In respect of private sector employees, however, gratuity received on retirement or on becoming incapacitated or on termination or any gratuity received by his widow, children or dependants on his death is exempt subject to certain conditions. Under the provisions of Section 10(10) of the IT Act, any death-cum-retirement gratuity of a government servant is completely exempt from income tax. This provision can be taken advantage of by the citizens of India who are in government service so that they can accumulate tax-free perquisites and allowances received outside India. Receipts from Hindu undivided family (HUF)Īny sum received by an individual as a member of a Hindu undivided family, where the said sum has been paid out of the income of the family, or, in the case of an impartible estate, where such sum has been paid out of the income of the estate belonging to the family, is completely exempt from income tax in the hands of an individual member of the family under Section 10(2).Īny allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India, rendering service outside India, are completely exempt from tax under Section 10(7). The manner of calculating tax on total income and agricultural income, is explained in the following illustration:Ģ. IT on aggregated income of Rs 202,000 (Rs 162,000 + Rs 40,000): Rs 200Īgricultural income which fulfils the above conditions is completely exempt from tax. On the next Rs 2,000 of taxable non-agricultural income 10%: Rs 200 On the next Rs 40,000 of agricultural income (falling under 10% slab): Nil On the first Rs 1,60,000 of taxable non-agricultural income: Nil The income tax payable by him will be computed as under: The manner of calculating tax on total income and agricultural income, is explained in the following illustration: Illustrationįor the assessment year 2010-2011 a male individual has a total income from trading in cloth amounting to Rs 162,000 besides, he has earned Rs 40,000 as income from agriculture. However, for individuals or HUFs when agricultural income is in excess of Rs 5,000, it is aggregated with the total income for the purposes of computing tax on the total income in a manner which results into "no" tax on agricultural income but an increased income tax on the other income.Īgricultural income which fulfils the above conditions is completely exempt from tax. Under the provisions of Section 10(1) of the Income Tax Act, agricultural income is fully exempt from income tax. However, he cannot tax you on the following 14 important items of income and receipts, as they are fully exempt from income tax and which a resident individual Indian assessee can use with profit for the purpose of tax planning. In a few months' time the taxman will coming knocking on your door.