Income Tax Exemptions

 

 

Ø       Exempted incomes are those incomes which are not taxable at all

Ø       It means that exemptions covers all those incomes earned, but they do not form part of your taxable income

Ø       Exemptions are covered under Section10 of the IT Act

 

Some of the important exemptions are as under:

 

1. Section 10(10D):

 

Any sum received under a life insurance policy including sum allotted by way of bonus on such policy is exempted. This exemption does not apply to :

 

Ø       Keyman insurance policy

Ø       Insurance policy issued on or after 01/04/2003 in respect of which the premium payable for any of the years exceeds 20% of the actual sum assured.

 

2. Section 10(15):

 

Income by way of interest, premium on redemption or other payment securities, bonds or certificates etc., notified for this purpose. Few of the notified investments are as follows:

 

Ø       12 year NSC

Ø       Treasury savings deposit certificates

Ø       National plan certificates

Ø       Post office cash certificates

Ø       National plan savings certificates

Ø       Post office NSC

Ø       Post office savings bank account etc.

 

3. Section 10(32):

 

In case of an individual, being a parent of a minor child, the parent can avail an exemption of Rs. 1,500 in respect of income of the each minor child.

 

4. Section 10(34):

 

Any income received by way of dividends is totally exempt in the hands of the receiver.

 

5. Section 10(35):

 

Any income in respect of units of a mutual fund is exempt.

 

6. Section 10(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 1-03-03 to 1-03-04 will be exempt from tax, provided such transfer takes place after holding the shares for a period of 12 months or more.

 

7. Section 10(13A):

 

House rent allowance granted to an assessee by his employer is exempt to the extent of least of the following:

 

Ø       Excess of rent paid over 10% of salary

Ø       If accommodation is provided in the metros, 50% of salary, Else 40% of salary

Ø       Actual allowance received for the period

 

However, this exemption is not available to an assessee who lives in his own house or in a house in which he does not pay any rent.