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A Fiscal Policy & Tax Management

Presentation

INCOMES EXEMPT FROM TAX


Group 2
Shahid | Somdeep | Mampi | Siddharth | Chinmay | Rahul | Avinash

Section B, Semester V, Bachelor of Business Management


(2013-2016)

Income
which comes in as the periodical product of
ones work, business, land, or investments
(commonly expressed in terms of money)
Oxford English Dictionary
Even though generally of a recurring character, Income may not
necessarily be recurring in nature.
Kamakshya Narain Singh of Ramgarh vs CIT (1943)

Under
Section
2 (24),
Income

includes

Profits & Gains


Dividend
Voluntary Contributions
received by a Trust
Perquisites in the hands of
an Employee/Director
Special Allowances or
Benefit
Dearness Allowance
Capital Gains
Insurance Profit
Income of Co-Op banking
Lottery Winnings
Provident Fund of Employees
Keyman Insurance Policy
Gift exceeding Rs 50,000/ Consideration for Shares
Issue

Exemptible Income is not


included in the computation
of income. Exemption can
never exceed the amount of
income.

Deduction is generally given from


income chargeable to tax.
Deduction can be less than or
equal to or more than the
amount of income. If amount
deductible is more than the amount
of income, the resulting amount will
be taken as loss

Deduction & Exemption - Example

House Rent Allowance is an exemption under


Section 10(13a) of the Indian Income Tax Act. It
will not be even taken into account during
computation of Gross Income.
After computation, if the gross income is Rs 5
lakh out of which Rs 1 lakh is invested in an
instrument that offers deduction (like the Equity
Linked Savings Scheme or Health Insurance),
the total taxable income (income on which
tax is due) reduces to Rs 4 lakh.

Incomes Exempt from


Tax

Daily Allowance of Lawmakers [Sec 10(17)]


Section 10 (17) provides exemption to MPs and State Legislatures in
respect of following allowances:
Nature of Allowance

Exemption in the
case of Members of
Parliament

Exemption in the
case of Members of
State Legislature

Case -1

Daily Allowance

Entire Amount

Entire Amount

Case-2

Any other allowances


received by MPs under
MP (Constituency
Allowance) Rules, 1986

Entire Amount

NA

Case-3

Constituency allowance
received by Members of
State Legislature

NA

Entire Amount from


the assessment year
2007-08

The expression Local


Authority means Panchayat
and Municipalities as
referred to in Articles 243(d)
and 243P(e), legally entitled
to or entrusted by the
Government of India, with
the control of a Municipal or
a local fund.

Exemptible Income of Local Authority [Sec 10(20)]

Income under the heads


Income from House
Property, Capital Gains
or Income from other
sources

Income from business


carried on by it , which
accrues or arises from the
supply of a commodity or
services (not water or
electricity) within its own
jurisdictional area

Income from business


from supply of water or
electricity within or
outside its own
jurisdictional area

Except the income from supply of a


commodity/service (other than water & electricity)
outside its own jurisdiction.

Specified News Agency

A news agency that


applies its income or
accumulates it for
application solely for
collection and
distribution of news.
ANI and PTI are few of
the specified news
agencies.

Income from Specified News Agency [Sec 10(22B)]


Its Exemptible Income is applied or accumulated solely for
collection and distribution of news and does not distribute that
income in any manner to its members.
The notification granting exemption, will have effect not
exceeding 3 assessment years (including an assessment year
or years commencing before the date of issue of such notification)
If the Central Government is satisfied that a news agency under
this clause is not using or accumulating its income solely for
collecting and distributing the news, it may at any point, after
giving a reasonable opportunity of showing cause, rescind the
notification to such agency.

Applications
BBMP, had earned an income attributed to sale of pesticides as follows: Rs
4,50,000 from Bangalore and Rs 2,30,000 from Pune. What is the taxable income
in this case?
Rs 2, 30, 000 is the taxable income as the income from supply of
commodity/services is exempt under a local authoritys own jurisdiction but
taxable (other than Water & Electricity) for outside its jurisdiction.

Out of the Rs 10,00,000 the Press Trust of India earned as income, it allocates Rs
4,00,000 for its operation of fielding correspondents and the rest as a
remuneration for its members. How much is it liable for exemption?
It is liable to be exempted for Rs 4,00,000 as the income allocated for sole
purpose of collection or distribution of news by a specified news agency is
Tax-Exempt.

Educational Scholarship (Sec.10 (16))


Finance by Government not necessary.

No further enquiry, if object is to meet cost of education

Incidental expenses.

Application
X studying at a Private University receives a Government Scholarship of Rs
30, 000 and receives another educational scholarship of Rs 1,00,000 from a
non-governmental trust. His annual fees is Rs 1,00,000. How much is
taxable ?
Nil. Because Cost of Education takes within its ambit not only Tuition fees but all the
other incidental expenses incurred for acquiring education

Agricultural Produce market committee


Section 10 (26AAB) provides for tax exemption with respect to the
income of an Agricultural Produce Marketing Committee or Board which
has been constituted under any law for the purpose of regulating the
marketing of agricultural produce.
Applicability: This amendment has been made applicable with effect
from 1st April, 2009 and shall accordingly apply for assessment year
2009-10 and subsequent assessment years.
Any income accruing or arising to Coffee Board, Rubber Board,
Tea Board, Tobacco Board, Agricultural and Processed Food
Products Export Development Authority, Spices Board , and
Marine Products Export Development Authority is exempt from
tax .

Subsidy received by planters (Sec. 10 [31])


Subsidies received by the assesse engaged in the business of growing
and manufacturing rubber, coffee, cardamom, (or such commodities
notified by the Central Govt. is exempt from tax. The subsidy should
be received from or through the concerned Board under any scheme
for replantation or for rejuvenation or consolidation of areas used for
their cultivation.

If the income of an individual includes the income of his minor child in


terms of section 64(1A), such an individual is entitled to exemption of
Rs 1,500 in respect of each minor child if the income of such minor is
includible under section 64(1A). The exemption cannot exceed the
income of any minor so includible in the total income of the individual.

References

52nd Edition, Taxmanns Direct Taxes,


Singhania & Singhania
Income Tax Government Portal
TaxGuru.in
YourFinanceBook.com

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