Section 10

CHAPTER III

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) ²⁴[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 ;

²⁵[(3) any receipts which are of a casual and non-recurring nature, ¹[not being winnings from lotteries, to the extent such receipts do not exceed one thousand rupees in the aggregate] :

Provided that this clause shall not apply to—

(i)   capital gains chargeable under the provisions of section 45 ; or

(ii)  receipts arising from business or the exercise of a profession or occupation ; or

(iii)  receipts by way of addition to the remuneration of an employee ;]

²(4)  in the case of a non-resident, ³[any income from interest on such securities as the Central Government may, by notification in the Official Gazette, specify in this behalf, or] any income from interest on, or from premium on the redemption of, any bonds issued by the Central Government under a loan agreement between the Central Government and the International Bank for Reconstruction and Development or under a loan agreement between the Central Government and the Development Loan Fund of the United States of America or by any industrial under-taking or financial corporation in India under a loan agreement with the said Bank or Fund, as the case may be, which is guaranteed by the Central Government ;

⁴[(4A)  in the case of a person resident outside India, any income from interest on moneys standing to his credit in a Non-resident (External) Account in any bank in India in accordance with the Foreign Exchange Regula-tion Act, 1973 (46 of 1973), and any rules made thereunder.

Explanation : In this clause, ⁵“person resident outside India” shall have the meaning assigned to it in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973) ;]

⁶[(4B)  ^6ain 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 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 Regulation Act, 1973 (46 of 1973), 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 grand-parents, 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 Regulation Act, 1973 (46 of 1973), and any rules made thereunder ;]

⁷[(5)  subject to such conditions as the Central Government may prescribe, in the case of an individual being a citizen of India,—

(i)    in relation to any assessment year not being an assessment year commencing after the 1st day of April, 1970, the value of any travel concession or assistance received by or due to such individual,—

(a)  from his employer for himself, his spouse and children, in connection with his proceeding on leave to his home-district in India;

(b)  from his employer or former employer for himself, his spouse and children, in connection with his proceeding to his home-district in India after retirement from service or after the termination of his service ;

(ii)   in relation to any other assessment year the value of any travel concession or assistance received by or due to such individual,—

(a)   from his employer for ⁸[himself and his family], in connection with his proceeding on leave to any place in India ;

(b)  from his employer or former employer for ⁸[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 :

^8aProvided that the amount exempt under item (a) or item (b) of this sub-clause ⁹[shall not, except in such cases and under such circumstances as may be prescribed having regard to the travel concession or assistance granted to the employees of the Central Government, exceed] the value of the travel concession or assistance which would have been received by or due to the individual in connection with his proceeding to his home-district in India on leave or, as the case may be, after retirement from service or after the termination of his service.]

¹⁰[Explanation : For the purposes of this sub-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;]

¹¹[(5A)  in the case of an individual who is not a citizen of India and is a non-resident, who comes to India solely in connection with the shooting of a cinematograph film in India by the individual, firm or company referred to in clause (d) of the Explanation to clause (i) of sub-section (1) of section 9, any remuneration received by him for rendering any service in connection with such shooting ;]

(6)   in the case of an individual who is not a citizen of India,—

¹²[(i)   ^12asubject to such conditions as the Central Government may pres-cribe, passage moneys or the value of any free or concessional passage received by or due to such individual—

(a)  from his employer for himself, his spouse and children, in connection with his proceeding on home leave out of India ;

¹³[(aa)  from his employer, for his children having full time education in any educational institution outside India, in connection with their proceeding to India during vacation ;]

(b)  from his employer or former employer for himself, his spouse and children, in connection with his proceeding to his home country out of India after retirement from service in India or after the termination of such service ;]

(ii)  the remuneration received by him as ambassador, high commissioner, envoy, minister, charge d'affaires, commissioner, counsellor or the secretary, adviser or attache of an embassy, high commission, legation or commission of a foreign State, for service in such capacity ;

(iii)   the remuneration received by him as a consul de carriere, whether called a consul-general, consul, vice-consul, consular agent, proconsul or by any other name, of a foreign State for service in such capacity ;

(iv)   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), if the remuneration of the corresponding officials, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country ;

(v)    the remuneration received by him as a member of the staff of any of the officials referred to in clause (ii), clause (iii) or clause (iv), if the member—

(a)  is a subject of the country represented ;

(b)  is not engaged in any business or profession or employment in India otherwise than as a member of such staff ;

and further, where the individual is a member of the staff of any official referred to in clause (iv), if the country represented has made corresponding provisions for similar exemptions in the case of members of the staff of the corresponding officials of the Government;

(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 ;

¹⁴[(via)   the remuneration received by him as an employee of, or a con-sultant to, an institution or association or a body established or formed outside India solely for philanthropic purposes, for services rendered by him in India in connection with such purposes ; pro-vided that such institution or association or body and the purposes for which his services are rendered in India are approved by the Central Government;]

^14a(vii)   the remuneration due to or received by him chargeable under the head “Salaries” for services rendered as a technician in the employment ¹⁵[(commencing from a date before the 1st day of April, 1971)] of the Government or of a local authority or of any corporation set up under any special law or in any business carried on in India, if he was not resident in any of the four financial years immediately preceding the financial year in which he arrived in India to the extent mentioned below—

(a)  where his contract of service ¹⁶[is approved by the Central Government before the commencement of his service or within one year of such commencement]—

(i) in the case of a technician who has special knowledge and experience in industrial or business management techni-ques, such remuneration due to or received by him during the period of six months commencing from the date of his arrival in India ;

(ii)  in the case of any other technician, such remuneration due to or received by him during the thirty-six months commencing from the date of his arrival in India, and where any such person continues ¹⁷[with the approval of the Central Government obtained before the 1st day of October of the relevant assessment year] to remain in employment in India after the expiry of the thirty-six months aforesaid and the tax on his income chargeable under the head ‘‘Salaries’' is paid by the employer to the Central Government [which tax in the case of an employer being a company may be paid notwithstanding anything contained in ¹⁸section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding ¹⁹[sixty] months following the expiry of the thirty-six months aforesaid;

(b)   in any other case, not being the case of a technician who has special knowledge and experience in industrial or business management techniques, such remuneration due to or received by him for the period of three hundred and sixty-five days in all commencing from the date of his arrival in India.

Explanation : ²⁰[For the purposes of this sub-clause,] “technician” means a person having specialised knowledge and experience in—

(i)  constructional or manufacturing operations, or in mining or in the generation or distribution of electricity or any other form of power, or

(ii)   industrial or business management techniques,

who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised ;

²⁰[(viia)  ^20awhere such individual renders services as a technician in the employment (commencing from a date after the 31st day of March, 1971) of the Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved for the purposes of this sub-clause by the prescribed authority or in any business carried on in India and the following conditions are fulfilled, namely, that—

(1)  the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India, and

(2)  the contract of his service in India is approved by the Central Government, the application for such approval having been made to that Government before the commencement of such service or within six months of such commencement,

the remuneration for such services due to or received by him, which is chargeable under the head “Salaries ”, to the extent mentioned below, namely :—

(A)  such remuneration due to or received by him during the period of twenty-four months commencing from the date of his arrival in India, in so far as such remuneration does not exceed an amount calculated at the rate of four thousand rupees per month, and where the tax on the excess, if any, of such remuneration for the period aforesaid over the amount so calculated is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)], also the tax so paid by the employer ; and

(B)  where he continues, with the approval of the Central Government obtained before the 1st day of October of the relevant assessment year, to remain in employment in India after the expiry of the period of twenty-four months aforesaid and the tax on his income chargeable under the head “Salaries” is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in ²¹section 200 of the Companies Act, 1956 (1 of 1956)], the tax so paid by the employer for a period not exceeding twenty-four months next following the expiry of the first-mentioned twenty-four months :

²²[Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition specified in item (1) of this sub-clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing, erection or commissioning.]

Explanation : For the purposes of this sub-clause, “technician” means a person having specialised knowledge and experience in—

(i)  constructional or manufacturing operations, or in mining or in the generation of electricity or any other form of power, or

(ii)   agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, ²³[or]

²³[(iii)   ^23asuch other field as the Central Government may, having regard to the availability of Indians having specialised knowledge and experience therein, the needs of the country and other relevant circumstances, by notification in the Official Gazette, specify,]

who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised ;]

(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 ;

²⁴[(ix)   any income chargeable under the head “Salaries” received by or due to him during the thirty-six months commencing from the date of his arrival in India for service rendered as a professor or other teacher in a University or ”;other educational institution, and where any such individual continues to remain in employment in India after the expiry of the thirty-six months aforesaid and the tax on his income chargeable under the head “Salaries” is paid by the University or other educational institution concerned to the Central Government, the tax so paid for a period not exceeding twenty-four months following the expiry of the thirty-six months aforesaid, provided in either case the following conditions are fulfilled, namely :—

(i)  such individual was not resident in any of the four financial years immediately preceding the financial year in which he arrived in India ; and

(ii)  his contract of service is approved by the Central Govern-ment—

(a)  on or before the 1st day of October, 1964, in the case of a professor or other teacher whose service commenced before the 1st day of April, 1964 ;

(b) before the commencement of his service or within one year of such commencement, in any other case ;]

²⁴[(x)   any sum due to or received by him, during the twenty-four months commencing from the date of his arrival in India, for undertaking any research work in India, provided the following conditions are fulfilled, namely :—

(a)  the research work is undertaken in connection with a research scheme approved in this behalf by the Central Government on or before the 1st day of October of the relevant assessment year ; and

(b)  such sum is payable or paid directly or indirectly by the Government of a foreign State or any institution or association or other body established outside India ;]

²⁵[(xi)   the remuneration received by him as an employee of the Govern-ment 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 (14 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 ;]

¹[(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 and approved by the Central Government, the tax on such income is payable, under the terms of such agreement, by Government or the Indian concern to the Central Government, the tax so paid.

Explanation : For the purposes of this clause,—

(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 ;]

(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 ment and the Government of a foreign State (the terms where of provide for the exemption given by this clause)—

(?)   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 out-side 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 ;

(9)   the income of any member of the family of any such individual as is referred to in clause (8) 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 ;

²[(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;

³(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 three years immediately preceding the year in which the gratuity is paid, subject to a maximum of ⁴[thirty-six thousand] rupees or twenty months’ salary so calculated, whichever is less :

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 ⁴[thirty-six thousand] rupees :

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 ⁴[thirty-six thousand] rupees 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 :

⁵[Provided also that the Central Government may, having regard to the maximum amount which may for the time being be exempt under sub-clause (i), increase, by notification in the Official Gazette, the limit of thirty-six thousand rupees, for all the three purposes for which it has been mentioned in the foregoing provisions of this clause, up to such maximum amount:

Provided also that in relation to cases in which the event (that is to say, retirement of the employee or his becoming incapacitated or termination of his employment or his death, as the case may be) on which gratuity is received had taken place before the 31st day of January, 1982, the proviso immediately preceding this proviso shall not apply and the remaining provisions of this clause shall have effect as if for the words “thirty-six thousand rupees”;, at the three places where they occur, the words “thirty thousand rupees” had been substituted.]

Explanation : In this clause, “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule ;]

⁶[(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 ⁷[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 :

Provided that the maximum limit of payment specified in sub-clause (ii)(a) or sub-clause (ii)(b) shall not apply in respect of any such payment made before the 19th day of August, 1965 ;]

⁸[(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 ⁹[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 ¹⁰[whether] on superannuation or otherwise as does not exceed six months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his' retirement ¹⁰[whether] on super-annuation or otherwise, or thirty thousand rupees, whichever is less :

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 thirty thousand rupees :

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 thirty thousand rupees, 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 :

Provided also that the Central Government may, having regard to the maximum amount which may for the time being be exempt under sub-clause (i), increase, by notification in the Official Gazette, the limit of thirty thousand rupees, for all the three purposes for which it has been mentioned in the foregoing provisions of this sub-clause, up to such maximum amount :

Provided also that in relation to an employee retiring ¹⁰[whether] on superannuation or otherwise before the 1st day of January, 1982, the proviso immediately preceding this proviso shall not apply and the remaining provisions of this sub-clause shall have effect as if for the words “thirty thousand rupees”, at the three places where they occur, the words “twenty-five thousand live hundred rupees” had been substituted.

Explanation : For the purposes of sub-clause (ii),—

(i)   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 ;

(ii)   “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule ;]

¹¹[(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, ¹²[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 ¹³clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947) ; or

(ii)    fifty thousand rupees, 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;

¹⁴(c)  the expressions “employer” and “workman” shall have the same meanings as in the Industrial Disputes Act, 1947 (14 of 1947) ;]

(11)  any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies ¹⁵[or from any other provident fund set up by the Central Government and notified^15a by it in this behalf in the Official Gazette] ;

(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 ;

¹⁶[(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 oh 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 ;]

¹⁷[(13A) ^17aany 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 ¹⁸[(not exceeding ¹⁹[four] hundred rupees per month)] as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant considerations.]

²⁰[Explanation : For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where—

(?)    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)  any special allowance or benefit, not being in the nature of an entertainment allowance or other 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, to the extent to which such expenses are actually incurred for that purpose.

²¹[Explanation : For the removal of doubts, it is hereby declared that any allowance granted to the assessee 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 shall not be regarded, for the purposes of this clause, as a special allowance granted to meet expenses wholly, necessarily and exclusively incurred in the performance of such duties ;]

(15)  (i) monthly payment on the 15-Year Annuity Certificates issued by or under the authority of the Central Government or such other annuity certificates issued by or under the authority of that Government as that Government may, by notification in the Official Gazette, specify in this behalf, to the extent to which the amounts of the certificates do not exceed in each case the maximum amount which is permitted to be invested therein;

²²[(ia) annual payment on National Defence Gold Bonds, 1980;]

²³[(ib) premium on the redemption of Special Bearer Bonds, 1991 ;]

²⁴(ii) interest on Treasury Savings Deposit Certificates, Post Office Cash Certificates, Post Office National Savings Certificates, National Plan Certificates, Twelve-Year National Plan Savings Certificates and such other certificates issued by the Central Government as that Government may, by notification in the Official Gazette, specify in this behalf, ²⁵[interest on deposits in Post Office Savings Banks and bonus in respect of deposits under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959,] to the extent to which the amounts of such certificates or deposits do not exceed in each case the maximum amount which is permitted to be invested or deposited therein :

¹[Provided that where in the case of an assessee the interest on deposits in a Public Account of the nature referred to in item (3) in the Table below rule 3 of the Post Office Savings Banka Rules, 1965, exceeds two thousand two hundred and fifty rupees, the amount of interest on such deposits that shall not be included in the total income of the assessee under this sub-clause shall be two thousand two hundred and fifty rupees;]

²[(iia) ^2ainterest on fixed deposits under any scheme framed by the Central Government and notified by it in this behalf in the Official Gazette, to the extent to which the amounts of such deposits do not exceed, in each case, the maximum amount which is permitted to be deposited therein;]

³[(iib) ⁴[in the case of an individual or a Hindu undivided family,] interest on such ^4aCapital Investment Bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf;]

(iii) interest on securities held by the Issue Department of the Central Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949 ;

⁵[(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 the Explanation to clause (iii) of sub-section (5) of section 11 ;]

(iv) interest payable—

(a)     by Government or a local authority on moneys borrowed by it from ⁴[, or debts owed by it to,] sources outside India ;

^5a(b)     by an industrial undertaking in India on moneys borrowed by it under a loan agreement entered into 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 ;

^5b(c)     by an industrial undertaking in India on any moneys borrowed or debt incurred by it in a foreign country in respect of the purchase outside India of raw materials ⁴[or components] or capital plant and machinery, ⁶[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].

⁷[Explanation : 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;]

⁸[(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), ⁷[or the Export-Import Bank of India established under the Export-Import Bank of India Act, 1981 (28 of 1981),] 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, 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;]

⁸[(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 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 Taw 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;]

⁹[(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 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;

⁷[(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 approved by the Central Government for the purposes of 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, 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 ¹⁰[items (f) and (g)], the expression ¹¹“foreign currency” shall have the meaning assigned to it in the Foreign Exchange Regulation Act, 1973 (46 of 1973) ;]

(16)  scholarships granted to meet the cost of education;

(17)  any daily allowance received by any person by reason of his membership of Parliament or of any State Legislature or of any Committee thereof ¹²[or any allowance received by a member of either House of Parliament under the Members of Parliament (Additional Facilities) Rules, 1975];

¹³[(17A) any payment made, whether in cash or in kind, in pursuance of ¹⁴(awards for literary, scientific or artistic work or attainment or for service for alleviating the distress of the poor, the weak and the ailing], or for proficiency in sports and games, instituted by the Central Government, or by any State Government or approved by the Central Government in this behalf :

Provided that the approval granted by the Central Government shall have effect for such assessment year or years (including an assessment year or years commencing before the date on which such approval is granted) as may be ^14aspecified in the order granting the approval ;]

¹³[(17B) any payment made, whether in cash or in kind, 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 payment made, whether in cash or in kind, by the Central Government or any State Government in pursuance of gallantry awards instituted or approved by the Central Government;

¹⁵[(18A) any ex gratia payments made by the Central Government consequent on the abolition of privy purse ;]

(19)  ¹⁶[* * *]

¹⁷[(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 “Interest on securities”, “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 ¹⁸[(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] ;

¹⁹[(20A) any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both;]

(21)  any income of a scientific research association for the time being approved for the purpose of clause (ii) of sub-section (1) of section 35 which is applied solely to the purposes of that association :

²⁰[Provided that nothing contained in this clause shall apply if for any period during the previous year—

(i)  any sums by way of contributions received by the association are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in subsection (5) of section 11 ; or

(ii) any funds of the association invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983 ; or

²¹(iii) any shares in a company (not being a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) or a corporation established by or under a Central, State or Provincial Act) are held by the association after the 30th day of November, 1983 ;]

(22)  any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit;

²²[(22A) any income of a 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;]

^22a(23)  any income of an association or institution established in India having as its object the control, supervision, regulation or encouragement in India of the games of cricket, hockey, football, tennis or such other games or sports 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 ;

(ii) no part of the income of the association or institution is distributed in any manner to its members except as grants to any association or institution affiliated to it; and

^22a(iii) 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 ;

²³[(23A) any income (other than income chargeable under the head “Interest on securities” or “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^23a 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 ;]

²⁴[(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 ;]

²⁵[(23B) any income of an institution constituted as a public charitable trust or registered under the Societies Registration Act, I860 (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.

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) ¹“khadi” and “village industries” have the meanings respectively assigned to them in that Act;]

²[(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, ¹“khadi” and “village industries” have the meanings respectively assigned to them in the Khadi and Village Industries Commission Act, 1956 (61 of 1956) ;]

³[(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 ;]

⁴[(23C) any income received by any person on behalf of—

(i)  the Prime Minister’s National Relief Fund ; or

(ii) the Prime Minister’s Fund (Promotion of Folk Art) ; or

(iii) the Prime Minister’s Aid to Students Fund ; or

^4a(iv) any other fund or institution established for charitable purposes which may be notified by the Central Government in the Official Gazette, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States ;

^4b(v)  any trust (including any other legal obligation) or institution, being a trust or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be notified by the Central Government in the Official Gazette, 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 purposes thereof :

Provided that any notification issued by the Central Government under sub-clause (iv) or sub-clause (v) shall have effect for such assessment year or years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification ;]

(24) any income chargeable under the heads “Interest on securities”, “Income from house property” and “Income from other sources” of a registered Union within the meaning of the Indian 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 ;

(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 ;

⁵[(iv) any income received by the trustees on behalf of an approved gratuity fund ;]

⁶[(v) any income received—

(a)   by the Board of Trustees constituted under the Coal Mines Provident Fund 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;]

⁷[(26)  in the case of a member of a ⁸Scheduled 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 Nagaland, Manipur and Tripura or in the Union territories of Arunachal Pradesh and Mizoram 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 (18 of 1971)], any income which accrues or arises to him,—

(a) from any source in the areas, States or Union territories aforesaid, or

(b) by way of dividend or interest on securities ;]

⁹[(26A) any income accruing or arising to any person ¹⁰[* * *] from any source in the district of Ladakh or outside India in any previous year relevant to any assessment year commencing before the 1st day of April, ¹¹[1989], where such person is resident in the said district in that previous year :

Provided that this clause shall not apply in the case of any such person unless he was resident in that district in the previous year relevant to the assessment year commencing on the 1st day of April, 1962.

Explanation ¹²[1]: For the purposes of this clause, a person shall be deemed to be resident in the district of Ladakh if he fulfils the require-ments of sub-section (1) or sub-section (2) or sub-section (3) or subsection (4) of section 6, as the case may be, subject to the modifications that—

(i) references in those sub-sections to India shall be construed as references to the said district; and

(ii) in clause (i) of sub-section (3), reference to Indian company shall be construed as reference to a company formed and registered under any law for the time being in force in the State of Jammu and Kashmir and having its registered office in that district in that year.]

¹³[Explanation 2 : In this clause, references to the district of Ladakh shall be construed as references to the areas comprised in the said district on the 30th day of June, 1979 ;]

¹⁴[(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 either the Scheduled Castes or the Scheduled Tribes or of both.

Explanation : For the purposes of this clause, ¹⁵“Scheduled Castes” and “Scheduled Tribes” shall have the meanings respectively assigned to them in clauses (24) and (25) of article 366 of the Constitution ;]

(27)  ¹⁶[* * *]

¹⁷[(28) any amount adjusted or paid in respect of a tax credit certificate under the provisions of Chapter XXIIB and any scheme made thereunder ;]

¹⁸[(29) in the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities ;]

¹⁹[(30) ^19ain 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^19b for replantation or replacement of tea bushes ²⁰[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 Income-tax Officer, along with his return of income for the assessment year concerned or within such further time as the Income-tax 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).]

 

 

[AS AMENDED BY THE FINANCE ACT, 1986]