The incomes enumerated below are exempt from tax under sections 10 and 13A :


• Agricultural income [clause (1)].

• Payments received from family income by a member of a Hindu undivided family [clause (2)].

• Share of profit from a firm [clause (2A)].

• Interest received by a non-resident from prescribed securities [clause (4)].
  

• Interest received by a person who is resident outside India on amounts credited in the "Non-resident (External) Account".
  

• In the case of an Indian citizen or a person of Indian origin who is a non-resident, the interest from notified Central Government securities [i.e., National Savings Certificates, VI and VII Issues] if such certificates are subscribed in foreign currency or other foreign exchange remitted from outside through official channels [clause (4B)].
  

• Leave travel concession provided by an employer to his Indian citizen employee [clause (5)].
  

• Tax paid by employer of non-resident Indian technician [clause (5B)].
  

• Value of concessional passage money received by a foreign national employee from his employer [clause (6)(i].
  

• Remuneration received by foreign diplomats of all categories [clause (6)].
  

• Salary received by a foreign citizen in India as an employee of a foreign enterprise provided his stay in India does not exceed 90 days [clause (6)(vi)].
  

• Salary received by a non-resident foreign citizen as a member of ship's crew provided his total stay in India does not exceed 90 days [clause (6)(viii)].
  

• Remuneration received by an employee, being a foreign national, of a foreign Government deputed in India for training in a Government establishment or public sector undertaking [clause (6)(xi)].
  

• Tax paid on behalf of foreign companies [clause (6A)].
  

• Tax paid by Government or an Indian concern in the case of a non-resident/foreign company [clause (6B)].
  

• Income arising to notified foreign companies from services provided in or outside India in projects connected with the security of India [clause (6C)].
  

• Foreign allowance granted by the Government of India to its employees posted abroad [clause (7)].
  

• Remuneration received from a foreign Government by an individual who is in India in connection with any sponsored co-operative technical assistance programme with a foreign Government and the income of the family members of such employee [clauses (8) and (9)].
  

• Remuneration/fees received by non-resident consultants and their foreign employers [clauses (8A) and (8B)].
  

• Death-cum-retirement gratuity subject to the limits specified in para 12.2 [clause (10)].
  

• Commuted value of pension subject to the limits specified in para 12.3 and with effect from the assessment year 1997-98, any payment received by way of connotation of pension by an individual out of annuity plan of LIC from a fund set up by that corporation [clause (10A)].
  

• Leave salary [clause (10AA)].
  

• Retrenchment compensation [clause (10B)].
  

• Compensation received by victims of Bhopal gas leak disaster [clause (10BB)].
  

• Compensation received from a public sector company at the time of voluntary retirement [clause (10C)].
  

• Tax on perquisite paid by employer [clause (10CC)].
  

• Any sum (including bonus) on life insurance policy (not being a Keyman insurance policy) [clause (10D)].
  

• Any amount from provident fund paid to retiring employee [clause (11)].
  

• Amount from an approved superannuation fund to legal heirs of the employee [clause (13)].
  

• House rent allowance subject to certain limits [clause (13A)].
  

• Special allowance granted to an employee [clause (14)].
  

• Income received by a public financial institution as exchange risk premium in certain cases [clause (14A)].
  

• Interest from certain exempted securities [clause (15].
  

• Payment made by an Indian company, engaged in the business of operation of an aircraft, to acquire an aircraft on lease from a foreign Government or foreign enterprise [clause (15A)].
  

• Scholarship granted to meet the cost of education [clause (16)].
  

• Daily allowance of a Member of Parliament or State Legislature (entire amount is exempt), and any other allowance subject to certain conditions [clause (17)].
  

• Rewards given by the Central or State Government 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 or gallantry awards approved by the Government [clauses (17A)].
  

• Pension and family pension of gallantry award winners [clause (18)].
  

• Ex gratia payments made by the Central Government consequent on the abolition of privy purse [clause (18A)].
  

• Notional property income of any one palace occupied by a former ruler [clause (19A)].
  

• Income of local authorities [clause (20)].
  

• Any income of housing boards constituted in India for planning, development or improvement of cities, towns or villages [clause (20A)].
  

• Any income of an approved scientific research association [clause (21)].
  

• Income of a notified news agency (i.e., PTI for the assessment years 1994-95 to 2002-03 and UNI for the assessment years 1994-95 to 2002-03) [clause (22B)].
  

• Income of an approved sports association [clause (23)].
  

• Any income (other than interest on securities, income from property, income received for rendering any specific services and income by way of interest or dividends) of approved professional bodies [clause (23A)].
  

• 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 [clause (23AA)].
  

• Any income of the pension fund set up by LIC or any other insurer approved by the Controller of Insurance or Insurance Regulatory and Development Authority [clause (23AAB)].
  

• Income of funds established for the welfare of employees [clause (23AAA)].
  

• Any income (other than business income) of a trust or a society approved by Khadi and Village Industries Commission [clause (23B)].
  

• Income of an authority whether known as Khadi and Village Industries Board or by any other name for the development of khadi and village industries [clause (23BB)].
  

• Income of the European Economic Community derived in India by way of interest, dividends or capital gains in certain cases under the European Community International Institutional Partners Scheme, 1993 [clause (23BBB)].
  

• Income arising to any body or authority established, constituted or appointed under any enactment for the administration of public, religious or charitable trusts or endowments or societies for religious or charitable purposes [clause (23BBA)].
  

• Any income of SAARC Fund for Regional Projects [clause (23BBC)].
  

• Any income of Secretariat of Asian Organisation of Supreme Audit Institutions [clause (23BBD)].
  

• Income received by any person on behalf of specified national funds, approved public charitable institutions, educational institute and hospital [clause (23C)].
  

• Income of a Mutual Fund set up by a public sector bank or public financial institution [clause (23D)].
  

• Income of the notified Exchange Risk Administration Fund (i.e., Exchange Risk Administration Fund set up by IDBI, IFCI and ICICI or set up by the Power Finance Corporation Ltd. [clause (23E)].
  

• Income of investor protection fund [clause (23EA)].
  

• Income of Credit Guarantee Fund Trust [clause (23EB)].
  

• Income by way of dividends and long-term capital gains of venture capital funds and venture capital companies [clause (23F)].

• Income by way of dividend or long-term capital gain of venture capital fund/undertaking [clause (23FA)].
  

• Income of venture capital fund/venture capital company [clause (23FB)].
  

• Dividend, interest, etc. of an infrastructure capital fund [clause (23G)].
  

• Income by way of interest on securities, property income and income from other sources of a registered trade union or an association of registered trade unions [clause (24)].
  

• Any income received by a person on behalf of statutory provident fund, recognised provident fund, approved superannuation fund, approved gratuity fund and approved coal-mines provident fund [clause (25)].
  

• Income of Employees' State Insurance Fund [clause (25A)].
  

• Income of a member of a scheduled tribe, residing in Nagaland, Manipur, Tripura, Arunachal Pradesh, Mizoram and Ladakh from any source arising by reason of his employment therein and income by way of dividend and interest on securities [clause (26)].
  

• Any income accruing or arising to any resident of Ladakh from any source therein or out of India up to the assessment year 1988-89, provided that such person was resident in Ladakh in the previous year relevant to the assessment year 1962-63 [clause (26A)].
  

• Any income of a statutory corporation or of a body/institution, financed by the Government formed for promoting the interest of scheduled castes/tribes [clause (26B)].
  

• Income of National Minorities Development and Finance Corporation [clause (26BB)].
  

• Income of ex-serviceman corporations [clause (26BBB)].
  

• Income of a co-operative society formed for promoting interest of members of scheduled castes/tribes [clause (27)].
  

• Income of the marketing authority from letting of godowns and warehouses [clause (29)].
  

• Income of certain Commodity Boards/Authorities [clause (29A)].
  

• Subsidy from the Tea Board for replanting or replacement of tea bushes or for rejuvenation or consolidation of areas used for

• cultivation of tea in India [clause (30)].
  

• Subsidy received by planters [clause (31)].
  

• Income of a minor child up to Rs. 1,500 in respect of each minor child whose income is includible under section 64(1A) [clause (32)].
  

• Capital gains on transfer of US 64 [clause (33)].
  

• Dividand on or after April, 2003 from domestic companies [clause (34)].
  

• Interest on units of a Mutual Fund on or after April 1, 2003 [clause (35)].
  

• Capital gains on transfer of listed equity shares [clause (36)].
  

• Any income of a political party by way of interest on securities, property income, income from other sources or income by way of political contributions [sec. 13A].

Section 10A makes special provision in respect of newly established undertakings in free trade zone, etc. The provisions given below are applicable from the assessment year 2001-02.

Conditions to be satisfied -In order to get deduction, an undertaking must satisfy the following conditions :

MUST BEGIN MANUFACTURE OR PRODUCTION IN FREE TRADE ZONE - It has begun or begins to manufacture/produce articles or things or computer software during the following years-

Free trade zones - Free Trade Zones are : Kandla Free Trade Zone, Santacruz Electronics Export Processing Zone, Falta Export Processing Zone, Madras Export Processing Zone, Cochin Export Processing Zone and Noida Export Processing Zone.

Electronic/software/hardware technology park - "Electronic hardware technology park" means any park set up in accordance with the Electronic Hardware Technology Park (EHTP) Scheme notified by the Government of India in the Ministry of Commerce and Industry.

Software technology park - "Software technology park" means any park set up in accordance with the Software Technology Park (STP) Scheme notified by the Government of India in the Ministry of Commerce and Industry.

For the purpose of section 10A or 10B, as long as a unit in the EPZ/EOU/STP itself produces computer programmes and exports them, it should not matter whether the programme is actually written within the premises of the unit. Where a unit in the EPZ/EOU/STP develops software sur place, that is, at the client's site abroad, such unit should not be denied the tax holiday under section 10A or 10B on the ground that it was prepared on-site, as long as the software is a product of the unit, i.e., it is produced by the unit.

a. any computer programme recorded on any disc, tape, perforated media or other information storage device; or
b. any customized electronic data or any product or service of similar nature, as may be notified by the Board, which is transmitted or exported from India to any place outside India by any means.
The Central Board of Direct Taxes has specified the following Information Technology enabled products or services, as the case may be, for this purpose namely : (i) Back-office Operations; (ii) Call Centres; (iii) Content Development or Animation; (iv) Data Processing; (v) Engineering and Design; (vi) Geographic Information System Services; (vii) Human Resource Services; (viii) Insurance Claim Processing; (ix) Legal Databases; (x) Medical Transcription; (xi) Payroll; (xii) Remote Maintenance; (xiii) Revenue Accounting; (xiv) Support Centres; and (xv) Web-site Services.

Should not be formed by splitting/reconstruction of business -

The industrial undertaking should not have been formed by the splitting up or reconstruction of a business already in existence. However, where an industrial undertaking is formed as a result of re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section the same will qualify for the tax concession.

The industrial undertaking should not have been formed by the transfer of a new business of machinery or plant previously used for any purpose. For this purpose, any machinery or plant which was used outside India by any person other than the assessee is not regarded as machinery or plant previously used for any purpose if the following conditions are fulfilled, namely:
a.such machinery or plant was not previously used in India;
b. such machinery or plant is imported into India from a foreign country; and
c. no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable in computing the total income of any person for any period prior to the installation of the machinery or plant by the assessee. Further, this tax concession is not denied in a case where the total value of used machinery or plant transferred to the new business does not exceed 20 per cent of the total value of the machinery or plant used in that business.

There must be repatriation of sale proceeds into india

Sale proceeds of articles or things or computer software exported out of India must be received in, or brought into India by the assessee in convertible foreign exchange during the previous year or within a period of six months from the end of the relevant previous year. For instance, for the assessment year 2002-03, the repatriation of the sale proceeds into India must be completed on or before September 30, 2002. The sale proceeds shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.

Extension of time limit

The aforesaid limit of six months can be extended by the Reserve Bank of India or such other competent authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange. AUDIT - Deduction under section 10A shall not be admissible with effect from April 1, 2001, unless the assessee furnishes in the prescribed form [Form No. 56F] along with the return of income, the report of an accountant certifying that the deduction has been correctly claimed in accordance with the provisions of section 10A.

Must not transfer ownership or beneficial interest in undertaking

If during any previous year, the ownership or the beneficial interest in the undertaking is transferred by any means, the deduction under section 10A shall not be allowed to the assessee for the assessment year relevant to such previous year and the subsequent years. For this purpose, in the case of a company, if 51 per cent of the voting right shareholders on the last day of the previous year in which the undertaking was set up do not continue to hold 51 per cent of the voting right shares on the last day of the relevant previous year, the company shall be deemed to have transferred its ownership.

EXCEPTIONS- The aforesaid rule is not applicable in the following cases-

1. Exception one - The above provisions are not applicable if there is any change in shareholding as a result of (a) its becoming company in which the public are substantially interested, or (b) disinvestment of the equity share by any venture capital company/fund. In other words, in these circumstances, such companies would not lose the benefit of the provisions of section 10A or 10B, even if there is a change in the shareholding pattern.
2. Exception two - It is applicable from the assessment year 2003-04. If a firm or a sole proprietary concern is succeeded by a company, the deduction under section 10A or 10B shall be allowed to the company. However, the benefit would be available only if-
• in the case of firm, the aggregate of the shareholding in the company of the partners of the firm is not less than 51 per cent of the total voting power in the company and their shareholding continues to be as such for a period for which the company is eligible for this deduction; or
• in the case of a sole proprietary concern, the shareholding of the sole proprietor in the company is not less than 51 per cent of the total voting power and his shareholding shall continue to remain as such for a period for which the company is eligible for this deduction
3. Exception three - From the assessment year 2004-05, these provisions are not applicable. In other words, even if there is a change of ownership, section 10A or 10B tax holiday will be available.

Amount of deduction - General provision

- If the aforesaid conditions are satisfied, the deduction under section 10A may, be computed as under :
90 per cent of [Profits of the business of the undertaking × Export turnover ÷ Total turnover of the business carried on by the undertaking]

• For this purpose, 'export turnover' means the consideration in respect of export of articles or things or computer software received in, or brought into India by the assessee in convertible foreign exchange within the prescribed period but does not include the following :
  a. freight;
  b. telecommunication charges;
  c. insurance attributable to the delivery of the articles or things or computer software outside India;
  d. expenses, if any, incurred in foreign exchange in providing the technical services outside India.

• The profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.
  PERIOD OF DEDUCTION - If the aforesaid conditions are satisfied, the assessee can claim deduction under section 10A from his total income, for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software.

• For the undertakings which have claimed exemption up to assessment year 2000-01 under the old section 10A, the deduction shall be available for the unexpired period of the 10 consecutive assessment years under the new section 10A.

• For an undertaking which was initially located in free trade zone or export processing zone and is subsequently located in a special economic zone by reason of conversion of such zones in to a special economic zone, the deduction shall be available for 10 years from the previous year in which the undertaking was first setup in such free trade zone or export processing zone.
• 'Relevant assessment year' means any assessment year falling within a period of ten consecutive assessment years referred to in section 10A.
• No deduction under section 10A shall be allowed to any undertaking from the assessment year 2010-11.

Amount of deduction - Special provision

The deduction under section 10A in the case of an undertaking which begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year 2003-04 (or any subsequent year) in any special economic zone, shall be 100 per cent of profits and gains derived from the export of such articles or things or computer software for a period of 5 consecutive assessment year (beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be) and thereafter, 50 per cent of such profits and gains for further 2 assessment years.

Power of the income-tax department to recompute profits -

In the following circumstances, the Assessing Officer has power to ignore the declared profit and to make necessary adjustments so as to arrive at the profits for the purpose of deduction under section 10A.

• If any goods held for the purpose of the eligible business is transferred to any other business carried on by the assessee, and vice versa, and in either case, the consideration if any for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of transfer, profits of the eligible business will be computed as if the transfer in either case had been made at the market value of the goods as on that date. If such a manner of computation is found, in the opinion of the Assessing Officer, to present exceptional difficulties, the Assessing Officer is authorised to compute the profits on such reasonable basis as he may deem fit. This power has been granted to the Assessing Officer with a view to curb any attempt to under-invoice or over-invoice goods by the assessee in order to inflate the profits of the eligible business. For this purpose, the expression "market value" is defined to mean the price that such goods would ordinarily fetch on sale in the open market.

• If it appears to the Assessing Officer that business between the assessee (engaged in eligible business) and any other person is so arranged that the business transacted between them produces to the assessee more than the ordinary profits that might be expected to arise in such eligible business, either due to the close connection between the assessee and that other person or due to any other reason, then the Assessing Officer shall take the amount of profit as may be reasonably deemed to have been derived therefrom.

Impact of claiming deduction under section 10A

One should note the following consequences :

• For the assessment year(s) succeeding the last assessment year for which the deduction is claimed under this section, deduction under section 32 and the expenditures under sections 35 and 36(1)(ix) would be considered as had been given full effect to for the period covered under the period of deduction. Thus, unabsorbed depreciation allowances or unabsorbed capital expenditure on scientific research or family planning are not allowed to be carried forward and set off against the income of assessment years following the period of deduction.

• The losses under section 72(1) or 74(1) or 74(3) are not allowed to be carried forward in assessment years succeeding the period of deduction. The deductions under section 80HH, 80HHA, 80-I, 80-IA or 80-IB shall also not be available to such undertakings after the expiry of tax holiday period.

• In the assessment year following period of deduction, the depreciation will be computed on the written down value of the asset as if the depreciation has actually been allowed in respect of each assessment year falling in the period of exemption.

Option available to new undertakings not to claim deduction under section 10A

The benefits under this section are optional. In case the assessee does not wish to claim the benefit under section 10A he has to file a declaration to this effect along with the return of income before the due date of filing the return for the first assessment year for which the deduction under this section is available to him.

Section 10B has been inserted with a view to providing incentive (similar to tax holiday available under section 10A) to hundred per cent export-oriented units. The provisions applicable from the assessment year 2001-02 are given below :

Conditions to be satisfied

An undertaking must satisfy the following conditions in order to avail the deduction under section 10B. IT MUST BE AN APPROVED HUNDRED PER CENT EXPORT-ORIENTED UNDERTAKING - The expression "hundred per cent export-oriented undertaking" means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951, and the rules made under that Act.

It must produce or manufacture articles or things Or computer software

It must manufacture or produce any article or thing or computer software. The expression computer software means-
a. any computer programme recorded on any disc, tape, perforated media or other information storage device; or
b. any customized electronic data or any product or service of similar nature as may be notified by the Board, which is transmitted or exported from India to any place outside India by any means.
The Central Board of Direct Taxes has specified the following Information Technology enabled products or services, as the case may be, for this purpose : (i) Back-office Operations; (ii) Call Centres; (iii) Content Development or Animation; (iv) Data Processing; (v) Engineering and Design; (vi) Geographic Information System Services; (vii) Human Resource Services; (viii) Insurance Claim Processing; (ix) Legal Databases; (x) Medical Transcription; (xi) Payroll; (xii) Remote Maintenance; (xiii) Revenue Accounting; (xiv) Support Centres; and (xv) Web-site Services.
IT SHOULD NOT BE FORMED BY SPLITTING/RECONSTRUCTION OF BUSINESS
IT SHOULD NOT BE FORMED BY TRANSFER OF OLD MACHINERY
THERE MUST BE REPATRIATION OF SALE PROCEEDS INTO INDIA
AUDIT REPORT SHOULD BE SUBMITTED IN FORM NO. 56G
MUST NOT TRANSFER OWNERSHIP OR BENEFICIAL INTEREST IN UNDERTAKING

Amount of deduction

If the aforesaid conditions are satisfied, the deduction under section 10B may be computed as under : 90 per cent [Profits of the business of the undertaking × Export turnover ÷ Total turnover of the business carried on by the undertaking]

• For this purpose, 'export turnover' means the consideration in respect of export of articles or things or computer software received in, or brought into India by the assessee in convertible foreign exchange within the prescribed period, but does not include the following :
  a. freight ;
  b. telecommunication charges;
  c. insurance attributable to the delivery of the articles or things or computer software outside India;
  d. expenses, if any, incurred in foreign exchange in providing the technical services outside India.
• Profits and gains derived from on site development of computer software outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.

Period of deduction

If the aforesaid conditions are satisfied, the assessee can claim deduction under section 10B, from his total income for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software.

• For the undertakings which have claimed exemption upto assessment year 2000-01 under the old section 10B, the deduction shall be available for the unexpired period of the 10 consecutive assessment years under the new section 10B.
• 'Relevant assessment year' means any assessment year falling within a period of ten consecutive assessment years referred to in section 10B.
• No deduction under section 10B shall be allowed to any undertaking from the assessment year 2010-11.

Power of income-tax department to recompute profits
Impact of availing deduction under section 10B

In computing the total income of the assessee of the assessment year immediately succeeding the deduction period the following points should be noted--

• The losses under section 72(1) or 74(1) or 74(3) are not allowed to be carried forward in assessment years succeeding the period of deduction. The deductions under section 80HH, 80HHA, 80-I, 80-IA or 80-IB shall also not be available to such undertakings after the expiry of tax holiday period.

• For the assessment year(s) succeeding the last assessment year for which the deduction is claimed under this section, deduction under section 32 and the expenditures under sections 35 and 36(1)(ix) would be considered as had been given full effect to for the period covered under the period of deduction. Thus, unabsorbed depreciation allowances or unabsorbed capital expenditure on scientific research or family planning are not allowed to be carried forward and set off against the income of assessment years following the period of deduction.

• In the assessment year following period of deduction, the depreciation will be computed on the written down value of the asset as if the depreciation has actually been allowed in respect of each assessment year falling in the period of deduction.

Option available to new undertaking not to claim deduction under section 10B -

Section 10B will be applicable to all eligible undertakings unless the assessee opts out of scheme by making a declaration under sub-section (8) before the due date of furnishing return of income.

Section 10C provides special provisions in respect of certain industrial undertakings in North-Eastern Region for the assessment years 1999-2000 to 2002-03

Conditions -
In order to claim exemption under section 10C one has to satisfy the following conditions -

1. Should not be formed by splitting/reconstruction of business - The industrial undertaking should not have been formed by the splitting up or reconstruction of a business already in existence. However, where an industrial undertaking is formed as a result of re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section, the same will qualify for the tax concession.

2. Should not be formed by transfer of old machinery - The industrial undertaking should not have been formed by the transfer to a new business of machinery or plant previously used for any purpose. For this purpose, any machinery or plant which was used outside India by any person other than the assessee is not regarded as machinery or plant previously used for any purpose if the following conditions are fulfilled, namely :
a. such machinery or plant was not previously used in India;
b. such machinery or plant is imported into India from a foreign country; and
c. no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable in computing the total income of any person for any period prior to the installation of the machinery or plant by the assessee.
Further, this tax concession is not denied in a case where the total value of used machinery or plant transferred to the new business does not exceed 20 per cent of the total value of the machinery or plant used in that business.

3. Must begin production in North-Eastern Region - The assessee must begin manufacture or production of any article or thing after March 31, 1998 in any Integrated Infrastructure Development Centre or Industrial Growth Centre located in the North- Eastern Region.
"Integrated Infrastructure Development Centre" means such centres located in the States of the North- Eastern Region, which the Central Government may, by notification in the Official Gazette, specify for this purpose.
"Industrial Growth Centre" means such centres located in the States of the North-Eastern Region, which the Central Government may by notification in Official Gazette, specify for this purpose.

Amount and period of exemption -

If the aforesaid conditions are satisfied, then a complete tax exemption is available in respect of 10 consecutive assessment years beginning with assessment year relevant to the previous year in which the industrial undertaking begins to manufacture/produce articles or things. However, no deduction under section 10C will be available from the assessment year 2004-05.

Impact of claiming exemption under section 10C - Section 10C(4) provides the following-

1. In computing the total income of the assessee after the expiry of tax holiday period, the unabsorbed depreciation allowance under section 32(2), unabsorbed capital expenditure on scientific research under section 35 and unabsorbed capital expenditure under section 36(1)(ix) relating to the tax holiday period will not be taken into consideration
2. Unabsorbed business loss or loss under the head "Capital gains" relating to the tax holiday period will not be taken into account after the expiry of the tax holiday period.
3. After the expiry of tax holiday period, no deduction will be available under sections 80HH, 80HHA, 80-I, 80-IA, 80-IB and 80JJA.
4. Further, in computing the depreciation allowance on any asset in the assessment years following the tax holiday period, the written down value of the assets will be computed as if the assessee had claimed and been allowed the depreciation in accordance with the provisions of the Act during each one of the relevant assessment years.

Option available to new undertaking not to claim tax holiday under section 10C -

Section 10C will be applicable to all eligible undertakings unless the assessee opts out of scheme by making a declaration under sub-section (6) before the due date of furnishing return of income.

Deductions from total income [Secs. 80CCC to 80U]

The deductions specified in sections 80CCC to 80U are allowed from the gross total income in order to arrive at the net income. The aggregate amount of the deductions under these sections cannot, however, exceed the gross total income (after excluding long-term capital gain and incomes referred to in sections 115A, 115AB, 115AC, 115AD and 115D) of the assessee.

The salient features of the provisions of section 80D are given below :
Conditions - To get deduction under section 80D one should satisfy the following conditions-
1. The taxpayer is an individual (maybe resident/non-resident or Indian citizen/foreign citizen) or a Hindu undivided family (maybe resident or non-resident).
2. Insurance premium is paid in accordance with the scheme framed in this behalf by the General Insurance Corporation of India and approved by the Central Government or in accordance with a scheme framed in this behalf by any other insurer and approved by Insurance Regulatory and Development Authority.
3. The aforesaid premium is paid by cheque (maybe bearer, crossed or account payee cheque).
4. It is paid out of income chargeable to tax.
5. Mediclaim policy is taken on the health of the following persons-

• "Dependent parents" - Meaning of - Parents are "dependent" on son, if their own resources are not sufficient to support them even if they receive help from their other children, the test being whether the son's contribution is in whole or in part a means of maintaining the parents in the manner in which they have been living and whether they look forward to, and rely on, the continuance of the son's contribution to that end- Wende v. McManigal CCA NY 135 F 2d. 151,152. In other words parents' dependency on son need not be "dependency" to a great or considerable degree, though dependency must be actual ; question being whether the son's contribution was needed to provide parents with some of ordinary necessities of life suitable to persons in their class- Zedalis v. Jeddo Highland Coal Co. 172A, 169, 170,113 Pa Super 49.

• "Children" - Meaning of - The word "children" is commonly used to denote issue of the first generation only- New York Life Ins. Co. v. Beebe DC Md. 57F. Supp. 754, 757. AMOUNT OF DEDUCTION - If all the aforesaid conditions are satisfied, then the insurance premium paid or Rs. 10,000, whichever is lower, is deductible.

• The aforesaid limit has been increased to Rs. 15,000 with effect from the assessment year 2000-01 where the assessee or his wife or her husband, or dependant parents or any member of the family is a senior citizen (i.e., one who is resident in India and who is at least of 65 years of age at any time during the previous year) and the medical insurance premium is paid to effect or keep in force an insurance in relation to him or her. In order to get a deduction in excess of Rs. 10,000, one has to pay mediclaim insurance premium to effect or keep in force insurance in relation to a senior citizen as noted above.

The provisions of section 80DD as applicable from the assessment year 1999-2000 are given below-

Conditions - The following conditions should be satisfied-
1. The taxpayer is resident in India (maybe ordinarily resident or not ordinarily resident).
2. The resident taxpayer is an individual (maybe an Indian citizen or foreign citizen) or a Hindu undivided family.
3. The taxpayer has opted for any (or both) of the following options-

4. The above expenditure/deposit is made out of income chargeable to tax.
5. For the above purpose, a "handicapped dependent" is a person who satisfies the following points-

a. he is a relative of the individual or, as the case may be, is a member of the Hindu undivided family and is not dependent on any person other than such individual or Hindu undivided family for his support or maintenance [relative for this purpose is the husband, wife, brother or sister or any lineal ascendant or descendant of that individual];
b. he is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, being a permanent physical disability or mental retardation specified in the rules made by the Board for the purposes of section 80DD;
c. the permanent physical disability is certified by a physician, a surgeon, an oculist or a psychiatrist, as the case may be, working in a Government hospital; and
d. the permanent physical disability has the effect of reducing considerably such person's capacity for normal work or engaging in a gainful employment or occupation.

For this purpose, "Government hospital" includes a departmental dispensary whether full-time or part-time established and run by a Department of the Government for the medical attendance and treatment of a class or classes of Government servants and members of their families, a hospital maintained by a local authority and any other hospital with which arrangements have been made by the Government for the treatment of Government servants.

6. Under Option 2, the scheme provides for payment of an annuity or a lump sum amount for the benefit of a handicapped dependent in the event of the death of the individual or the member of the Hindu undivided family in whose name subscription to the scheme has been made.
7. Under Option 2, the assessee nominates either the handicapped dependent or any other person or a trust to receive the payment on his behalf, for the benefit of the handicapped dependent.

Amount of deduction - The amount of deduction is as follows-
Assessment year 2004-05 onwards - The amount deductible is a fixed deduction of Rs. 50,000 whenever the conditions of section 80DD are satisfied, irrespective of the amount incurred or deposited under Opinion 1 and/or opinion 2. A higher deduction of Rs. 75,000 shall be allowed, where such dependent is a person with severe disability under the Persons with Disability (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 having any disability over 80 per cent.

Assessment years 2000-01 to 2003-04 - The amount deductible is a fixed deduction of Rs. 40,000 whenever the conditions specified above are satisfied, irrespective of the amount incurred or deposited under Option 1 and/or Option 2.

For the assessment year 1999-2000 - The amount of deduction is -
a. the amount paid/deposited under Option 1 and/or Option 2;
b. Rs. 40,000,
whichever is less.

If handicapped dependent predeceases the taxpayer - If the handicapped dependent predeceases the individual or the member of the Hindu undivided family referred to above, an amount equal to the amount paid or deposited under section 80DD(1) shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year.

The provisions of section 80DDB are given below-

Conditions - One has to satisfy the following conditions-

1. The taxpayer is resident in India.
2. The taxpayer is an individual (maybe an Indian citizen or a foreign citizen) or a Hindu undivided family.
3. The taxpayer has incurred some expenditure for the medical treatment of a specified disease or ailment as prescribed in rule 11DD.
4. The expenditure is incurred for medical treatment of the assessee himself or dependent relative (i.e., husband, wife, brother or sister or any lineal ascendent or descendent of the taxpayer). If the taxpayer is a Hindu undivided family, the expenditure is incurred for the medical treatment of any member of the family.
5. The assessee shall have to submit a certificate in the prescribed form (i.e., Form No. 10-I) from a prescribed authority (i.e., any doctor registered with the Indian Medical Association with a post-graduate qualification).

Amount of deduction - The amount of deduction is as follows-
• From the assessment year 2004-05 onwards - The amount of deduction is Rs. 40,000 or the expenditure actually incurred, whichever is lower.

» Where the expenditure incurred is in respect of the assessee or his dependant or any member of a Hindu undivided family of the assessee and who is a senior citizen (i.e., an individual who is resident in India and who is at least 65 years of age at any time during the previous year), then Rs. 60,000 or actual expenditure, whichever is lower will be the amount of deduction.
» Deduction under this section shall be reduced by the amount received, if any, under an insurance from an insurer, or reimbursed by an employer.

• Assessment years 2000-01 to 2003-04 - If all the aforesaid conditions are satisfied, the amount of deduction is Rs. 40,000. The deduction to be allowed is a sum of Rs. 40,000 even though the expenditure actually incurred by the assessee is less than Rs. 40,000 or exceeds it. Moreover, where the expenditure incurred is in respect of the assessee or his dependant relative or any member of a Hindu undivided family of the assessee and who is a senior citizen (i.e., one who is resident and who is at least 65 years of age at any time during the previous year), then a fixed deduction of Rs. 60,000 will be available. Further, if any amount is received from an insurer for the medical treatment for the person mentioned in (4) supra, then the amount so received shall be deducted from the deduction otherwise available (i.e., Rs. 40,000 or Rs. 60,000, as the case may be).
For the assessment years 1997-98 to 1999-2000 - For the assessment years 1997-98 to 1999-2000, the amount of deduction is Rs. 15,000.

Specified diseases - For the purposes of section 80DDB, the specified diseases and ailments shall be as follows : (1) neurological diseases : (a) dementia, (b) dystonia musculorum deformans; (c) motor neuron disease, (d) ataxia, (e) chroea, (f) hemiballismus, (g) aphasia, (h) parkinsons disease; (2) cancer; (3) full blown acquired immuno-deficiency syndrome (AIDS); (4) chronic renal failure; (5) hemophilia; and (6) thalassaemia. The diseases mentioned at (1) shall be treated as chronic and protracted, if the disability has been certified to be 40 per cent and above.

The Deduction under section 80G is available to any taxpayer (maybe individual, company, firm or any other person) and calculated under the following three steps :

STEP 1 - GROSS QUALIFYING AMOUNT - Gross qualifying amount is the aggregate of the donations made to any of the institutions/fund. Donation made in kind shall not be included.
STEP 2 - NET QUALIFYING AMOUNT - Net qualifying amount is limited to 10 per cent of gross total income of the assessee as reduced by the following :

a. amount deductible under sections 80CCC to 80U (but not section 80G);
b. such incomes on which income-tax is not payable;
c. long-term capital gains; and d. incomes referred to in section 115A, 115AB, 115AC or 115AD.

Amount deductible - Net qualifying amount is eligible for deduction on the basis given below in column (3) of table infra-

Maximum amount - Where the aggregate of the sums mentioned in (v), (w), (x), (y), (z) (za) or (zb) supra exceeds 10 per cent of the adjusted gross total income, then the amount in excess of 10 per cent of the adjusted gross total income will be ignored while computing the aggregate of the sums in respect of which deduction is to be allowed.

Proof of payment - Proper proof of payment must be submitted to claim deduction-Golecha Properties (P.) Ltd. v. CIT [1988] 171 ITR 47 (Raj.). However, simply because a receipt which is produced before the Assessing Officer is defective (not affixed with revenue stamps) it does not automatically invalidate the donation itself.
A receipt issued by the donee-institute should be submitted to get the benefit of deduction. If, however, donations are made to the National Defence Fund, the Army Central Welfare Fund, Indian Naval Benevolent Fund, Air Force Central Welfare Fund, National Relief Fund, the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund, through the employer by a consolidated cheque, deduction will be available on the basis of certificate issued by DDO/employer in this behalf - Circular No. 777, dated July 1, 1999, Ciruclar No. 782, dated November 13, 1999 and Circular No. 7/2001, dated March 21, 2001.

In computing total income, an assessee is allowed a deduction in respect of expenditure towards payment of rent for any furnished or unfurnished accommodation occupied by him for the purpose of his own residence provided the following conditions are satisfied:

• He should be a self-employed person and/or a salaried employee who is not in receipt of house rent allowance at any time during the previous year.
• He or his spouse or minor child (including step child and adopted child) or the Hindu undivided family of which he is a member, should not own any residential accommodation in India or abroad. Under the modified condition applicable from the assessment year 1984-85, the deduction under section 80GG is denied only where the taxpayer, his spouse or minor child or the Hindu undivided family of which he is a member, owns any residential accommodation at the place where the taxpayer resides, performs the duties of his office, or employment or carries on his business or profession. Where, however, the taxpayer owns any residential accommodation at any other place and the concession in respect of self-occupied house property under section 23(2)(a) or 23(4)(a) is claimed by him in respect of such accommodation, no deduction is allowed in respect of the rent paid, even if he does not own any residential accommodation at the place where he ordinarily resides, performs the duties of his office or employment or carries on his business or profession.
• The assessee should file a declaration in Form No. 10BA regarding the expenditure incurred by him towards payment of rent.

Amount of deduction - The amount deductible under this section is the least of the following amounts:
a. Rs. 2,000 per month for the assessment year 1987-88 onwards;
b. 25 per cent of total income (excluding long-term capital gain and income referred to in section 115A or 115D but before making any deduction under this section) (this limit was 15 per cent up to the assessment year 1986-87); or
c. the excess of actual rent paid over 10 per cent of total income (after excluding long-term capital gain and income referred to in section 115A or 115D but before making any deduction under this section).

An assessee (other than an assessee whose gross total income includes income chargeable under the head "Profits and gains of business or profession") is entitled to deduction in the computation of his total income in respect of the following payments/donations :

• Sums paid to a scientific research association which has as its object the undertaking of scientific research, or to a university, college or other institution to be used for scientific research where such association, university, college or institution has been approved by the prescribed authority for the purpose of section 35(1)(ii).

• Sums paid to a university, college or other institution to be used for research in social science or statistical research provided such university, college or institution is approved for the purpose of section 35(1)(iii) [applicable from the assessment year 1992-93 onwards].
• Sums paid to an approved association or institution which has as its object the undertaking of any programme of rural development to be used for carrying out any such programme approved under section 35CCA.
• Sums paid to an approved association or institution which has as its object the training of persons for implementing programmes of rural development.
• Sums paid to a public sector company, local authority or an approved association or institution for carrying out any eligible project or scheme, referred to in section 35AC [applicable from the assessment year 1992-93 onwards].
• Sum paid (before April 1, 2002) to an approved association or institution, which has as its object the undertaking of any programme of conservation of natural resources (or of afforestation, with effect from the assessment year 1991-92), to be used for carrying out any programme approved under section 35CCB.
• With effect from the assessment year 1983-84, any sum paid towards notified rural development fund [i.e., National Fund for Rural Development notified vide Notification No. GSR 84(E), dated February 28, 1984].
• With effect from the assessment year 1991-92, sum paid (before April 1, 2002) to notified fund for afforestation.
• Sums paid to notified National Poverty Eradication Fund (applicable from the assessment year 1996-97).

Where deduction under this section is claimed and allowed, deduction will not be allowed in respect of the same payment under any other provision of the Act for the same or any other assessment year.

Deduction in respect of profits and gains from newly set up industrial undertakings or hotels under sections 80HH and 80HHA -