Section 10(23C)(vi)
Income of any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the Principal Commissioner or Commissioner. An application in the prescribed form and manner has to be made to the Principal Commissioner or Commissioner, for grant of approval.
Income of Hospital [Section 10(23C)(iiiac)/(iiiae)/(via)]
Income arises to any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, shall be exempt from tax under following situations:
1) If the hospital or other institution is wholly or substantially financed by the Government then exemption would be available under section 10(23C)(iiiac).
2) If the aggregate annual receipt of such hospital or institution do not exceed Rs. 5 Crores then exemption would be available under section 10(23C)(iiiae).
Note:
W.e.f. Assessment Year 2022-23, the Finance Act, 2021 has increased the limit of aggregate annual receipts from Rs. 1 crore to Rs. 5 crores.
3) If the hospital is approved by the Principal Commissioner or Commissioner. An application in the prescribed form and manner has to be made to the Principal Commissioner or Commissioner, for grant of approval.
Receipt from university/institution/hospital referred in section 10(23C)(iiiad) and section 10(23C)(iiiae)
If the person has receipts from university or universities or educational institution or institutions as referred to in section 10(23C)(iiiad), as well as from hospital or hospitals or institution or institutions as referred to in section 10(23C)(iiiae), the exemptions under these clauses shall not apply, if the aggregate of annual receipts of the person from such university or universities or educational institution or institutions or hospital or hospitals or institution or institutions, exceed Rs. 5 crores.
Income of Charitable Institution or Fund [Section 10(23C)(iv)]
Any income of a charitable institution or fund which is approved by the Principal Commissioner or Commissioner having regard to its objects and its importance throughout India or throughout any State or States is exempt from tax.
An application in the prescribed form and manner has to be made to the Principal Commissioner or Commissioner, for grant of approval.
Income of religious/charitable trust [Section 10(23C)(v)]
Income of any trust (including any other legal obligation) or institution formed wholly for public religious purposes or wholly for public religious and charitable purposes, which is approved by the Principal Commissioner or Commissioner having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied or the objects thereof, is exempt from tax.
An application in the prescribed form and manner has to be made to the Principal Commissioner or Commissioner, for grant of approval.
Conditions for claiming exemption under section 10(23C)section 10(23C)(iv)/(v)/(vi)/(via), the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, had to comply with the following conditions:
1. An application in the prescribed form and manner has to be made to the Principal Commissioner or Commissioner, for grant of approval within the prescribed time limits. Timelines to make an application for approval has been summarised in the below table. However, after the amendment by Finance (No. 2) Act 2024, the application for approval under this provision can be filed only before 01-10-2024
| Section 10(23C) | |
| Making an application for grant of approval by entities referred to in section 10(23C)section 10(23C)(iv)/(v)/(vi)/(via) | |
| If entity is approved on or before 31-03- 2021 | On or before 30-06-2024 |
| If entity is approved and the period of such approval is due to expire | At least 6 months prior to expiry of said approval |
| Where such entity has been provisionally approved | At least 6 months prior to expiry of the period of the provisional approval; or within 6 months of the commencement of its activities. |
| Any other case (applicable upto 30-09-2023) | At least 1 month prior to commencement of the previous year relevant to the assessment year from which said approval is sought |
| Any other case (applicable from 01-10-2023) where activities of such entity have not commenced | At least 1 month prior to commencement of the previous year relevant to the assessment year from which said approval is sought |
| Any other case (applicable from 01-10-2023) where activities of such entity have commenced and no income (or part) has been excluded on account of applicability of section 10(23C) or section 11 for any previous year ending on or before the date of such application | At any time after the commencement of activities |
2. On receipt of application for grant of approval, the Principal Commissioner or Commissioner is required to pass an order granting approval within the following period. However, after the amendment by the Finance (No. 2) Act 2024, approval under this provision shall be granted only if the application is filed before 01-10-2024
| Section 10(23C) | |
| Passing an order granting approval | |
| If entity is approved on or before 31-03- 2021 | Within 3 months from end of the month in which application is received |
| If entity is approved and the period of such approval is due to expire | Within 6 months from the end of the month in which application is received |
| Where such entity has been provisionally approved | Within 6 months from the end of the month in which application is received |
| Any other case (applicable upto 30-09-2023) | Within 1 month from the end of the month in which application is received |
| Any other case (applicable from 01-10-2023) where activities of such entity have not commenced | Within 1 month from the end of the month in which application is received |
| Any other case (applicable from 01-10-2023) where activities of such entity have commenced and no income (or part) has been excluded on account of applicability of section 10(23C) or section 11 for any previous year ending on or before the date of such application | Within 6 months from the end of the month in which application is received |
Where application is made by an assessee (already approved for exemption) for renewal of approval or for conversion of provisional approval to regular approval or direct regular approval after commencement of activities, the Principal Commissioner or Commissioner may call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself about:
a) The genuineness of activities of assessee; and
b) The compliance of such requirements of any other law for the time being in force by it as are material for the purpose of achieving its objects.
If he is not satisfied about the genuineness of activities and compliance required, he may pass an order rejecting the application and cancelling its approval. However, he is required to grant an opportunity of being heard to the assessee.
3. It should apply its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and, in a case, where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five year.
4. Funds should not be invested or deposited for any period during the previous year otherwise than in any one or more of the forms/modes specified in section 11(5). However, this condition is not applicable in respect of the following:-
(i) any assets which form part of the corpus of the fund, trust or institution or any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1973;
(ii) Equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such equity shares form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998
(iii) Debentures of a company acquired by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution before the 1st day of March, 1983;
(iv) any accretion to the shares, forming part of the corpus of the fund mentioned in point no. (i) and (ii), by way of bonus shares allotted to the fund, trust or institution or any university or other educational institution or any hospital or other medical institution; voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify’s;
5. Any corpus donations received by such fund or institution or any university or other educational institution or any hospital or other medical institution, shall not be included in the income of such entities. Such voluntary contributions made with a specific direction that it shall form part of the corpus shall be invested or deposited in one or more of the forms or modes specified in Section 11(5)maintained specifically for such corpus.
6. The Finance Act 2022 inserted Explanation 1A and 1B to the third proviso to section 10(23C)with retrospective effect from the assessment year 2021-22. It provides that where the property held under a trust or institution includes any temple, mosque, gurdwara, church or other place notified under section 80G(2)(b), any sum received by such trust or institution as a voluntary contribution for renovation or repair of such temple, mosque, gurdwara, church or other place, may, at its option, be treated by such trust or institution as forming part of the corpus of the trust or the institution.
The following conditions are to be satisfied by such trust or institution:
- Corpus to be applied only for the purpose for which the voluntary contribution was made;
- Corpus shall not be applied for making a contribution or donation to any person;
- Corpus to be maintained as separately identifiable;
- Corpus to be invested in Section 11(5)modes.
If any trust or institutionop has treated any sum received by it as forming part of the corpus, and subsequently, any of the specified conditions is violated. In that case, such sum shall be deemed to be the income of such trust or institution of the previous year during which the violation takes place.
8. Application out of corpus shall not be considered as an application for charitable or religious purposes. However, when it is invested or deposited back, into one or more of the forms or modes specified in Section 11(5)maintained specifically for such corpus from the income of the previous year, such amount shall be allowed as an application in the previous year in which it is deposited back to the corpus to the extent of such deposit or investment. [first provisoto Explanation 2(i) to Section 10(23C)]
(a) Conditions to claim the application of income for the amount reinvested or redeposited in permissible mode [Second proviso to Explanation 2(i) to third proviso to Section 10(23C)]
The second proviso provides thatthe first proviso (i.e., application of income out of corpus donations reinvested or re-deposited to the permissible mode) shall apply if the following conditions are satisfied:
■ Such application should not be in the form of a corpus donation to another trust [Twelfth proviso to Section 10(23C)];
■ TDS, if applicable, should be deducted on such application [Thirteenth proviso to Section 10(23C)];
■ Where payment or aggregate of payments made to a person in a day exceeds Rs 10,000 in other than specified modes (such as cash) is not allowed [Thirteenth proviso to Section 10(23C)];
■ Carry forward and set off of excess application is not allowed [Explanation 2 to Section 10(23C)];
■ Application is allowed in the year in which it is actually paid [Explanation 3 to Section 10(23C)];
■ The application should not directly or indirectly benefit any person referred to in Section 13(1) and the income of the trust or institution should not enure any benefit to such person [Twenty-first proviso to Section 10(23C)]
(b) Limitation prescribed to reinvest or redeposit the corpus donation in permissible mode [Third proviso to Explanation 2(i) to the third proviso to Section 10(23C)]
The third proviso provides thatthe amount invested or deposited back shall not be treated as an application for charitable or religious purposes under the firstproviso unless such investment or deposit is made within a period of 5 years from the end of the previous year in which such application was made from the corpus.
(c) No grandfathering is allowed for application made from the corpus in earlier years [Fourth proviso to Explanation 2(i) to third proviso to Section 10(23C)]
The fourth proviso provides that nothing contained in the first proviso shall apply where application from the corpus is made on or before 31-03-2021.
9. Application from loans and borrowings shall not be considered as an application for charitable or religious purposes. However, when loan or borrowing is repaid from the income of the previous year, such repayment shall be allowed as an application in the previous year in which it is repaid to the extent of such repayment. [first proviso to Explanation 2(ii)to the third proviso to Section 10(23C)]
(a) Conditions to claim the repayment of the loan as an application of income [Second proviso to Explanation 2(ii) to third proviso to Section 10(23C)]
The second proviso provides that the first proviso (i.e., repayment of the loan will be considered as an application of income) shall apply if the following conditions are satisfied:
■ Such application should not be in the form of a corpus donation to another trust [Twelfth proviso to Section 10(23C)];
■ TDS, if applicable, should be deducted on such application [Thirteenth proviso to Section 10(23C)];
■ Where payment or aggregate of payments made to a person in a day exceeds Rs 10,000 in other than specified modes (such as cash) is not allowed [Thirteenth proviso to Section 10(23C)];
■ Carry forward and set off of excess application is not allowed [Explanation 2 to Section 10(23C)];
■ Application is allowed in the year in which it is actually paid [Explanation 3 to Section 10(23C)];
■ The application should not directly or indirectly benefit any person referred to in Section 13(1) and the income of the trust or institution should not enures any benefit to such person [Twenty-first proviso to Section 10(23C)].
(b) Limitation prescribed to repay the loan or borrowings [Third proviso to Explanation 2(ii) to third proviso to Section 10(23C)]
The third proviso provides that the repayment of loan or borrowings shall not be treated as an application for charitable or religious purposes under the first proviso unless such repayment is made within a period of 5 years from the end of the previous year in which such application was made from the loan or borrowings.
(c) No grandfathering is allowed for the application made from the loans or borrowings in earlier years [Fourth proviso to Explanation 2(ii) to third proviso to Section 10(23C)]
The fourth proviso provides that nothing contained in the first proviso shall apply where application from the loan or borrowing is made on or before 31-03-2021.
10. The Finance Act 2023 inserted clause (iii) in Explanation 2to the third proviso of Section 10(23C) with effect from 01-04-2024. It provides that any amount credited or paid out of the income [other than the corpus donation] of any trust or institution approved under Section 10(23C) to any other trust or institution approved under Section 10(23C) or registered under Section 12AB, as the case may be, shall be treated as application for charitable or religious purposes only to the extent of 85% of such amount credited or paid.
11. The income is not applied towards charitable purposes in the year of receipt and is proposed to be accumulated, such accumulation will be allowed only if the following conditions are complied with:
(a) The person furnishes a statement in form 10 stating the purpose/period for accumulation.
(b) The accumulated money shall be invested in permissible modes under section 11(5).
(c) The statement in Form 10 is furnished at least two months prior to the due date specified under Section 139(1) for furnishing the return of income for the previous year
12. In the following circumstances, the accumulated income shall be taxed in the hands of a fund or institution:
(a) Any accumulated income, if it is applied for purposes other than wholly and exclusively to the objects for which the fund or institution is established or ceases to be accumulated or set apart for application thereto shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart.
(b) If it ceases to remain invested or deposited in any of the forms or modes specified in Section 11(5), it shall be deemed to be the income of such person of the previous year in which it ceases to remain so invested or deposited.
(c) If it is not utilized for the purpose for which it is so accumulated or set apart during the period, it shall be deemed to be the income of such person of the previous year being the last previous year of the period, for which the income is accumulated or set apart, but not utilized for the purpose for which it is so accumulated or set apart.
If it is credited or paid to any trust or institution registered under section 12AA or section 12AB or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), it shall be deemed to be the income of such person of the previous year in which it is credited or paid to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution.
13. The Finance Act 2022 inserted an Explanation 5 to the third proviso to section 10(23C)with effect from the assessment year 2023-24. It provides that where due to circumstances beyond the control of the person in receipt of the income, any income invested or deposited for a specified purpose cannot be applied for the purpose for which it was accumulated or set apart, the Assessing Officer may, on an application made to him in this behalf, allow such person to apply such income for such other purpose in India as is specified in the application by that person and as is in conformity with the objects for which the fund or institution or trust or any university or other educational institution or any hospital or other medical institution.
14. For claiming exemption under section 10(23C)(iv) and (v), the fund, trust or institution, as the case may be, should disinvest by March 30, 1993, all the investment made before April 1, 1989, otherwise than in any one or more of the forms or modes specified in section 11(5).
15. For claiming exemption under section 10(23C)(vi) and (via), the university or other educational institution or any hospital or other medical institution, as the case may be, should disinvest by March 30, 2001, all the investment made before June 1, 1998, otherwise than in any one or more of the forms or modes specified in section 11(5).
16. The exemption shall not apply in relation to any income of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business.
17. If the total income of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in Section 10(23C) (iv)/ (v)/ (vi)/ (via), without giving effect to the provisions of the said sub-clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall keep and maintain books of account and other documents in such form and manner and at such place, as prescribed in Rule 17AA.
18. If taxable income [before giving exemption under section 10(23C)] exceeds the exemption limit, the institution should get books of account audited in Form No. 10Bor 10BB and audit report should be furnished one month prior to the due date for furnishing the return of income.
19. Any amount of donation received by the fund or institution in terms of clause (d) of section 80G(2)in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of section 80G(5C), in the manner specified in that clause, or which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of section 80G(5C)and not transferred to the Prime Minister’s National Relief Fund on or before the 31st day of March, 2004 shall be deemed to be the income of the previous year and shall accordingly be charged to tax.
20. Any donation given by a trust/institution [registered under section 12AA/12ABor referred to in section 10(23C)(iv)/(v)/(vi)/(via)] to any other trust [which is registered under section 12AAor referred to in section 10(23C)(iv)/(v)/(vi)/(via)] as contribution with specific direction that they shall form part of the corpus of the recipient trust/institution, shall not be treated as an application of income.
21. If tax is deductible from any payment but it is not deducted and payment is made to a resident person, 30% of such payment will be disallowed. In other words, only 70% of an expense shall be deemed as application of income if tax is not deducted from such payment in accordance with Chapter XVII-B. The disallowance shall be made in accordance with Section 40(a)(ia).
22. The Finance Act, 2018 has extended the provisions of Section 40A(3)and 40A(3A)mutatis mutandis to the institutions approved under section 10(23C)(iv)/(v)/(vi)/(via)]. Consequently, if payment for an expense exceeding Rs. 10,000 is made in any mode other than account payee cheque, bank draft, net banking (i.e., payment in cash or bearer cheque) that payment or expense will not be considered while computing the application of income.
23. If the fund or trust or institution does not apply its income during the year of receipt and accumulates it, any payment or credit out of such accumulation to any trust or institution registered under section 12AAor section 12ABor to any fund or trust or institution approved under section 10(23C) shall not be treated as application of income to the objects for which such fund or trust or institution or university or educational institution or hospital or other medical institution, as the case may be, is established.
24. The normal or provisional approval can be cancelled by the Principal Commissioner (PCIT) or Commissioner (CIT). The approval can be cancelled under the following circumstances:
(a) The Principal Commissioner or Commissioner has noticed occurrence of one or more ‘Specified Violations’ during any previous year.
(b) The Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to Section 143(3) for any previous year.
(c) Such a case has been selected in accordance with the risk management strategy, formulated by the Board from time to time for any previous year
The following shall be considered as ‘Specified Violation’:
- If any income of the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has been applied other than for the objects for which it is established
- If the fund or institution or trust or any university or other educational institution or any hospital or other medical institution has income from profits and gains of business, which is not incidental to the attainment of its objectives
- Separate books of account are not maintained by it in respect of the business which is incidental to the attainment of its objectives.
- Any activity being carried out by the trust or institution is not genuine or is not being carried out in accordance with the conditions subject to which it was registered.
- The trust or institution has not complied with the requirement of any other law for the time being in force as is material to achieve its objects, and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality.
- If the application for approval/provisional approval/renewal of approval referred to in the first provisois not complete, or it contains false or incorrect information.
Procedure to be followed by PCIT/CIT
The PCIT or CIT shall call for such documents or information from the trust or institution or make such inquiry as he thinks necessary to satisfy himself about the occurrence or otherwise of any specified violation.
He shall pass an order in writing, cancelling the approval of such trust or institution after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place.
Suppose he is not satisfied about the occurrence of one or more specified violations. In that case, he shall pass an order in writing, refusing to cancel the approval of such trust or institution.
PCIT/CIT shall forward a copy of the cancellation order or order refusing to cancel the approval, as the case may be, to the Assessing Officer and such trust or institution.
Time-limit to pass cancellation order
The cancellation order or order refusing to cancel the approval, as the case may be, shall be passed before the expiry of 6 months, calculated from the end of the quarter in which the first notice is issued by the PCIT or CIT, on or after the 01-04-2022, calling for any document or information, or for making any inquiry.
23. Any anonymous donation referred to in section 115BBCon which tax is payable in accordance with the provisions of the said section shall be included in the total income.
24. The provisions of section 2(15)shall apply and the organization should not engage in commercial activities
25. No exemption under section 10other than agricultural income under section 10(1)shall operate to exclude any income received on behalf of such fund or trust or institution or university or other educational institution or hospital or other medical institution, as the case may be, from the total income of the person in receipt thereof for that previous year.
26. The Finance Act 2022 inserted an explanation to the nineteenth proviso to section 10(23C)with effect from 01-04-2022. It provides that if an institution approved under section 10(23C)(iv)/(v)/(vi)/(via)is notified under Section 10(46)/(46A), the approval or provisional approval granted to such institution shall become inoperative from the date of notification of under Section 10(46)/(46A).
27. The Finance Act 2022 inserted the twentieth proviso to Section 10(23C)to provide that for the purpose of exemption under this clause, any trust or institution is required to furnish the return of income for the previous year in accordance with the provisions of section 139(4C)of the Act, within the time allowed under Section 139(1) or Section 139(4).
28. The Finance Act 2022 inserted the twenty-first proviso to Section 10(23C)of the Act to provide that where the income or part of income or property of any trust or institution has been applied directly or indirectly for the benefit of any person referred to in Section 13(3), such income or part of income or property shall be deemed to be the income of such person of the previous year in which it is so applied. The provisions of Section 13(2), (4) and (6) of the Act shall also apply to trust or institution referred to in Section 10(23C).
29. The Finance Act 2022 inserted Twenty-second proviso to section 10(23C)has been inserted to provide that where an Institution violates the following provisions, its income will be computed in a specified manner:
- Tenth proviso to section 10(23C)(Maintenance of books of account, etc. and audit of accounts)
- Twentieth proviso to section 10(23C)(Filing of return of income)
- Eighteenth proviso to section 10(23C)(Income in violation of proviso to section 2(15))
The income chargeable to tax shall be computed after allowing the deduction for the expenditure (other than capital expenditure) incurred in India for the objects of the trust or institution, subject to fulfilment of the following conditions, namely:
(a) Such expenditure is not from the corpus standing to the credit of such trust or institution as on the last day of the financial year immediately preceding the previous year relevant to the assessment year for which the income is being computed;
(b) Such expenditure is not from any loan or borrowing;
(c) Claim of depreciation is not in respect of an asset, acquisition of which has been claimed as an application of income in the same or any other previous year; and
(d) Such expenditure is not in the form of any contribution or donation to any person.
The provisions of Section 40(a)(ia), Section 40A(3) and Section (3A) shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.
30. The Finance (No. 2) Act 2024 inserted the twenty-fourth proviso to Section 10(23C)providing that no approval under this provision shall be granted if the application is filed on or after 01-10-2024
31. For the purpose of claiming exemption under section 10(23C), where any income is required to be applied or accumulated, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this clause in the same or any other previous year.
32. No set-off or deduction or allowance of any excess application, of any of the year preceding the previous year shall be allowed during the previous year. Therefore, the charitable trusts shall not be permitted to carry forward the losses or excess application of earlier years.
33. The Finance Act 2022 inserted an Explanation 3 to section 10(23C)with effect from the assessment year 2022-23 to provide that any sum payable by an institution shall be considered as an application of income in the previous year in which such sum is actually paid by it (irrespective of the previous year in which the liability to pay such sum is incurred by the institution according to the method of accounting regularly employed by it).
However, where during any previous year any sum has been claimed to have been applied by the fund or institution or trust or any university or other educational institution or any hospital or other medical institution, such sum shall not be allowed as an application in any subsequent previous year.
Income of mutual fund [Section 10(23D)]
Any income of following mutual funds is exempt from tax:
- A mutual fund registered under the Securities and Exchange Board of India Act or regulation made thereunder.
- A mutual fund set-up by a public sector bank, or a public financial institution or authorised by RBI (subject to conditions notified by the Central Government).
Income of a securitisation trust [Section 10(23DA)]
Any income of a securitisation trust from the activity of securitisation is exempt from tax.
Income of notified investor protection fund [Section 10(23EA)]
Any income by way of contributions received from recognised stock exchanges and the members thereof, of a notified Investor Protection Fund set up by recognised stock exchanges in India is exempt from tax.
Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a recognised stock exchange, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax.
Income of Credit Guarantee Fund Trust [Section 10(23EB)]
Any income of Credit Guarantee Fund Trust for Small Industries, being a trust created by the Government of India and the Small Industries Development Bank of India, is exempt from tax for 5 years relevant to the assessment years 2002-03 to 2006-07.
Income of the notified investor protection fund set-up by commodity exchange [Section 10(23EC)]
Any income by way of contributions received from commodity exchanges and the members thereof, of a notified Investor Protection Fund set up by commodity exchanges in India is exempt from tax.
Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a commodity exchange, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax.
Income of Investor Protection Fund set by a depository [Section 10(23ED)]
Any income, by way of contributions received from a depository, of notified Investor Protection Fund set up by a depository in accordance with the regulations made under the SEBI Act and Depository Act is exempt from tax.
Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with a depository, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall, accordingly, be chargeable to income-tax.
Income of Core Settlement Guarantee Fund [Section 10(23EE)]
Section 10(23ED) grants exemption to Income of any specified income of such Core Settlement Guarantee Fund, set up by a recognised clearing corporation in accordance with the regulations, as the Central Government may, by notification in the Official Gazette, specify in this behalf.
It should be checked that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall, accordingly, be chargeable to income-tax.
“Recognised clearing corporation” shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation 2 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992 and the Securities Contracts (Regulation) Act, 1956 or clause (n) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019.
“Regulations” means the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities and Exchange Board of India Act, 1992 and the Securities Contracts (Regulation) Act, 1956 or the International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019.
“specified income” shall mean,—
(a) the income by way of contribution received from specified persons;
(b) the income by way of penalties imposed by the recognised clearing corporation and credited to the Core Settlement Guarantee Fund; or
(c) the income from investment made by the Fund;
“Specified person” shall mean :
(a) any recognised clearing corporation which establishes and maintains the Core Settlement Guarantee Fund.
(b) any recognised stock exchange being a shareholder in such recognised clearing corporation or a contributor to the Core Settlement Guarantee Fund.
(c) any clearing member contributing to the Core Settlement Guarantee Fund.
Income of a venture capital fund or a venture capital company from investment in a venture capital undertaking [Section 10(23FB)]
Income of a venture capital fund or a venture capital company from investment in a venture capital undertaking is exempt from tax from assessment year 2001-02. However, this exemption is subject to satisfaction of conditions specified in section 10(23FB).
These provisions shall not apply in respect of any income of a venture capital company or venture capital fund, being an investment fund specified in clause (a) of the Explanation 1 to section 115UB, of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2016.
Income of an investment fund [Section 10(23FBA)]
Any income of an investment fund other than the income chargeable under the head “Profits and gains of business or profession” is exempt under Section 10(23FBA).
“Investment fund” shall have the same meaning assigned to it in clause (a) of the Explanation 1 to section 115UB.
Income arising to unit holder from specified fund [Section 10(23FBC)]
Any income accruing or arising to, or received by, a unit holder from a specified fund or on transfer of units in a specified fund in exempt from tax under section 10(23FBC)
Note:
a) “specified fund” shall have the same meaning as assigned to it in clause (c) of the Explanation to clause (4D);
b) “unit” means beneficial interest of an investor in the fund and shall include shares or partnership interests;
Income referred to in section 115UB of a unit holder of an investment fund [Section 10(23FBB)]
Any income referred to in section 115UB, accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head “Profits and gains of business or profession” is exempt under section 10(23FBB).
“Investment fund” shall have the same meaning assigned to it in clause (a) of the Explanation 1 to section 115UB.
Income of a of a Business Trust [Section 10(23FC)]
Any income of a business trust by way of:
a) interest received or receivable from a special purpose vehicle; or
b) dividend received or receivable from a special purpose vehicle
“special purpose vehicle” means an Indian company in which the business trust holds controlling interest and any specific percentage of shareholding or interest, as may be required by the regulations under which such trust is granted registration.
Certain income of a business trust being a real estate investment trust [Section 10(23FCA)]
Any income of a business trust, being a real estate investment trust, by way of renting or leasing or letting out any real estate asset owned directly by such business trust is exempt under section 10(23FCA).
“Real estate asset” shall have the same meaning as assigned to it in clause (zj)of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992.
Income of specified person in nature of dividend, interest or long-term capital gains arising from investment made in India [Section 10(23FE)]
Any income of a specified person in the nature of dividend, interest, any sum referred to in clause (xii) of section 56(2) or long-term capital gains (whether or not such capital gains are deemed as short term capital gains under section 50AA)7 arising from an investment made by it in India, whether in the form of debt or share capital or unit, is exempt under section 10(23FE).
However, the exemption is available if specified conditions are fulfilled by the specified entity.
Note: Kindly refer section 10(23FE) to read the details conditions and specified entities eligible for exemption.
Income in nature of capital gains earned by non-resident or specified fund [Section 10(23FF)
Any income of the nature of capital gains, arising or received by a non-resident/specified fund, on account of transfer of share of a company resident in India, by the resultant fund or a specified fund to the extent attributable to units held by non-resident (not being a permanent establishment of a non-resident in India) shall be exempt from tax under section 10(23FF). However, the exemption shall be available if:
1) such shares were transferred from the original fund to the resultant fund in relocation; and
2) capital gains on such shares were not chargeable to tax if that relocation had not taken place.
Note:
“original fund”, “relocation” and “resultant fund” shall have the meanings respectively assigned to them in the Explanation to clause (viiac) and clause (viiad) of section 47
“specified fund” shall have the meaning assigned to it in clause (c) of the Explanation to clause (4D) of section 10;’
Distributed Income of a Unit Holder from the Business Trust [Section 10(23FD)]
Any distributed income, referred to in section 115UA, received by a unit holder from the business trust, not being that proportion of the income which is of the same nature as the income referred to in sub-clause (a) of clause (23FC) or clause (23FCA) of section 10 is exempt from tax.
Income of a registered trade union [Section 10(24)]
Any income chargeable under the head “Income from house property” and “Income from other sources” of a registered union within the meaning of the Indian Trade Union Act, 1926, formed primarily for the purpose of regulating the relation between workmen and employers or between workmen and workmen is exempt from tax. Similar exemption is available to an association of registered unions.
Income of provident fund [Section 10(25)]
Following income is exempt from tax under this section:
- Interest on securities held by a statutory provident fund and any capital gains arising from such securities.
- Any income received by the trustee on behalf of a recognised provident fund or an approved superannuation fund or an approved gratuity fund; and
- Any income received by the Board of Trustees on behalf of Deposit-linked Insurance Fund.
Income of the Employees’ State Insurance Fund [Section 10(25A)]
Any income of the Employees’ State Insurance Fund of the Employees’ State Insurance Corporation set-up under the provisions of the Employees’ State Insurance Act, 1948 is exempt from tax under section 10(25A).
Income of a member of a Scheduled Tribe [Section 10(26)]
Income of a member of a Scheduled Tribe [as per article 366(25) of the Constitution] is exempt from tax, if following conditions are satisfied:
Such member resides in any area in the State of Nagaland, Manipur, Tripura, Arunachal Pradesh, Mizoram or district of North Cachar Hills, Mikir Hills, Khasi Hills, Jaintia Hills and Garo Hills or in the Ladakh region of the State of Jammu and Kashmir.
Such exemption is available in respect of income which accrues/arises from any source in such areas or income by way of dividends/interest on securities arises from any area.
Income of a “Sikkimese” individual [Section 10(26AAA)]
Following income of a Sikkimese individual [as explained in section 10(26AAA)], is exempt from tax:
- Any income from the State of Sikkim; or
- Income by way of dividend or interest on securities (generated in Sikkim or any other place).
Income of an Agricultural Produce Marketing Committee/Board [Section 10(26AAB)]
With effect from assessment year 2009-10, any income of an Agricultural Produce Marketing Committee/Board constituted under any law for the purpose of regulating the marketing of agricultural produce is exempt from tax under section 10(26AAB).
Income of corporation or other body or institution or association established for promoting the interest of members of Scheduled Caste, etc. [Section 10(26B)]
Any income of a corporation established by a Central, State or Provincial Act or of any other body, institution or association (wholly financed by the Government), formed for promoting the interests of the members of the Scheduled Castes/Tribes/backward classes or of any two or all of them [as explained in section 10(26B)], is exempt from tax under section 10(26B).
Income of corporation established for promoting interest of minority caste [Section 10(26BB)]
Any income of a corporation established by the Central Government or State Government for promoting the interests of the members of such minority community as notified by the Central Government from time-to-time, is exempt from tax under section 10(26BB).
Income of corporation established for ex-servicemen [Section 10(26BBB)]
From assessment year 2004-05, any income of a statutory corporation established by Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen (being citizen of India) is exempt from tax under section 10(26BBB).
“ex-serviceman” means a person who has served in any rank, whether as combatant or non- combatant, in the armed forces of the Union or armed forces of the Indian States before the commencement of the Constitution (but excluding the Assam Rifles, Defence Security Corps, General Reserve Engineering Force, Lok Sahayak Sena, Jammu and Kashmir Militia and Territorial Army) for a continuous period of not less than six months after attestation and has been released, otherwise than by way of dismissal or discharge on account of misconduct or inefficiency, and in the case of a deceased or incapacitated ex-serviceman includes his wife, children, father, mother, minor brother, widowed daughter and widowed sister, wholly dependent upon such ex- serviceman immediately before his death or incapacitation
Income of a co-operative society formed for promoting the interests of the members of Scheduled Castes or Scheduled Tribes [Section 10(27)]
Any income of a co-operative society formed for promoting the interests of the members of Scheduled Castes or Scheduled Tribes or both [as given in section 10(26B)] is exempt from tax. Exemption is available only if the membership of the co-operative society consists of only other co-operative societies formed for similar purposes and the finances of the society are provided by the Government and such other societies [Section 10(27)].
Income of coffee board, rubber board, etc. [Section 10(29A)]
Any income of Coffee Board, Rubber Board, Tea Board, Tobacco Board, Marine Products Export Development Authority, Agricultural and Processed Food Products Export Development Authority, Spices Board and Coir Board, is exempt from tax under section 10(29A).
Subsidy from the Tea Board [Section 10(30)]
In the case of a taxpayer, who carries on business of growing and manufacturing tea in India, the amount of any subsidy received from or through the Tea Board under the notified scheme for replantation or replacement of tea bushes or for rejuvenation or consolidation of the area used for cultivation of tea, is exempt from tax (for notified schemes see Notification No. S.O. 3616, dated September 27, 1976).
To claim exemption, a certificate from the Tea Board as to the amount of subsidy paid to the taxpayer during the year is to be obtained.
A similar exemption is available under section 10(31) in respect of subsidy received by an taxpayer engaged in the business of growing and manufacturing rubber, coffee, cardamom or such other commodities as the Central Government may by notification specify [Section 10(31)].
Income of minor [Section 10(32)]
Under section 64(1A) income of a minor child is clubbed along with the income of his/her parent, subject to certain conditions. If the income of an individual includes any income of his/her minor child, then such individual can claim exemption (in respect of each minor child) of lower of following amount:
(a) Rs. 1,500 per minor child; or
(b) Amount of income of each minor child (which is clubbed).
Capital gains on transfer of US 64 [Section 10(33)]
As per section 10(33), long-term or short-term capital gains arising on transfer of units of Unit Scheme, 1964 (US 64) are exempt from tax if the transfer of such asset takes place on or after 1/04/2002.
Income of a shareholder on account of buy back of shares by the company [Section 10(34A)]
Any income arising to an assessee, being a shareholder, on account of buy back of shares by the company (whether listed or unlisted) as referred to in section 115QA is exempt from tax under section 10(34A). This exemption is available only in those cases where additional income-tax is payable on distributed income under section 115QA by the company opting for buy back of such shares.
With effect from 05/07/2019, Section 115QA has been amended to levy additional tax on buy back of shares by listed companies as well. Consequently, Section 10(34A) has also been amended to exempt income arising in hands of shareholder on account of buy back of shares by listed companies.
However, this exemption is not available with respect to any buy back of shares by a company on or after 01-10-2024.
Tax exemption for inter-corporate dividend distribution within IFSC Units engaged in the aircraft leasing business [Section 10(34B)]
The Finance Act 2023 has introduced a new clause (34B) in Section 10, which will come into effect from the assessment year 2024-25. This clause exempts dividend income earned by an IFSC unit primarily engaged in aircraft leasing business. However, the exemption is subject to the condition that the company paying the dividend should also be an IFSC unit and engaged in the aircraft or ship 8leasing business.
Income of an investor received from a securitisation trust [Section 10(35A)]
Any distributed income referred to in section 115TA received from a securitisation trust by any person being an investor of the said trust is exempt from tax under section 10(35A).
Note: The exemption shall not be available from 1st June 2016.
Capital gains in case of compulsory acquisition of urban agricultural land [Section 10(37)]
An individual or Hindu Undivided Family (HUF) can claim exemption in respect of capital gain arising on transfer by way of compulsory acquisition of agricultural land situated in an urban area provided compensation is received on or after April 1, 2004. This exemption is available if the land was used by the taxpayer (or by his parents in the case of an individual) for agricultural purpose for a period of 2 years immediately preceding the date of its transfer.
Capital gain on transfer of specified capital assets under land pooling scheme of the Andhra Pradesh Government[section 10(37A)]
Section 10(37A) (as inserted by the Finance Act, 2017 w.r.e.f. 1-4-2015) provides exemption in respect of capital gain arising on transfer of specified capital asset by an Individual or HUF under the land pooling scheme of the Andhra Pradesh Government.
“specified capital asset” means,—
(a) the land or building or both owned by the assessee as on the 2nd day of June, 2014 and which has been transferred under the scheme; or
(b) the land pooling ownership certificate issued under the scheme to the assessee in lieu of land or building or both transferred under the scheme; or
(c) the reconstituted plot or land, as the case may be, received by the assessee in lieu of land or building or both transferred under the scheme, if such plot or land, as the case may be, so received is transferred within 2 years from the end of the financial year in which the possession of such plot or land was handed over to assessee.
Long-term capital gains on transfer of equity shares or units of an equity oriented mutual fund or a unit of a business trust covered by securities transaction tax [Section 10(38)]
Long-term capital gains arising on transfer of securities are not chargeable to tax in the hands of any person, if following conditions are satisfied:
The asset transferred should be equity shares of a company or units of an equity oriented mutual fund or a unit of a business trust.
1. The transaction should be liable to securities transaction tax, at the time of transfer.
2. Such asset should be a long-term capital asset.
3. Transfer should have taken place on or after October 1, 2004.
Equity oriented mutual fund means a mutual fund specified under section 10(23D) and 65% of its investible funds, out of total proceeds are invested in equity shares of a domestic company.
Note:
(1) With effect from 1-4-2016, exemption from capital gains under Section 10(38) shall be available even in respect of long-term capital gains arising from transfer of units of a business trust which were acquired in lieu of shares of special purpose vehicle as referred to in section 47(xvii) and on which securities transaction tax has been paid.
(2) Exemption from long term capital gains under section 10(38) shall be available w.e.f April1, 2017 even where STT is not paid, provided that –
– transaction is undertaken on a recognised stock exchange located in any International Financial Service Centre, and
– consideration is paid or payable in foreign currency
(3) With effect from the assessment year 2018-19, exemption under section 10(38) will not be available even if STT is paid at the time of transfer if the following conditions are satisfied-
a. Long-term capital gain is arise from transfer of equity shares in a company.
b. The shares were acquired on or after 1/10/2004.
c. At the time of acquisition of shares, the transaction was not chargeable to security transaction tax.
d. The transaction of acquisition shouldn’t be a notified transaction. The Central Government will notify certain transaction to protect the exemption in genuine cases.
(4) No exemption under section 10(38) is available with effect from Assessment Year 2019-20. The long-term capital gains arising from sale of listed securities in excess of Rs. 1 lakh is taxable at the rate of 10% under Section 112A (subject to certain conditions).
Income from international sporting event [Section 10(39)]
From the assessment year 2006-07, any specified income of notified person, arising from an international sporting event held in India is exempt from tax, if the event is approved by the international body and is notified by the Central Government and has participation by more than two countries.
Grants received by specified subsidiary company [Section 10(40)]
Income of any subsidiary company by way of grant or otherwise received from its Indian holding company which is engaged in the business of generation/ transmission/distribution of power is exempt, if such receipt is for settlement of dues in connection with reconstruction or revival of an existing business of power generation. The exemption is available, if the reconstruction or revival is by way of transfer of business to the Indian company notified under 80IA(4)(v)(a).
Under section 10(41), any capital gain arising in the above case is not chargeable to tax, if the transfer has taken place before April 1, 2006.
Income of certain non-profit body or authority [Section 10(42)]
Any specified income of non-profit body/authority notified by the Central Government and established, constituted or appointed under a multilateral treaty agreement or convention to which Central Government is a signatory is exempt from tax under section 10(42).
Loan in the case of reverse mortgage [Section 10(43)]
Any amount received by an individual as a loan (either in lump sum or in instalments) in a transaction of reverse mortgage referred to in section 47(xvi), is not chargeable to tax.
Income of New Pension System Trust [Section 10(44)]
With effect from assessment year 2009-10, any income received by any person for, or on behalf of the New Pension System Trust established on 27-2-2008 under the provisions of the Indian Trust Act, 1882 will be exempt from tax.
Exemption of specified income of notified body/ authority/trust/board/commission [Section 10(46)]
Under section 10(46), any specified income arising to any notified body/authority/Board/ Trust/Commission (or a class thereof) which has been established or constituted by or under a Central, State or Provincial Act, or has been constituted by the Government or a State Government with the object of regulating or administering any activity for the benefit of the general public and is not engaged in any commercial activity and is notified by the Central Government in the Official Gazette for the purposes of this clause is exempt from tax.
Exemption to income of notified board/authority/body/trust of commission [Section 10(46A]
Any income arising to a body or authority or Board or Trust or Commission not being a company, which:
a) Has been established or constituted by or under a Central Act or State Act with one or more of the following purposes:
-
- Dealing with and satisfying the need for housing accommodation;
- Planning development or improvement of cities, towns and villages;
- Regulating, or regulating and developing any activity for the benefit of the general public; or
- Regulating any manner for the benefit of the general public arising out of the object for which it has been creased and
b) Is notified by the Central Government in the official gazette.
Exemption to income of credit guarantee trusts/funds [Section 10(46B]
W.e.f. Assessment Year 2024-25, any income accruing or arising to the following trusts/funds shall be exempt from tax:
a) National Credit Guarantee Trustee Company Limited (NCGTC).
b) Credit guarantee funds established and wholly financed by the Central Government and managed by NCGTC.
c) Credit Guarantee Fund Trust for MSMEs (CGTMSE) created by CG and SIDBI.
Any income of a notified infrastructure debt fund set-up in accordance with prescribed guidelines [Section 10(47)]
As per section 10(47), any income of a notified infrastructure debt fund set-up in accordance with the guidelines prescribed in Rule 2F of the Income-tax Rules is exempt from tax.
Income received by certain foreign companies in Indian currency for import of crude oil etc. [Section 10(48)]
Any income received in India in Indian currency by a foreign company on account of sale of crude oil, any other notified goods or rendering of notified services to any person in India is exempt from tax provided-
(i) receipt of such income in India by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by the Central Government;
(ii) having regard to the national interest, the foreign company and the agreement or arrangement are notified by the Central Government in this behalf; and
(iii) the foreign company is not engaged in any activity, other than receipt of such income, in India.
Any income of a foreign company on account of storage and sale of crude oil [Section 10(48A)]
Any income arising to a foreign company through storage of crude oil in a facility in India and sale therefrom to any person resident in India is exempt from tax provided that-
a) the storage and sale by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by the Central Government; and
b) having regard to the national interest, the foreign company and the agreement or arrangement are notified by the Central Government in this behalf; ]
Any income of a foreign company on account of sale of leftover stock of crude oil [Section 10(48B)]
Section 10(48B) provides that any income accruing or arising to a foreign company on account of sale of leftover stock of crude oil, if any, from a facility in India after the expiry of an agreement or an arrangement or on termination of said agreement in accordance with the terms mentioned therein shall be exempt subject to such conditions as may be notified by the Central Government in this behalf.
Exemption to Financial Institution [Section 10(48D)]
Section 10(48D) provides exemption for any income accruing or arising to an institution established for financing the infrastructure and development. The institution shall be set up under an Act of Parliament and later would be notified by the Central Government. The exemption shall be available for a period of 10 consecutive assessment years beginning from the assessment year relevant to the previous year in which such institution is set up.
Exemption to DFI [Section 10(48E)]
Section 10(48E) provides exemption to any income accruing or arising to a DFI licensed by the Reserve Bank of India. The exemption shall be available for 5 consecutive assessment years beginning from the assessment year relevant to the previous year in which the DFI is set up.
However, the Central Government may extend the period of exemption of 5 years for a further period, not exceeding 5 more consecutive assessment years, subject to fulfilment of such conditions as may be specified.
Tax exemption to National Financial Holdings Company Limited [Section 10(49)]
As per section 10(49), any income of the National Financial Holdings Company Limited, being a company set-up by the Central Government, of any year relevant to any assessment year commencing on or before the 1st day of April, 2014 is exempt from tax.
Income subject to equalisation levy [Section 10(50)]
Any income arising from specified services or arising from an e-commerce supply or services made or provided or facilitated on or after 01-04-2020 but before 01-08-2024, which is chargeable to equalisation levy is exempt from tax.
Note: The above exemption has been withdrawn by the Finance Act, 2025 with effect from 01.04.2025
Other important exemptions
Apart from above discussed exemption of section 10 following is the list of other important exemptions:
- Section 10Aprovides for exemption in respect of income of newly established undertakings in free trade zone or electronic hardware technology park or electronic software technology park.
- Section 10AAprovides for exemption in respect of income of newly established units in Special Economic Zones.
- Section 11and 12 provide exemption in respect of income of a public charitable or religious trust.
- Section 13Aprovides exemption in respect of income of a political party.
- Section 13Bprovides exemption in respect of income of an electoral trust.
MCQ on TAX-FREE INCOMES
Q1. Section _________ grants exemption to gratuity received by Government employee (i.e., Central Government or State Government or local authority).
(a) 10(5) (b) 10(10)(i)
(c) 10(10)(ii) (d) 10(10A)
Correct answer : (b)
Justification of correct answer :
Section 10(10)(i) grants exemption to gratuity received by Government employee (i.e., Central Government or State Government or local authority).
Thus, option (b) is the correct option.
Q2. Exemption under section 10(10D) is not available in respect of policy taken in the name of a person suffering from diseases/disability specified under section 80DDB/80U.
(a) True (b) False
Correct answer : (b)
Justification of correct answer :
Exemption under section 10(10D) is unconditionally available in respect of sum received for a policy which is issued on or before March 31, 2003. However, in respect of policies issued on or after April 1st, 2003, the exemption is available only if the amount of premium paid on such policy in any financial year does not exceed 20% (10% in respect of policy taken on or after 1st April, 2012) of the actual capital sum assured. With effect from 1-4-2013, in respect of policy taken in the name of a person suffering from diseases specified under section 80DDB or in the name of a person suffering from disability specified under section 80U, the limit will be increased to 15% of capital sum assured.
Thus, the statement given in the question is false and hence, option (b) is the correct option.
Q3. While computing the exemption in respect of House Rent Allowance under section 10(13A) read with rule 2A, salary will include only basic salary and dearness allowance forming part of salary while computing all retirement benefits.
(a) True (b) False
Correct answer : (b)
Justification of correct answer :
While computing the exemption in respect of House Rent Allowance As per section 10(13A), read with rule 2A, salary will include basic salary, dearness allowance forming part of salary while computing all retirement benefits and commission based on fixed percentage of turnover achieved by the employee. Apart from this, salary for this purpose does not include any other allowances/perquisites.
Thus, the statement given in the question is false and hence, option (b) is the correct option.
Q4. As per section _________ any income of the Prasar Bharati (Broadcasting Corporation of India) is exempt from tax.
(a) 10(20) (b) 10(21)
(c) 10(23BBE) (d) 10(23BBH)
Correct answer : (d)
Justification of correct answer :
As per section 10(23BBH), any income of the Prasar Bharati (Broadcasting Corporation of India) established under section 3(1) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is exempt from tax.
Thus, option (d) is the correct option.
Q5. The amount of exemption available under section 10(32) is lower of Rs. _________ per minor child or amount of income of each minor child (which is clubbed). (a)
Rs. 500 (b) Rs. 1,000
(c) Rs. 1,500 (d) Rs. 2,000
Correct answer : (c)
Justification of correct answer :
Under section 64(1A) income of a minor child is clubbed along with the income of his/her parent, subject to certain condition. If the income of an individual includes any income of his/her minor child, then such individual can claim exemption (in respect of each minor child) of lower of following amount:
(a) Rs. 1,500 per minor child; or
(b) Amount of income of each minor child (which is clubbed).
Thus, option (c) is the correct option.
Q6. Any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA is exempt from tax under section _________
(a) 10(34) (b) 10(34A)
(c) 10(35) (d) 10(35A)
Correct answer: (b)
Justification of correct answer :
Any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA is exempt from tax under section 10(34A).This exemption is available only in those cases where additional income-tax is payable on distributed income under section 115QA by the company opting for buy back of such shares. Thus, option
(c) is the correct option.
Q7. Under section 10(37), a partnership firm can claim exemption in respect of capital gain arising on transfer of agricultural land situated in an urban area by way of compulsory acquisition.
(a) True (b) False
Correct answer : (b)
Justification of correct answer :
As per section 10(37), an individual or Hindu Undivided Family (HUF) can claim exemption in respect of capital gain arising on transfer by way of compulsory acquisition of agricultural land situated in an urban area provided compensation is received on or after April 1, 2004. This exemption is available if the land was used by the taxpayer (or by his parents in the case of an individual) for agricultural purpose for a period of 2 years immediately preceding the date of its transfer.
Thus, the statement given in the question is false and hence, option (b) is the correct option.
Q8. As per section 10(48), any income received in India in Indian currency by a foreign company on account of sale of crude oil, any other notified goods or rendering of notified services, to any person in India is exempt from tax.
(a) True (b) False
Correct answer : (a)
Justification of correct answer :
As per section 10(48), any income received in India in Indian currency by a foreign company on account of sale of crude oil, any other notified goods or rendering of notified services to any person in India is exempt from tax provided-
(i) receipt of such income in India by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by the Central Government;
(ii) having regard to the national interest, the foreign company and the agreement or arrangement are notified by the Central Government in this behalf; and
(iii) the foreign company is not engaged in any activity, other than receipt of such income, in India. Thus, the statement given in the question is true and hence, option (a) is the correct option.
Q9. Section _________ grants exemption to interest and withdrawals from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873.
(a) 10(5) (b) 10(10)(i)
(c) 10(10)(ii) (d) 10(11A)
Correct answer : (d)
Justification of correct answer :
As per section 10(11A), any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 made under the Government Savings Bank Act, 1873 is exempt from tax. In other words, interest and withdrawals from such account will be exempt from tax under section 10(11A).
Thus, option (d) is the correct option.
Q10. Section 13A provides exemption in respect of income of _________.
(a) A political party (b) An electoral trust
(c) A public charitable or religious trust (d) Units established in SEZ
Correct answer : (a)
Justification of correct answer :
Section 13A provides exemption in respect of income of a political party. Thus, option (a) is the correct option.
Notes:
1 Inserted by the Finance Act, 2021, with effect from Assessment Year 2022-23.
2 Inserted by the Finance Act, 2025, w.e.f. 01.04.2026.
3 Inserted by the Finance Act, 2025, w.e.f. 01.04.2026.
4 Inserted by the Finance Act, 2025, w.e.f. 01.04.2025.
5 Inserted by the Finance Act, 2025, w.e.f. from 01.04.2025.
6 Inserted by the Finance Act, 2025, w.e.f. 01.04.2025.
7 Inserted by the Finance Act, 2025, w.e.f. 01.04.2025.
8 Inserted by the Finance Act, 2025, w.e.f. 01.04.2025.
