Chapter III - Incomes Which Do Not Form Part of Total Income
Section 11
Section 11: incomes not to be included in total income
Section 11 is the umbrella provision for exemptions under the Income-tax Act, 2025. Rather than listing exempt income items directly in the section (as the old "section 10" used to), this Act moves the actual list into Schedules II to VII, and Section 11 is the operative rule that gives those Schedules legal effect - conditional on the taxpayer meeting whatever conditions each Schedule specifies.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) In computing the total income of any person for a tax year under this Act, any income enumerated in Schedules II, III, IV, V and VI shall not be included, subject to fulfilment of conditions specified therein.
(2) Wherever the conditions referred to in the Schedules referred in sub-section (1) are not satisfied in any tax year in respect of any income enumerated in the said Schedules, such income shall be charged to tax under this Act on the total income for that tax year.
(3) The persons enumerated in Schedule VII shall, subject to fulfilment of the conditions specified therein, not be chargeable to tax under this Act on the total income for a tax year.
(4) Wherever the conditions referred to in Schedule VII are not satisfied in respect of the persons enumerated in the said Schedule in any tax year, the income of such person shall be charged to tax under the provisions of this Act for that tax year.
(5) The Central Government may make rules or issue notifications for the purposes of this section as specified in Schedules II, III, IV, V, VI and VII.
Introduction
The section is a gateway to scheduled exemptions. It distinguishes exempt income items in Schedules II–VI from persons in Schedule VII who may not be chargeable on total income. In both routes, the schedule's conditions control.
Key takeaways
Exempt-income schedules
Income listed in Schedules II to VI is excluded from total income only when the relevant scheduled conditions are met.
Exempt persons
Schedule VII separately lists persons not chargeable on total income, again subject to its conditions; failure of a condition can bring income into tax for that year.
Scheduled exemptions amended in August 2026
The Taxation and Other Laws (Amendment) Act, 2026 received assent on 17 August 2026. Its general commencement is deemed to be 1 April 2026; specified new entries for rough-diamond sales and component storage apply from 1 October 2026. Section 11’s text remains unchanged, but the current Schedules must be used.
Schedule IV now includes conditional exemptions for Foreign Institutional Investors and the Bank for International Settlements on Government-security interest and gains. The exemption depends on the prescribed information requirement; it is not a general exemption for every non-resident or every security.
The Act also changes the specified electronics-manufacturing and data-centre entries. The new rough-diamond and component-storage entries have their own person, transaction, location and information conditions and apply up to the tax year ending 31 March 2041. Check the precise entry instead of extending one exemption to an entire industry.
For business-trust distributions, Schedule V entry 5 no longer contains the former dividend exclusion in condition (b). The remaining interest and direct-real-estate-income exclusions still require separate classification. The corresponding special-purpose-vehicle surcharge change is a company-level rule, distinct from the unit holder’s exemption.
What Section 11 says
Section 11(1): in computing total income for a tax year, any income listed in Schedules II, III, IV, V and VI is not included, subject to the conditions specified in those Schedules.
Section 11(2): if the conditions in the relevant Schedule are not satisfied in a tax year for a particular item of income, that income becomes chargeable to tax for that tax year under the Act.
Section 11(3): the persons listed in Schedule VII are not chargeable to tax on their total income for a tax year, subject to the conditions specified in that Schedule.
Section 11(4): if the conditions in Schedule VII are not satisfied for a person listed in it, that person's income becomes chargeable to tax for that tax year under the Act.
Section 11(5): the Central Government may make rules or issue notifications for the purposes of this section, as specified in Schedules II, III, IV, V, VI and VII.
How this differs from the earlier Act
Under the Income-tax Act, 1961, exempt incomes were listed directly in section 10 with its many sub-clauses. Under this Act, that list has been reorganised into separate Schedules (II to VII), each apparently grouping related categories of exemption, and Section 11 is simply the switch that activates them - subject to whatever conditions each Schedule itself lays down.
This means the specific rupee limits, eligibility conditions, and categories of exempt income are not found in Section 11 itself, but in the text of the relevant Schedule.
A schedule-based eligibility check
Identify the exact Schedule and entry covering the income or person. Then test every condition for the relevant tax year; Section 11 itself supplies no blanket exemption.
If a condition is missed, subsections (2) and (4) direct the income back into taxation for that year. Check any rule or notification made under subsection (5).
Official August 2026 amendment
Step-by-step flow for applying Section 11
- 1
Is the income enumerated in Schedule II, III, IV, V or VI?
- No: Section 11(1) does not exclude it; skip to the Schedule VII check (step 3).
- Yes: Go to the next step.
- 2
Are the conditions in that Schedule fulfilled for this tax year?
The Schedules, and any rules or notifications made under Section 11(5), set the conditions.
- Yes: The income is not included in total income (Section 11(1)).
- No: The income is charged to tax for that tax year (Section 11(2)).
- 3
Is the person enumerated in Schedule VII?
- No: The person is taxed under the ordinary provisions.
- Yes: Go to the next step.
- 4
Are the Schedule VII conditions fulfilled for this tax year?
- Yes: The person is not chargeable to tax on total income for that year (Section 11(3)).
- No: The person's income is charged to tax for that year (Section 11(4)).
Practical checklist
Do
- Cite the specific Schedule entry and maintain evidence for every condition in the claim year.
- Check whether a rule or notification changes the entry's operation.
Avoid
- Do not treat every receipt of a Schedule VII person as automatically exempt without checking its conditions.
- Do not infer an exemption merely from the broad wording of Section 11.
Illustrative example
Worked example: an exclusion that depends on conditions
Hypothetical facts (illustration only, not a real taxpayer): An individual's income for a tax year is ₹10,00,000. Of this, ₹1,50,000 is a receipt enumerated in one of Schedules II to VI, available subject to conditions in that Schedule. The amount and the item are assumed; this example does not describe any particular Schedule entry.
Locate the entry
Identify the exact Schedule entry and its conditions, together with any rules or notifications issued under Section 11(5).
Conditions met
If all conditions are satisfied for the tax year, ₹1,50,000 is not included and total income is ₹10,00,000 − ₹1,50,000 = ₹8,50,000.
Conditions not met
If any condition is not satisfied in that tax year, Section 11(2) charges the ₹1,50,000 to tax, and total income is ₹10,00,000.
Related expenditure
Where the receipt is excluded, expenses incurred in relation to it are examined under Section 14.
Outcome
- Exclusion depends on meeting the Schedule conditions in each tax year; it is not automatic.
- Keep evidence of each condition for the year in which the exclusion is claimed.
Glossary
- Schedule
- A numbered part of the Act containing the particular income, person and condition for an exemption route.
Frequently asked questions
Where do I find the actual list of tax-exempt incomes under this Act?
Section 11 itself doesn't list them - it activates Schedules II to VI (for specific exempt income items, each subject to its own conditions) and Schedule VII (for specified exempt persons/entities).
What happens if I don't meet a Schedule's conditions?
Under Section 11(2) and 11(4), if the conditions specified in the relevant Schedule are not satisfied, the income (or the person's income, for Schedule VII cases) becomes taxable for that tax year under the Act.
Need help applying this provision to your situation?
Talk to our tax team about applicable exemptionsLast updated 10 October 2026