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EXCLUSIONS FROM TOTAL INCOME

EXCLUSIONS FROM TOTAL INCOME

Income Tax Act of 1961 certain income is exempted from tax either fully or partially. In other words it is a list of tax‐free income in the hands of the assessee and though it is an income of the year assessee is not required to pay tax on it.

1. Agricultural income Sec: ‐ For an income to be called an agricultural income conditions to be
satisfied are‐
(a) Rent or revenue should be derived from land.
(b) Land should be used for agricultural purpose.
(c) The land should be situated in India.

EXCLUSIONS FROM TOTAL INCOME

Examples: ‐
1. Income from lease of agricultural land.
2. Income from land used for agricultural purpose e.g. produce grown for consumption by man
(grains, vegetables or fruits) or animals (grass or pastures); cash crops (cotton jute etc.),
luxury items such as coffee, tobacco; crops grown for self‐consumption etc;
3. Compensation received from Insurance Company for damage to tea garden.
4. Income from growing flowers.
5. Salary or interest on capital received by a partner from a firm engaged in agriculture (as salary
or interest is only a way of distributing profits).

EXCLUSIONS FROM TOTAL INCOME
Examples of Non agricultural income: ‐
1. Income not directly derived from land: Interest on arrears of rent; dairy farming, poultry
farming, dividend received from a limited company having only agricultural income; salary of
a manager of an agricultural estate, rent for land used for storing crops; manufacture of salt
from sea‐water.
2. Income without performing basic agricultural operations: Sale of plants which have grown
spontaneously (on their own without any sowing of seeds e.g. mushrooms); sale of trees
which were already standing on the agricultural estate when purchased.
3. Income from produce sold by others and not by the cultivator: Sale of agricultural produce
received as interest on loan; received as price for water supplied to agricultural land; sale of
agricultural produce by a broker.

EXCLUSIONS FROM TOTAL INCOME
2. Receipt from H.U.F. Sec. 10 (2): Any amount received by member of H.U.F. out of the family income
is exempt from tax.

EXCLUSIONS FROM TOTAL INCOME
3. Partners Share in the profits of the firm Sec. 10 (2A): Partner of the firm is not required to pay tax in
individual capacity on his share in profits of the firm.

EXCLUSIONS FROM TOTAL INCOME
4. Leave Travel Concession Sec. 10 (5): It is the amount given by the employer to the employee for
traveling while on leave or to settle at any place in India after retirement.
Subject to certain restrictions this income is exempt from tax in respect of travel concession
received by an assessee from his employer or former employer:
(a) For himself & his family in connection with his proceeding to any place in India.
(b) For himself & his family in connection with his proceeding to any place in India after
retirement from service or after termination of his service.
However, exemption under this section is restricted to amount actually spent by the
assessee.

EXCLUSIONS FROM TOTAL INCOME
For the purpose of this section Family in relation to any individual means:
i. The spouse and children of the individual.
ii. The parents, brothers & sisters of the individual or any of them wholly or mainly dependent
on the individual.

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