Sections 11 and 12 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.
Chapter III of the Income-tax Act, 2025 has only two sections, and both are gateways. Section 11 says that incomes listed in Schedules II to VI are left out of total income, and that persons listed in Schedule VII are not chargeable to tax, in each case subject to conditions. Section 12 does the same for the incomes of political parties and electoral trusts listed in Schedule VIII. This article explains both, as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
The two sections carry no list of exempt items themselves. The list is in the Schedules. If the conditions in the Schedule are met, the income is not included in total income (or the person is not chargeable to tax); if the conditions are not met in a tax year, the income or person is charged to tax for that year. The Central Government may make rules or issue notifications for the purposes of the sections as specified in the Schedules.
Where these sections sit
Chapter III is divided into two parts: "Incomes not to be included in total income" (section 11) and "Incomes not to be included in total income of political parties and electoral trusts" (section 12). The Act's list of exempt incomes is spread across the Schedules, which are explained in separate articles: Schedule II in the article on agricultural income and life insurance receipts and the article on provident fund, pension and other receipts, Schedule IV in two further articles, Schedule V in two and Schedule VII in two. To see how a return reports such incomes, our income tax return filing team can help. For a view across the Schedules, see our note on where the earlier Act's exemptions sit in the 2025 Act: Section 10 exemptions and Schedules II to VII.
Section 11: the five sub-sections
Section 11(1): income left out of total income
"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."
Three features follow from the words:
- It applies to any person, so the Schedules decide who can use each entry.
- It is "in computing the total income": the income is left out when total income is computed.
- It is subject to the conditions printed in the Schedule against each entry. If a condition is not satisfied, subsection (2) applies.
Section 11(2): conditions not satisfied
Wherever the conditions in the Schedules are not satisfied in any tax year in respect of any income enumerated in them, that income "shall be charged to tax under this Act on the total income for that tax year". The test is year by year: the tax year in which the condition is missed is the tax year in which the income becomes chargeable.
Section 11(3): persons not chargeable to tax
The persons enumerated in Schedule VII shall, subject to fulfilment of the conditions specified in it, not be chargeable to tax under this Act on the total income for a tax year. Here the Schedule exempts the person, not a single receipt: the person's total income is not charged at all, while the conditions hold.
Section 11(4): conditions of Schedule VII not satisfied
Wherever the conditions in Schedule VII are not satisfied in respect of the persons enumerated in it in any tax year, the income of that person shall be charged to tax under the provisions of the Act for that tax year.
Section 11(5): rules and notifications
The Central Government may make rules or issue notifications for the purposes of section 11 as specified in Schedules II, III, IV, V, VI and VII. The Schedules say when such a power arises. What has been made or notified under it is not in the text consulted, and the detail is left to the Income-tax Rules, 2026.
| Sub-section | Subject | Schedule(s) | Result when conditions are met | Result when conditions fail |
|---|---|---|---|---|
| 11(1), (2) | Income enumerated | II, III, IV, V, VI | Income not included in total income | Income charged to tax on total income for that tax year |
| 11(3), (4) | Persons enumerated | VII | Person not chargeable to tax on total income | Income of the person charged to tax for that tax year |
| 11(5) | Rules or notifications | II to VII | Power as specified in the Schedules | Not applicable |
Section 12: political parties and electoral trusts
Section 12(1)
"In computing the total income of any political party or an electoral trust for a tax year under this Act, any income enumerated in Schedule VIII shall not be included, subject to fulfilment of conditions specified therein." The section applies only to a political party or an electoral trust. For the definition of an electoral trust, see section 2(43): a trust so approved by the Board as per the scheme made by the Central Government.
Section 12(2)
Wherever the conditions in Schedule VIII are not satisfied in any tax year in respect of any income enumerated in it, such income is charged to tax under the Act for that tax year.
Section 12(3)
The Central Government may make rules or issue notifications for the purposes of section 12 as specified in Schedule VIII.
How the Schedules map to the sections
| Section | Schedule(s) it points to | Subject of the Schedule, in the section's words |
|---|---|---|
| 11(1) | II, III, IV, V, VI | Income enumerated, not included in total income |
| 11(3) | VII | Persons enumerated, not chargeable to tax |
| 12(1) | VIII | Income of a political party or an electoral trust |
What the two sections do not say
- They do not list any exempt receipt. Each entry, its conditions and its limits (if any) are in the Schedule.
- They do not say how a missed condition is cured or what notice is given; they only say the income is charged for the tax year in which the condition is not satisfied.
- They do not state any rate. The rate applicable to chargeable income is found in the charging and rate provisions.
Examples
Condition fails in one year. Vanya (invented) receives an income that is enumerated in Schedule II and is left out of her total income because the Schedule's condition is satisfied in the tax year commencing 1 April 2026. In the following tax year, the same kind of income arises but the condition is not satisfied. Under section 11(2), that income is charged to tax on her total income for that following tax year; the earlier year is not touched by the sub-section.
A person in Schedule VII. A body (invented) is enumerated in Schedule VII and meets the conditions throughout the tax year. Under section 11(3) it is not chargeable to tax on its total income for that year. If a condition in the Schedule is not satisfied in a later tax year, section 11(4) says its income for that year is charged to tax under the Act.
An electoral trust. An electoral trust receives an income enumerated in Schedule VIII and satisfies the conditions: under section 12(1) it is not included in the trust's total income. If it does not satisfy them, section 12(2) charges that income for the tax year.
Need help with exempt income and your return?
Claiming an income as not included in total income is only safe if the Schedule's conditions are met, and a missed condition brings the income back into charge. To check your position before filing, see our income tax return filing service.
Key takeaways
- Section 11(1) leaves out income enumerated in Schedules II, III, IV, V and VI, subject to conditions.
- If a condition is not satisfied in a tax year, the income is charged for that tax year (section 11(2)).
- Schedule VII persons are not chargeable to tax on total income while the conditions hold; if they fail, the income is charged (section 11(3) and (4)).
- Section 12 does the same for political parties and electoral trusts under Schedule VIII.
- The Central Government may make rules or notifications as specified in the Schedules.
- The sections themselves list no exempt item and state no rate.
Read next
- Schedule II: agricultural income and life insurance policy receipts
- Schedule II: provident fund, pension scheme and other receipts
- Schedule VIII: political parties and electoral trusts
- Sections 13 and 14: heads of income
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.