Interest incomes which are exempted from Income Tax

There are several interests which are exempted from income tax u/s 10 of income tax act. These are as follows.

1-  Compensation received on account of disaster:- under section 10(10bc) of income tax act any amount of compensation received or receivable by an individual or his legal heir on account of disaster from either state or central government is not to be included in total income.

2-  Proceeds of LIP and Bonus on such policy:- under section 10(10D) OF INCOME TAX ACT ANY SUM RECEIVED UNDER A LIFE INSURANCE POLICY AND ANY SUM ALKLOCATED BY WAY OF BONUS ON SUCH POLICY IS FULLY EXEMPT.

3-  Interest from certain investment:- interest from certain investment are exempted from income tax such as

-    Interest on bonds as central government may have notified prior to June 1 2002 under section 10(15) (iib).

-    Interest on relief bonds subscribed by individual or H.U.F.

-    Interest on NRI bonds notified prior to June 1 2002 under section 10(15) (iid) of income tax act.

-    Interest on securities payable to central bank of Ceylon under section 10(15) (iii) of income tax.

-    Interest payable by any scheduled bank in India to any foreign bank performing central banking functions outside India under section 10(15)(iia).

-    Interest on bonds and debenture of a public sector company under section 10(15) (iv) (h).

-    Interest payable on retirement deposits of a government employee under section 10(15) (iv) (i).

-    Interest on securities and deposits for benefits of Bhopal Gas Victims under section 10(15) (v) of income tax.

-    Interest on gold deposit bonds sec 10(15) (vi).

-    Interest on notified bonds of a local authority sec 10(15) (vii).

-    Interest on deposits made by NRI or NOR after 31 March 2005 in an offshore banking unit under section 10(15) (viii) r.w. Special Economic Zone Act.

1-     Interest on foreign loans:- interest on foreign loans is also exempted in the cases of

-     Interest payable to Nordic investment bank under section 10(15)(iiib)

-     Interest payable to European investment bank under section 10(15)(iiic).

-    Interest payable on foreign loans and deposits taken prior to 1 June 2001.

-    Interest payable by a scheduled bank to a non resident or NOR on deposits in foreign currency under section 10(15)(iv)(fa).

-    Interest payable by a public company on money borrowed by it in foreign currency from sources outside India under a loan agreement approved by the central government under section 10(15)(iv)(g).
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