Section 190 — Determination of tax where total income includes income on which no tax is payable. Successor to s.110 of the 1961 Act.
Section 190 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
Where an assessee's total income includes income on which no income-tax is payable under the Act, the section gives him a deduction from the income-tax chargeable on that total income, equal to tax calculated at the average rate of income-tax on the amount on which no tax is payable. The exempt amount therefore stays inside total income for rate purposes and is then backed out at the average rate rather than at the marginal rate.
It reconciles two things the Act does at once — including a non-taxable receipt in total income so that it influences the rate applied to the rest, and then not taxing it. Using the average rate for the withdrawal is what makes the inclusion rate-relevant instead of tax-neutral.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Rate at which the deduction is computed | The average rate of income-tax | Applied to the amount of income on which no income-tax is payable, and given as a deduction from the income-tax chargeable on total income | 190 |
The relief comes off tax, not off income, so the non-taxable amount is still in the total income that sets your average rate — the practical effect is that other income can be taxed in a higher band because of it. Compute the average rate on the whole total income first, then apply it to the exempt amount to get the deduction. The section gives no procedure or claim form; it is an arithmetic step in the computation.
An individual's total income for the year is Rs 12 lakh, of which Rs 2 lakh is income on which no income-tax is payable under the Act. The Rs 2 lakh is not taken out of total income — it stays in, and so lifts the rest of the income up the rate scale — and the relief comes instead as a deduction from the tax chargeable, equal to income-tax on Rs 2 lakh at the average rate of income-tax. The section states no rate of its own: the average rate is whatever the year's own computation produces, so the deduction is smaller than simply leaving the Rs 2 lakh out at the top of the income would have been. If the individual has no other income, there is nothing for the deduction to run against, since it runs only against the tax with which he is chargeable on his total income.
You never meet it as a separate step or a separate form. It shows up inside the tax computation of an intimation or an assessment order, as a deduction from the income-tax on total income.
the assessee shall be entitled to a deduction, from income-tax with which he is chargeable on his total income, of an amount equal to the income-tax calculated at the average rate of income-tax on the amount on which no income-tax is payable
See the full 1961 to 2025 concordance.
