Section 10(23AA): Income Tax Exemption for Regimental and Non-Public Funds
Section 10(23AA) of the Income-tax Act, 1961 provides an exemption for income received on behalf of specified regimental and non-public funds established by the armed forces of the Union for the welfare of serving or former personnel and their dependants.
Eligible recipient: Any person receiving income on behalf of a qualifying fund.
Qualifying fund: A regimental fund or non-public fund established by the armed forces of the Union.
Purpose: Welfare of past or present members of those forces or their dependants.
Exemption: The qualifying income is excluded from total income, without a separate monetary limit stated in this clause.
What does Section 10(23AA) provide?
Under Section 10 of the Income-tax Act, 1961, specified receipts are not included when computing total income. Clause (23AA) addresses any income received by any person on behalf of any regimental fund or non-public fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants.
The words on behalf of are important. The exemption attaches to income held or received for an eligible fund, rather than to all income earned personally by armed forces personnel.
Eligibility and nature of exempt income
| Eligible assessee or recipient | Any person receiving income on behalf of a qualifying regimental fund or non-public fund. |
|---|---|
| Fund requirement | The fund must have been established by the armed forces of the Union. |
| Welfare beneficiaries | Past or present members of the armed forces and their dependants. |
| Nature of income | Any income received on behalf of the qualifying fund, subject to the statutory description and applicable law. |
| Amount exempt | The entire qualifying income; no separate rupee ceiling is specified by Section 10(23AA). |
Meaning of important terms
Regimental fund
A fund maintained in connection with a regiment or military unit for eligible welfare purposes. Its precise constitution and administration should be established from the governing fund rules and records.
Non-public fund
A fund maintained outside the ordinary public-fund framework of the armed forces. The name alone is not sufficient for tax exemption; the fund must satisfy the statutory conditions concerning its establishment and welfare purpose.
Dependants
Persons dependent on past or present armed forces members in accordance with the fund's governing rules and applicable service or welfare regulations. The Act's clause should be read alongside those rules when determining entitlement.
Conditions for claiming the exemption
- Establishment by the armed forces: The fund must be a regimental fund or non-public fund established by the armed forces of the Union.
- Specified welfare objective: It must exist for the welfare of past or present members of those forces or their dependants.
- Receipt on behalf of the fund: The relevant income must be received by a person acting on behalf of the qualifying fund.
- Evidence: The fund should be able to demonstrate its legal constitution, governing rules, receipts, accounts and welfare purpose if its claim is examined.
Important distinction: Section 10(23AA) does not itself grant a blanket exemption to an individual soldier, veteran or dependant for salary, pension, interest or other personal income. Such receipts must be examined under the provisions applicable to the individual.
Illustrative examples
Example 1: Interest credited to a bank account operated by an authorised officer on behalf of a qualifying regimental welfare fund may fall within the exemption, provided the fund and receipt meet Section 10(23AA).
Example 2: Donations or other receipts received on behalf of an eligible non-public welfare fund require classification under applicable tax law; where they constitute income, Section 10(23AA) may exempt that income if its requirements are satisfied.
Example 3: A former service member receives interest on a personal fixed deposit. The interest is not exempt merely because the individual is a beneficiary of a regimental fund.
Documentation and compliance
For substantiating an exemption, retain the fund's establishment order or governing instrument, welfare rules, bank and investment statements, accounting records, details of persons authorised to receive income, and relevant supporting correspondence. Filing, audit and reporting obligations should be assessed separately under the law applicable to the fund and the recipient.
Application under the current tax framework
This page explains the exemption using its familiar reference in the Income-tax Act, 1961. The Income-tax Act, 2025 came into force on 1 April 2026, with transitional and savings provisions relevant to earlier tax years. For income arising from tax year 2026-27 onwards, consult the corresponding provisions of the new Act and current official guidance rather than assuming the old section numbering continues unchanged.
Frequently asked questions
Who is eligible under Section 10(23AA)?
Any person receiving income on behalf of a regimental fund or non-public fund established by the armed forces of the Union for the prescribed welfare purpose.
Is all income of an eligible fund exempt?
The clause covers any income received on behalf of a qualifying fund. The facts must show that the fund and the particular receipt meet the statutory conditions.
Is prior government notification expressly required by this clause?
Section 10(23AA) does not itself specify a separate Central Government notification or approval requirement of the kind found in some other Section 10 exemptions.
Does the exemption extend to personal income of dependants?
No automatic exemption arises for personal income merely because the recipient is a dependant or receives support from an eligible fund.
Official legal references
- Income Tax Department: Income-tax Act, 1961 (refer to Section 10, clause 23AA, for relevant earlier years).
- Income Tax Department: official tax law and guidance portal.
- India Code: central legislation and updated statutory texts.
- Income Tax e-Filing Portal.
This information is for general reference. The applicable statutory text, tax year, amendments and facts of each fund govern the final tax treatment.