Hello,
The income from units of UTI will be exempt from tax as per Section 10(35) of the Act.
The brief of the section is as under:
(Incomes not included in total income.
10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included:
(35) any income by way of,—
(a) income received in respect of the units of a Mutual Fund specified under clause (23D); or
(b) income received in respect of units from the Administrator of the specified undertaking; or
(c) income received in respect of units from the specified company:
Provided that this clause shall not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be.
Explanation.—For the purposes of this clause,—
(a) “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002)36;
(b) “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002)36;)