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Section 10 Of Income Tax Act: Exemptions, Allowances & How To Claim It?

Updated on: Jan 11th, 2023

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11 min read

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The Government of India provides some exemptions in order to reduce your income tax burdens. Section 10 of the Income Tax Act talks about those exemption provisions and the terms and conditions on which one can avail a tax exemption.
Here’s more on this matter. 

What Is Section 10 Of Income Tax Act?

While calculating the tax liability of an individual, there are certain income sources that do not form a part of the total income. Section 10 of the Income Tax Act 1961 includes all those exemptions that a taxpayer can get while paying income tax. 

What Are Exemptions Under Section 10?

Here is a list of exempted income under Section 10:

Section 10 (13A) of Income Tax Act

Section 10 (13A) of the Income Tax Act covers House Rent Allowance (HRA). The part of your salary that you receive for covering house rent and accommodation expenses is exempted from taxation.

However, there are a few exceptions that are included in Section 10 (13A) Rule 2A. The exemption is allowed for least of the following amounts:

  • Actual HRA received
  • 50% of [basic salary + DA] for those living in Delhi, Mumbai, Chennai, Kolkata or 
    40% of [basic salary + DA] for those living in other cities
  • Actual rent paid (-) 10% of basic salary + DA

Section 10 (5) of Income Tax Act

Section 10 (5), or leave travel allowance exemption, is applicable for individual taxpayers. The LTA exemption applies only to the domestic travel expenses, such as airfare, train or bus fare, incurred by the employee. Other expenses, such as transportation within the destination, sightseeing, hotels, and food, are not covered. Additionally, the exemption is limited to LTA provided in your CTC by the employer.
For example, if an employee is given LTA of Rs 30,000 and incurs travel expenses of Rs 20,000, only the amount actually spent on travel would be exempt from taxes and the remaining Rs 10,000 would be included as taxable income

Section 10 (26) of Income Tax Act

If you are a member of a Scheduled Tribe in Tripura, Nagaland, Mizoram, Manipur, and Arunachal Pradesh, you are eligible for tax exemptions under Section 10 (26) Of the Income Tax Act.

Section 10 (14) (I) of Income Tax Act

This section provides you exemptions for expenses incurred due to your employer’s business. It includes travelling, conveyance, research allowance and more.  

Section 10 (11) of Income Tax Act

Under this section, you receive exemptions for the interest you receive from a provident fund upon resignation or retirement. Moreover, it also includes any payment that you make from a Sukanya Samriddhi Account. 

Section 10 (34) of Income Tax Act

This section includes exemptions from the dividends that you receive from investing in an Indian company. However, this exception is only limited to an amount of Rs.10,000, exceeding which you have to pay tax. 

Section 10 (26AAA) of Income Tax Act

If you are a Sikkimese individual earning either in Sikkim or earning through dividends or interest on securities, this part of your income comes under tax exemption under Section 10 (26AAA). 

Section 10 (38) of Income Tax Act

When you get long-term capital gains by selling equity shares of an equity-oriented mutual fund, it is exempted from Income Tax calculation. However, the Securities Transaction Tax must be paid. 

Section 10 (23C) of Income Tax Act

Educational or medical institutions whose aggregate annual receipts do not exceed Rs.5 crore are eligible for exemption under this section. 

Section 10 (37) of Income Tax Act

This section provides exemptions for capital gains due to the compulsory acquisition of urban agricultural land. 

Section 10 (10A) of Income Tax Act

If you are a Government employee, under this section, you receive tax exemption on the money you get from accumulated pensions. 

Section 10 (10D) Of Income Tax Act

Under this section, you get an exemption for the income you receive from a life insurance policy or bonus. 

Section 10 (35) Of Income Tax Act

Any income that you gain from the sale of specified mutual fund units. 

GPF exemption in Income Tax Section 10

A GPF amount of Rs.2.5 lakh is exempted from taxation under Section 10 (11) and Section 10 (12) of the Income Tax Act. 

Internet allowance exemption under Section 10

Under Section 10 (14), the internet allowance provided by your employer is exempted from taxation. 

Food allowance exemption under Section 10

Section 10 (14) also includes a tax exemption of Rs.26,400 in a year for food allowance provided by your employer assuming two meals a day and 22 working days in a month.

What Is The Maximum Exemption Under Section 10?

Section 10 of the Income Tax Act maximum limit is of Rs.2.50 lakhs for people below 60 years of age and Rs.3 lakhs for individuals above 60 below 80 years and Rs 5 lakhs for people aged 80 years or more. The higher limit of Rs 3 & 5 lakhs is available only for those citizens who are Resident in India.

How Do I Claim Section 10 Exemptions On My Taxes?

If you are wondering how to claim an exemption under Section 10, you can do it by filing an income tax return. 

What Are Section 10 Allowances?

Section 10 contains all the exemptions that an individual can opt for under the Income Tax Act. They include gratuity, travel allowance, rent allowance, allowance for children, education allowance exemption, etc. 

Is Leave Encashment Exempted From Income Tax?

Leave encashment received at the time of their employment is fully taxable and forms part of ‘Income from Salary'. 

However, if you are a government employee (State or Central), your income from leave encashment will not be taxable at the time of resignation.

Alternatively, if you are a private sector employee, the government will consider your income from leave encashment after resignation or retirement as ‘Income From Salary' and, thus, will be taxable. But, there will be exemptions under Section 10(10AA) of the Income Tax Act. There will be tax on the amount remaining after exemptions according to your income tax slab.  

Now that you are aware of Section 10 benefits, you can make use of them in order to get tax relief. However, before filing a claim under this section, do consult a tax professional. 

FAQs

  1. What is the eligibility criteria for Section 10(10D)?

In order to be eligible for exemptions under Section 10(10D), you need to be an EPF member with an age of 58 years or an age of 50 years (reduced pension).

  1. Does House Rent Allowance fully exempt from taxation?  

No, Section 10 (13A) of the Income Tax Act only provides exemptions for a part of the HRA that too with a few limitations. 

  1. What does Section 10 (10C) exempt?

Section 10 (10C) exempts the income received on voluntary retirement. 

  1. What is the tax benefit of Section 10 (10D)?

This section provides tax benefits for the maturity of a life insurance policy. 

  1. What does Section 10 (9) exempt?

Section 10 (9) exempts the income of family members of foreign employees under the Cooperative Technical Assistance Program. 

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