Section 11 Income Tax Act 2025 – Exempt Incomes Explained

Section 11 of the Income Tax Act 2025 deals with exempt income. Parallel reference to Schedules II to VII is required to understand the exemption provisions under the Income Tax Act, 2025. The 1961 Income Tax Act covered exemption provisions under section 10.

What is Section 11 of the Income Tax Act 2025?

Section 11 deals with income not included in the total income. Read in conjunction with Schedules II to VII, these provisions deal with income eligible for exemption from total income. A few exemption provisions related to salary income are covered under section 19 of the Income Tax Act, 2025. These provisions take effect from 01st April, 2026, and are applicable from the tax year 2026-27.

Section 11 (IT Act 2025) vs Section 10 (IT Act 1961) – What Changed?

The most prominent difference between the old and new exemption sections is that the new act is simpler to navigate and understand. The following are the key differences between section 10 of the Income Tax Act 1961 and section 11 of the Income Tax Act 2025.

The Five Sub-Sections of Section 11 – Explained Simply

Section 11 has five sub-sections. Each one performs a specific role in the exemption framework. Here is what each of them does:

Section 11(1) – Exempt Incomes Listed in Schedules II to VI

Section 11(1) mentions that certain incomes are exempt from taxation for the particular tax year if they satisfy the criteria mentioned in Schedules II to VI.

The six Schedules referred to here and what they cover:

Section 11(2) – What Happens if Conditions Are Not Met

If the income does not satisfy the criteria for exemption as mentioned in the Schedules for the tax year, such income is chargeable to tax for that year. Simply put, this section is the flip side of section 11(1). 

Section 11(3) – Persons Exempt Under Schedule VII

This sub-section especially deals with ‘exempt persons’ as mentioned in Schedule VII. Certain persons can claim exemption for their total income earned during the financial year, on satisfaction of the criteria as mentioned in Schedule VII.

While sections 11(1) and 11(2) deal with exempt income, this sub-section deals with exempt persons. Schedule VII covers 49 persons, such as funds set up by LIC, the prime minister’s national relief fund, any university or educational institution set up and wholly financed by the government, etc.

Section 11(4) – Consequences for Schedule VII Persons Who Fail Conditions

Similar to section 11(2), section 11(4) deals with the flip-side of section 11(3). If the persons mentioned in Schedule VII fail to meet the specified criteria, the income earned by such person for the tax year is chargeable to tax.

Section 11(5) – Government's Power to Issue Rules and Notifications

Section 11(5) gives the Central Government the flexibility to issue rules and notifications as it may deem fit.

Popular Exempt Income under Section 11

Section 11 and the New Tax Regime – Does It Apply?

Yes - Section 11 exemptions apply regardless of which tax regime you choose. Whether you opt for the new tax regime under Section 202 or the old/normal regime, the incomes listed in Schedules II–VI are excluded from your total income before the tax computation begins.

This is an important distinction. Deductions (like Section 123 / old Section 80C) are regime-specific - many are not available under the new regime. But income exemptions under Section 11 are different - they reduce your gross income before it even becomes 'total income', so the regime choice does not affect them.

Conclusion

Section 11 of the Income Tax Act 2025 is the master exemption provision of India's new tax code. It consolidates what was an unwieldy Section 10 of the old 1961 Act into a clean, readable framework of six Schedules - making it far easier to identify whether a particular income or entity is exempt from tax. The substance has not changed: agricultural income, LIC payouts, PF withdrawals, NPS receipts, scholarships, and dozens of other incomes remain exempt - as long as you satisfy the conditions in the relevant Schedule. If in doubt, always verify the specific Schedule conditions or consult a qualified tax advisor.