All About Section 10 of Income Tax Act

Your income tax is the amount payable to the Government based on your gross income for the previous financial year. But there are certain exceptions in the income tax where these categories are known to be non-taxable. These categories are laid under Section 10 of the Income Tax Act, based on your income sources.

So, are you wondering what exemptions are made and whether you fit in any of the boxes? Read on to find out more about exemptions under section 10 and what documents are required to claim these deductions.

What is Section 10 of the Income Tax Act?

In Section 10 of income tax, the income that isn’t included in your total income when calculating the total tax liability is included. Such income is also known as exempted tax, and Section 10 of income tax includes the exemptions you make as a taxpayer.

What are the Exemptions Under Section 10 of Income Tax?

The Union Budget 2022 allows several tax exemptions, including:

Section 10 (1): Agriculture Income Exemption

If you have agricultural income from land in India, you can get tax exemption under section 10 of income tax. The income can include the following:

• Revenue or rent generated from agricultural land in India
• Performing basic agricultural operations on the land, like sowing, tilling, and cultivation
• Selling agricultural produce
• Operations of preserving and growing products, like cutting, weeding, pruning
• Any income that came from building a farm for operations

Section 10 (2): HUF Income Exemption

If you earn HUF income, you can get tax exemptions under section 10 of income tax, provided if:

• The income received is paid out to your family
• In an impartible estate, the income is paid out of the real estate that belongs to your family

Section 10 (2A): Partnership Firm Exemption

Under section 10 (2A) of income tax exemption, any profit earned as a partner or co-owner of a firm is exempted from tax. However, the partnership firm should be taxed and classified under Partnership Firm under the Income Tax Act of 1961, and the exemption is only limited to partners of a firm or LLP.

Section 10 (4): Income Exemption of NRI from India

As an NRI from India, you can enjoy some exemptions that include:

• Income earned on securities or bonds that are Government specified
• Income earned by redemption of these bonds
• Income that is earned by residents of India living outside and received in their Non-Resident (External) Account
• Interest earned on the income generated in the Non-Resident (External) Account

Section 10 (5): Leave Travel Concession Exemption

Under section 10 (5) of income tax exemption, if you are an employee of a company, you can get an exemption on your travel leaves. You can enjoy this benefit if you are an Indian or foreign citizen. Here’s what you need to keep in mind:

• The travel concession that you receive should be from your current employer for the current financial year when filing taxes
• The employer must receive the concession in connection with future travel
• You can get travel concessions from your employer of any amount if you take leaves to travel across India

Section 10 (6): Exemption for Indian Citizens Working Outside

Indian citizens who work outside India and represent the country are also eligible for exemptions under section 10 (6) of the income tax act. These are the people who are high commission officers, foreign state trade representatives, or officials of the embassy. Even foreign company employees can enjoy tax exemption benefits, but there are certain limitations:

• The tenure of living of the employee in India should not be more than 90 days
• The company should not have trade or business in India
• The remuneration of the employers should not be deducted

Section 10 (7): Exemption on Prerequisites and Allowances Paid by the Government

Indian Government provided prerequisites and allowances to Indian employees serving their services outside India are subject to tax exemptions under section 10 (7) of income tax. Government employees can take benefit from this exemption.

Section 10 (10CC): Exemption on Prerequisites Paid by the Employer

Some employers pay non-monetary prerequisites on their employees’ behalf, leaving the employee to tax exemption.

Section 10 (10D): Life Insurance Policy Maturity Exemption

Income tax under section 10 (10D) is subject to exemption upon maturity of your life insurance policy, but there are specific criteria to follow to enjoy this benefit:

• Your policy should be issued before April 1st 2012, and the premium shouldn’t be more than 20% of the amount assured
• For policies that were issued after April 1st 2012, the premium shouldn’t be more than 10% of the assured amount
• People with diseases or disabilities under Section 80DDB and 80U can get the bonus and maturity amount on the policy

Further, according to the Union Budget 2023, there are tax exemptions for life insurance policies issued after April 1st 2023, if:

• The premium amount paid is up to ₹2.5 Lakh for the ULIP policy
• The premium amount paid is up to ₹5 Lakh for other policies

Section 10 (11): Exemption on Payments Made to Sukanya Samriddhi Account and Provident Fund

Payment made from your Sukanya Samriddhi Account is subject to an exemption under section 10 (11). Moreover, contributions to your Provident Fund account also enjoy income tax exemption.

Section 10 (10BC): Exemption on Remuneration Against Disaster

If you have received any compensation for natural disasters from the local, State, or Central Government, you can enjoy income tax exemption under section 10 (10BC).

Section 10 (13A): HRA (House Rent Allowance) Tax Exemption

The HRA is exempted from tax. So, any part of your salary that goes towards accommodation or rent is exempted from income tax with these conditions:

• The HRA is 50% of the salary for metro city employees and 40% for non-metro city employees

The exemption under section 10 (13A) is only received on the HRA you get

• The rent you pay is less than 10% of your salary

Section 10 (14): Special Allowance Exemption

If your employer offers special allowances, you can benefit from tax exemptions. There’s no amount limit on the special allowances, but there are rules to where the allowance is used.

• Section 10 (14) (i)
  • Daily allowance: Given to meet daily expenses when the employee doesn’t work from the place of duty
  • Travel allowance: Given to meet travelling expenses for office duties
  • Research or academic allowance: Given to encourage training, academic, or research purposes among the employees
  • Uniform allowance: Given to maintain or purchase on-duty uniforms
  • Helper Allowance: Given to maintain a helper’s expense for office duties
• Section 10 (14) (ii)
  This exemption for Section 10 of the Income Tax Act includes the expenses made while performing your duties, but if the allowances cross the limits given, then it’s taxable.
  • Tribal area allowance: ₹200 given every month for employees in schedule, agency, or tribal areas
  • Children’s education allowance: ₹100 given every month for every child, up to two kids
  • Border area allowance: ₹200 to ₹1,300 given every month for army personnel
  • Compensatory field area allowance: ₹2,600 compensation given every month
  • Counter insurgency allowance: Up to ₹3,900 given every month for people from the armed forces away from their home
  • Special compensatory allowance: ₹300 to ₹7,000 is given every month for employees living in hilly areas for allowances like snowbound areas, high altitude, avalanche, or uncongenial climate
  • Island duty allowance: Up to ₹3,200 given every month to individuals in armed forces posted in Lakshadweep or Andaman and Nicobar Islands
  • High active field area allowance: Up to ₹4,200 given every month to armed forces members

Section 10 (15): Exemption on Income from Interests on Investments

You are subjected to an exemption under section 10 (15) if you earn interest on your investments, like:

• Section 10 (15) (i) and (ii): Notified premiums, interests, and redemptions on securities, bonds, and more
• Section 10 (15) (iv): Central, state, or public sector employees receiving interest deposits that the Government pays for retirement
• Section 10 (15) (vi): Notified interests on gold bond deposits
• Section 10 (15) (vii): Notified interests on local authority bonds

Who Can Claim Deduction Under Section 10 of Income Tax?

Under section 10 of income tax, anyone below the age of 60 can claim tax exemption up to ₹2.50 Lakh; above 60, you can claim deductions up to ₹3 Lakh. You can claim deductions if you fit in any of the subsections of section 10.

What are the Documents Required to Claim Exemption Under Section 10?

As a salaried Indian professional, you can claim tax deductions under section 10 of income tax by filing your income tax return. Here’s everything you’ll need to make claims for deductions:

• Aadhaar card
• PAN card
• Income tax login credentials
• Bank passbook or statement

Bottom Line

With the help of Section 10 of the Income Tax Act, you can make several exemptions if you fit into any of the mentioned categories. But to enjoy this benefit, you need to file your annual income tax every year and enable the advantage of avoiding paying tax for certain allowances.

FAQs

1. What’s the maximum exemption under Section 10 of Income Tax Act?
   For people under 60, the maximum limit for exemption under Section 10 is ₹2.50 Lakh. For people above 60 and below 80, it is ₹3 Lakh, and for people above 80, it is ₹50 Lakh. Further, only senior citizens who are Indian residents are available for the higher limit bracket.
2. Is section 10 of income tax exemption available in the new tax regime?
   Yes. In the new tax regime, you can claim deductions of up to ₹1.5 Lakh upon maturity of an insurance policy, excluding ULIP, where the total premium paid is up to or less than ₹5 Lakh.