Exempt Income

What is exempt income under the Income Tax Act?

Exempt income  is any amount received in money or in kind from various sources that is not subject to income tax.

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No. Exempt income is different from a tax deduction. A tax deduction is an amount that is deducted from a person’s taxable income, hence reducing the tax payable. Exempt income is any amount that is not subject to tax and is not included in the taxable income of a person.

The following are some of the amounts exempt from income tax:

Beneficiary

Amount exempt from tax

Listed institutions(Institutions listed in the First Schedule to this Act)

Income of a listed institution.

An organization or person entitled to privileges under the Diplomatic Privilege Act

Income of an organization or person entitled to privileges under the Diplomatic Privilege Act

A person in the public service of the government of a foreign country

The official employment income derived by a person in the public service of the government of a foreign country if—

(i)          the person is either a non-resident person or is a resident individual solely by reason of performing such service;

(ii)         the income is payable from the public funds of that country; and

(iii)        the income is subject to tax in that country.

A person working in a Ugandan foreign mission.

Any allowance payable outside Uganda to a person working in a Ugandan foreign mission;

Any local authority

All income of any local authority.

Exempt organizations (organizations that have a certificate of tax exemption from URA).

The income of an exempt organization, other than—

(i)          property income, except rent received by an exempt organisation in respect of immovable property which is used by the lessee exclusively for the activities of the organisation specified in paragraph (bb)(i) of the definition of “exempt organisation” in section 2; or

(ii)         business income that is not related to the function constituting the basis for the organisation’s existence.

Recipients of any education grant to study at a recognized educational or research institution.

Any education grant which the commissioner is satisfied has been made bona fide to enable or assist the recipient to study at a recognized educational or research institution.

Recipients of an alimony or allowance.

Any amount derived by way of alimony or allowance under any judicial order or written agreement of separation.

Recipients of any property by way of gift, bequest, devise or inheritance.

The value of any property acquired by gift, bequest, devise or inheritance that is not included in business, employment or property income.

A person who has made a capital gain that is not included in business income.

Any capital gain that is not included in business income, other than capital gains on the sale of shares in a private limited liability company or on the sale of a commercial building.

Individuals employed under a technical assistance agreement.

Employment income derived by an individual to the extent provided for in a technical assistance agreement where—

(i)          the individual is a nonresident or a resident solely for the purpose of performing duties under the agreement; and

(ii)         the Minister has concurred in writing with the tax provisions in the agreement;

·       Short term residents and members of their immediate family.

·       Persons in public service of the government of a foreign country or persons employed under a technical assistance agreement and their immediate family members.

foreign-source income derived by—

(i)          a short-term resident of Uganda;

(ii)         a person in public service of the government of a foreign country or a person employed under a technical assistance agreement.

(iii)        a member of the immediate family of a person referred to in subparagraph (i) or (ii) above.

Recipients of pension.

Pension.

Members of a resident retirement fund or their dependents.

A lump sum payment made by a resident retirement fund to a member of the fund or a dependent of a member of the fund.

Recipients of proceeds of a life insurance policy.

The proceeds of a life insurance policy paid by a person carrying on a life insurance business.

Persons employed in the Uganda Peoples’ Defence Forces (UPDF), the Uganda Police Force (UPF), the External Security Organization (ESO), the Internal Security Organization (ISO) or the Uganda Prisons Service.

The official employment income of a person employed in the UPDF, the UPF, the ESO, the ISO or the Uganda Prisons Service, other than a person employed in a civil capacity.

Members of parliament

The employment income of a person employed as a Member of parliament, except salary.

A prosecutor in the Office of the Director of Public Prosecution.

The employment income of a prosecutor in the Office of the Director of Public Prosecution.

Government of the Republic of Uganda and the government of any other country.

Income of the government of the Republic of Uganda and the government of any other country.

Bank of Uganda

Income of the Bank of Uganda

Collective investment scheme

Income of a collective investment scheme to the extent of which the income is distributed to participants in the collective scheme.

Employees of the East African Development Bank

Emoluments payable to employees of the East African Development Bank.

Investor compensation fund

The income of an investor compensation fund established under the Capital Markets Act.

The Deposit Protection Fund

Income of the Deposit Protection Fund established under the Financial Institutions Act.

An operator of an aircraft in domestic and international traffic.

Income of an operator of an aircraft in domestic and international traffic.

Exporters of finished consumer and capital goods.

Income of exporters of finished consumer and capital goods upon meeting set conditions.

Sports persons

An award received by a sports person as a reward for winning or participating in a sports competition.

Savings and Credit Cooperative Society (SACC0)

Income of a SACCO

A person letting or leasing facilities in an industrial park or free zone.

Income of a person letting or leasing facilities in an industrial park or free zone, upon meeting set conditions.

An operators in an industrial park or free zone.

Income of an operator in an industrial park or free zone, upon meeting set conditions.

A person carrying on business outside the industrial park or free zone

Income of a person letting or leasing facilities in an industrial park or free zone, upon meeting set conditions.

Buyers of infrastructure bonds

Interest paid on infrastructure bond

Companies which came into existence through stock exchange.

Dividends earned by a company which came into existence through stock exchange.

 

 

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