Section 11 of the Income Tax Act 2025

Section 11 of the Income Tax Act, 2025, states that any income listed in Schedules II, III, IV, V, and VI will not be included when calculating the total income of any person for a tax year. However, if the income does not meet the conditions set out in the specific schedules, it will be subject to tax for that tax year.

In the Income Tax Act, 2025, Section 11 is actually pretty brief and contains only a few basic provisions. The detailed terms and conditions regarding exempt income and the various conditions under which these exemptions can be availed are mentioned separately in 5 separate schedules. So, to get a clear understanding of Section 11, it must be concurrently read with the applicable schedules.

The introduction of Section 11 is a major step toward streamlining the taxation process. Here are the key highlights of this section:

Section 11 of the new Income Tax Act, 2025, lists specific types of income that are excluded from taxable income. It means that taxpayers are not required to pay tax on that income.

For example, agricultural income, life insurance maturity proceeds, scholarships, provident fund withdrawals, etc. These exemptions help in reducing the tax burden on the taxpayers and promote tax savings and social welfare.

Section 11 of the new Income Tax, 2025, in terms of length is much shorter than the earlier Section 10 of the Income Tax Act, 1961. This is because the income exemptions applicable under Section 11 are separately mentioned in various schedules of Income Tax Act, 2025. This is different from the earlier Section 10 of Income Tax Act, 1961 that featured multiple subsections that lists exemptions as well as applicable conditions regarding applicability.

The specific schedules list the income that is exempt from taxation including those offered due to term insurance tax benefits. Given below are the specific schedules and their purpose:

Schedule II of Section 11 of the new Income Tax, 2025, lists the types of income that are included in the total income for taxation in a given tax year. Listed below are the types of income that are exempt from taxation:

There are certain conditions to claim the exemptions under Section 11 of the Income Tax Act, 2025. They are as follows:

• The income must be included in the categories listed in Schedules II, III, IV, V, and VI.
• The income satisfies the conditions and limits specified in the applicable schedules.
• If applicable terms and conditions specified in the schedule are not satisfied, such income is included as part of taxable income for the applicable tax year. In this case, the income may be taxed as per the income tax slab rate or other tax rate as specified in the Income Tax Act, 2025.

Section 11 of the Income Tax Act, 2025, does not directly mention the different categories of taxpayers who are eligible to claim tax exemption for eligible income specified under this section. This is mentioned under the schedules referenced in Section 11 including Schedule III, IV, V, VI and VII.

Based on the information provided in these schedules, the following are key categories of taxpayers who are eligible to claim tax exemption under Section 11:

• Individual Tax Payers including Residents, Non Resident Indians, Not Ordinary Resident, etc.
• Hindu Undivided Family (HUF)
• Foreign Nationals including employees of a foreign government
• Foreign Companies
• European Economic Community
• Investment Fund and unit holders of investment funds
• Non-Individual entities such as Business Trust, Venture Capital Company, etc.
• Various Funds including pension funds set up by entities such as Central Government, Life Insurance Corporation of India, Armed Forces of India, etc.

Note: The above list is for illustrative purposes only and not exhaustive. Please take the help of a tax expert or chartered accountant for additional details.

Section 11 of the new Income Tax Act, 2025, replaces Section 10 of the Income Tax Act, 1961. Here are the major differences between the two sections:

Therefore, Section 11 aims to provide a clear and easy analysis of income that is not part of total income for taxation purposes. Additionally, the section explicitly mentions that if the conditions mentioned in the schedules are not satisfied, the income will become taxable. This concept was not explicitly mentioned in Section 10 of the Income Tax Act, 1961.

The Government of India introduced Section 11 of the new Income Tax Act, 2025, to simplify tax laws, improve the readability of income exemptions, and make better updates through schedules. The new act has a better legal structure and is simple to refer to through schedules, making it easier for taxpayers to understand key taxation details.

The exempted income mentioned in different schedules of Section 11 of the new Income Tax Act, 2025, is treated as follows:

• The income is not included in the total taxable income of the taxpayer in the given tax year.
• However, the income may still need to be reported at the time of Income Tax e-filing by the taxpayers.
• The income does not attract income tax liability.

Section 11 of the new Income Tax Act, 2025, allows taxpayers to legally reduce their taxable income through certain exemptions. For example, investing in life insurance policies, contributing to provident funds, using government savings schemes, and receiving scholarships or education grants.

Thus, opting for these tax saving investments allows for tax exemptions and better tax-planning opportunities. Section 11 of the Income Tax Act 2025 replaces Section 10 of the Income Tax Act 1961, but the transformation is mainly structural rather than substantive. It means that all the exemptions are transferred to the schedules, rather than listing all the incomes directly in the section.

Additionally, all income types exempt from taxation are largely the same. Overall, the new act focuses on simple drafting and structural reorganisation.