Schedule III explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Schedule III is a Table of incomes that are left out of total income for named eligible persons, on stated conditions. It is brought in by section 11 of the Income-tax Act, 2025, which is why the Schedule opens with "". This article explains the Schedule as per the Income-tax Act, 2025 as amended by the Finance Act, 2026, and shows how to read its four columns.
Each row of the Table says which income is not included in total income (column B), for which eligible person (column C), subject to which conditions (column D). The Table runs from serial number 1 to 39. The Finance Act, 2026 inserted serial numbers 38A, 38B, 38C and 38D and Notes 12 and 13, w.e.f. 1-4-2026. A row helps you only if you are the person named in column C and meet every condition in column D.
Later amendments, the Income-tax Rules, 2026 and notifications should be checked. Where a row says "as may be prescribed" or "as may be notified", the detail is not in the Act text.
How the Schedule is built
The opening paragraph says that in computing the total income of a tax year of any eligible person named in column C, the income in column B is not included, subject to the conditions in column D. The expressions used in columns B to D carry the meanings given in the Notes below the Table. Our overview of sections 11 and 12 explains the gateway section, and the Chapter guide on incomes which do not form part of total income places the Schedules together. For the neighbouring Schedules see Schedule I and the list of exempt incomes in Schedules II to VII.
If you are an individual checking whether an allowance or sum you received can be left out, the tax planning advisory team can read the row and the conditions against your facts.
The Table, grouped by subject
The Table is long, so the groups below follow the serial numbers. Read the Schedule itself for every condition and Note before you claim a row.
| Serial numbers | Income left out | Eligible person (column C) | Points to note from column D |
|---|---|---|---|
| 1 | Any sum received by a member from the Hindu undivided family | An individual who is a member of a Hindu undivided family | Not covered by section 99(3) and (4); paid out of the family income or, for an impartible estate, the estate income |
| 2 | A partner's share in the total income of the firm | A partner of a firm separately assessed | Share as per the profit-sharing ratio in the partnership deed |
| 3 | Compensation for a disaster from the Central or a State Government or a local authority | Any individual or his legal heir | No deduction of this amount was allowed earlier for loss or damage by the disaster |
| 4 | Payment from the National Pension System Trust under the scheme in section 124 | An employee, or an assessee who is guardian or parent of a minor | Partial withdrawal as per the Pension Fund Regulatory and Development Authority Act, 2013 and regulations; exclusion not to exceed 25% of the contributions made |
| 5 to 7 | Daily allowance, constituency allowance of members of Parliament and State Legislatures | Members, by reason of membership | Nil conditions |
| 8 | Travel concession or assistance | Any individual | From employer or former employer for journeys in India; prescribed conditions; capped at expenses actually incurred |
| 9 | Allowances or perquisites paid outside India by the Government | A citizen of India | Paid for service rendered outside India |
| 10 | Perquisite whose tax is paid by the employer | An employee who is an individual | Not a monetary payment under section 17(1); employer pays at its option |
| 11 to 13 | Special allowances for rent, for office expenses, and other allowances | Any assessee | Extent as may be prescribed; actual expenditure |
| 14 to 16 | Pension of gallantry-award holders and family pensions | As named in each row | Nil, or death in operational duties on prescribed conditions |
| 17 | Income of a minor child includible under section 99(1)(c) | The individual referred to in that sub-section | Excluded up to Rs. 1,500 for each minor child |
| 18 | Capital gains on transfer of agricultural land | An individual or a Hindu undivided family | Land in an area under section 2(22)(iii); used for agriculture for two years before transfer; compulsory acquisition or an approved price; compensation received on or after 1 April 2004 |
| 19 and 20 | Income of a Scheduled Tribe member in specified areas; income of a Sikkimese from Sikkim | As named | Nil conditions |
| 21 | Subsidy from a Board for replanting of tea, rubber, coffee, cardamom and similar crops | Assessee growing and manufacturing those crops | Notified scheme; Board certificate furnished with the return |
| 22 | Income of a local authority | Any local authority | Trade or business income only if from supply within its area, or of water or electricity within or outside it |
| 23 to 25 | Research association; professional association; khadi and village industries institution | As named | Application of income to objects, approval; khadi approval for not more than three tax years at a time |
| 26 | Securitisation activity | A securitisation trust | Nil |
| 27 to 30 | Contributions to Investor Protection Funds and the core settlement fund of a clearing corporation | Funds of exchanges, depositories and clearing corporations | Fund notified; amounts shared are income of the year shared |
| 31 and 32 | Trade union income from house property and other sources; Provident Fund interest and gains | Registered trade union; Provident Fund under the Provident Funds Act, 1925 | Securities held by or property of the fund |
| 33, 34 and 36 | Income of nature and extent notified by the Central Government | Sporting event persons; treaty bodies; public bodies | Notification; no profit or commercial activity |
| 35 | Reverse mortgage loan received | Any individual | Reverse mortgage under section 70(1)(zh); nil conditions |
| 37 | Income from crude oil replenishment arrangement | Indian Strategic Petroleum Reserves Limited | Not if the crude oil is not replenished within three years from the end of the tax year of first removal |
| 38 | Gratuity computed under section 19(1) as the row cites | Widow, children or dependants on an employee's death | Nil |
| 39 | Income under section 10(15)(iic), (15)(iv)(i), (19A) or (40) of the Income-tax Act, 1961, as the row prints | Not stated | Subject to the conditions provided in those provisions |
Serial number 39 prints no entry in columns C and D; it states that the listed income "shall be subject to the conditions as provided therein". The references are to the Income-tax Act, 1961, quoted as printed.
Serial numbers 38A to 38D, inserted by the Finance Act, 2026
A footnote prints that serial numbers 38A to 38D were inserted by the Finance Act, 2026, w.e.f. 1-4-2026. Notes 12 and 13, which go with them, carry a footnote with the same date.
| Serial number | Income left out | Eligible person | Conditions as printed |
|---|---|---|---|
| 38A | Disability pension received (service element and disability element) | An individual who has been a member of the armed forces, including paramilitary forces, of the Union | Invalided out of service on account of bodily disability attributable to or aggravated by the service; has not retired on superannuation or otherwise |
| 38B | Interest on compensation awarded by the Motor Accident Claims Tribunal | An individual or his legal heir | Interest received under the Motor Vehicles Act, 1988 |
| 38C | Income on an award or agreement for compulsory acquisition of land | An individual or a Hindu undivided family | Award or agreement under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, except under its section 46 |
| 38D | Capital gains on transfer of a specified capital asset | An individual or a Hindu undivided family | Owner of the asset on the 2nd June, 2014; transferred under the Land Pooling Scheme covered by the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 2015; possession of the reconstituted plot or land handed over on or before the 31st March, 2031 |
Note 12 says, for serial number 38A, that the provisions apply on or after such date as the Central Government may notify, and that pending notification the entire disability pension, that is the disability element and the service element, of a disabled officer of the Indian armed forces is exempt from income-tax. Note 13 defines "specified capital asset" for serial number 38D as the land or building owned on the 2nd June, 2014 and transferred under the Scheme, the land pooling ownership certificate, or the reconstituted plot or land received in lieu if transferred within two years from the end of the financial year in which possession was handed over. Whether a notification has been issued under Note 12 is not in the text consulted.
Notes you must read with the Table
Notes 1 to 13 define the words used in the rows, for example "family" for serial numbers 8 and 15 (spouse and children, and parents, brothers and sisters wholly or mainly dependent: Note 2), "compensation or consideration" for serial number 18 (includes amounts enhanced by a court, Tribunal or other authority: Note 3), "Sikkimese" (Note 4) and "local authority" (Note 6). Several Notes refer to other laws; check those laws directly.
Worked example
All figures are assumed. Meera Nair has two minor children whose income is includible in her total income under section 99(1)(c). One child has income of Rs. 1,200 and the other Rs. 3,000. Under serial number 17 the exclusion is up to Rs. 1,500 for each minor child. The first child's Rs. 1,200 is wholly excluded. For the second, Rs. 1,500 is excluded and Rs. 1,500 remains includible. Total included: Rs. 1,500. For how clubbing works see our note on sections 99 and 100.
Need help claiming a row?
Before you leave an amount out of your return, confirm the person, the condition and any prescribed limit. Our income tax return filing service can review the claim before the return is filed.
Key takeaways
- Read the row in three parts: the income, the eligible person and the conditions.
- Serial numbers 38A to 38D and Notes 12 and 13 are new from 1-4-2026.
- Serial number 38A applies from a notified date; the Note says the full disability pension is exempt from income-tax pending that notification.
- Many rows leave extent and conditions to the rules or to a notification.
Read next
- Sections 11 and 12: incomes not included in total income
- Schedule I of the Income-tax Act 2025
- Exempt incomes in Schedules II to VII
- Schedule VI: IFSC exempt income
- Section 17: perquisites
- Section 124: NPS deduction
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.