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Tax Planning

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EXEMPTIONS

Exempted incomes are those incomes which are not taxable at all
It means that exemptions covers all those incomes earned, but they do not form part of your taxable income
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 :

Keyman insurance policy
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:

12 year NSC
Treasury savings deposit certificates
National plan certificates
Post office cash certificates
National plan savings certificates
Post office NSC
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:

Excess of rent paid over 10% of salary
If accommodation is provided in the metros, 50% of salary, Else 40% of salary
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.