Income Tax Act Section 10 – Allowances, Exemptions, and Process to Claim
.png)
Every individual in India with a taxable income has to pay income tax on their annual earnings. To lower the burden of tax on individuals, the government presents certain deductions in the form of exemptions under different sections of the IT Act of 1961. One such section of Income Tax is section 10, which discusses such exemptions and their terms and conditions. In this post, let’s understand these exemptions under section 10 of the IT Act.
Before discussing exemptions under section 10, let’s talk about income tax returns or ITR.
What is an Income Tax Return (ITR)
ITR or Income Tax Return is a form that a taxpayer has to submit to the income tax department of India offering information on their income and their tax liability. As per the tax liability of an individual, they pay the amount of tax to the IT dept. This tax is calculated on the income of the taxpayer. However, if taxpayers pay excess tax, they can receive a refund from the IT department by filing an ITR.
What Is Section 10 Of the Income Tax Act?
Section 10 of the Income Tax Act 1961 consists of various deductions available to taxpayers, which they can avail of at the time of paying income tax. This section emphasizes the income sources that don’t form a part of the total income of the taxpayer.
Exemptions Available Under Section 10
There is a wide list of exemptions available u/s 10 of the Income Tax Act 1961 as listed under:
1. Exemptions under Section 10(1)
Section 10(1) exempts income earned from agricultural land located in India, including rent/revenue earned from the land, earnings from cultivation, sowing, weeding, pruning, etc., revenue earned from the sale of agricultural produce, and revenue earned from farm building for agriculture.
2. Exemptions Under Section 10 (13A)
The (13A) clause of section 10 of the IT Act covers HRA or House Rent Allowance. As per this clause, the HRA part of your salary that you receive to cover your cost of accommodation or house rent is exempted from taxation. These exemptions are available with some exclusions included in Rule 2A of Section 10 (13A).
The deduction under section 10 (13A) applies to the least of the below amounts:
- Actual amount of HRA received
- 50% of [basic salary + DA] for residents of Delhi, Mumbai, Chennai, Kolkata
- 40% of [basic salary + DA] for residents of other cities, or
- Actual rent paid (-) 10% of basic salary + DA
3. Exemptions Under Section 10 (5)
Clause (5) of section 10 discusses the exemptions of leave travel allowance (LTA) that taxpayers can avail of. Employees who incur costs on domestic travel, including air/train/bus fare, can avail of the limited LTA exemptions within the salary coverage offered by your employer. However, LTA doesn’t cover other expenses such as hotel stays, food, or transport costs within a city. Let’s take an example: if your employer offers you an LTA of INR 40,000 and you incur travel expenses worth INR 30,000. You can avail of the exemption on the amount incurred on your travel, which is INR 30,000, while the remaining INR 10,000 will be taxed.
4. Exemptions Under Section 10 (26)
Clause (26) of section 10 allows tax exemption to people of scheduled tribes belonging to the Indian states of Arunachal Pradesh, Nagaland, Manipur, Mizoram, and Tripura.
5. Exemptions Under Section 10 (14) (I)
As per section 10 (14) (I), you are eligible for exemptions for costs incurred on research, travel, conveyance, etc., of your employer’s business.
6. Exemptions Under Section 10 (11)
Clause (11) of section 10 of the Income Tax Act 1961 allows exemptions on the interest amount earned from the provident fund after retirement. Also, it provides exemptions on payments made from SSA or Sukanya Samriddhi Account.
7. Exemptions Under Section 10 (34)
Clause (34) of section 10 includes exemptions earned from dividends by investing in an Indian company for up to INR 10,000 only. Any amount exceeding that requires you to pay tax.
8. Exemptions Under Section 10 (26AAA)
If you are a resident of Sikkim earning there or through security dividends/interest, etc., you can avail of exemptions on that part of your earning u/s 10 (26AAA)
9. Exemptions Under Section 10 (38)
Clause (38) of section 10 allows taxpayers exemption on capital gains over the long-term using equity shares of equity-oriented mutual funds. However, you must pay the tax on securities transactions.
10. Exemptions Under Section 10 (23C)
Section 10 (23C) allows tax exemptions for educational or medical institutions whose overall yearly income does not exceed INR 5 crore.
11. Exemptions Under Section 10 (37)
Section 10 (37) allows exemptions on capital gains caused by compulsory acquisition of urban agricultural land.
12. Exemptions Under Section 10 (10A)
Government employees can earn tax exemption under section 10 (10A) on the amount earned from accrued pensions.
13. Exemptions Under Section 10 (10D)
Section 10 (10D) allows taxpayers to avail of an exemption for the income earned from a life insurance policy or bonus.
14. Exemptions Under Section 10 (35)
Section 10 (35) of the Income Tax Act allows you to gain exemption from the sale of definite mutual fund units.
General Provident Fund (GPF) exemption under Section 10 of the Income Tax Act
Section 10(11) and 10(12) of the Income Tax Act allow taxpayers to avail of an exemption of GPF amount of INR 2.5 lakh.
1. Exemption on Internet allowance u/s 10 of Income Tax Act
Section 10 clause (14) of the Income Tax Act provides tax exemption on internet allowance offered by employers.
2. Exemption of Food allowance under Section 10 of the IT Act
Clause (14) of Section 10 offers an exemption of INR 26,400 in a year on tax for food allowance provided by employers
3. Maximum Limit of Exemptions Available Under Section 10
The total amount of exemption under section 10 of the IT Act is up to INR 2.5 lakh for taxpayers below the age of 60 years. This limit is INR 3 lakh for taxpayers above 60 years and below 80 years of age, while it is INR 5 lakh for super-senior citizens of 80 years and above provided, they are Indian residents.
The Process to Claim Exemptions Under Section 10
To claim a tax exemption u/s 10 of the Income Tax Act, you may simply file an ITR or income tax return.
Section 10 Allowances
Total exemptions that a taxpayer can earn under the Income Tax Act of India are mentioned under section 10, including travel, gratuity, rent, education, children’s allowance, and more.
Does Income Tax Allow Exemption of Leave Encashment?
Your employment considers whether your leave encashment is exempted under income tax or not. If you are a central or state government employee, the income you earned from leave encashment at the time of resignation will not be taxable.
On the other hand, the government considers income from leave encashment for private sector employees after retirement/resignation as taxable ‘Income from salary’. However, they can avail of exemptions u/s 10(10AA) of the Income Tax Act and may pay tax on the amount that is remaining after exemption.
So, leave encashment earned as part of one’s employment is completely taxable and is considered a part of ‘salary income’ for private job holders.
FAQs on Section 10 Of the Income Tax Act
Sec 10 is a section under the Income Tax Act of India that contains all the exemptions that an individual can avail of.
Several exemptions are available under section 10, which are mentioned in the post above.
Clause 21 of section 10 of the IT Act allows income tax exemptions for income earned from an Approved Scientific Research Association, including grants, donations, etc.
No, only a part of the HRA under Section 10 (13A) of the Income Tax Act provides HRA exemptions with some limitations.
You can get an exemption on income received on voluntary retirement under section 10 (10C)
Tax benefits on the maturity amount of a life insurance policy are discussed under section 10 (10D)
Author Bio
Paybima Team
Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
Other Life Insurance Products
Latest Post
Difference between investment plans and savings plans?
In this day and age of never-receding inflation, it is very important to understand how an investment plan differs from a savings plan.
We are always saving money so that we can buy things and also use them during emergencies. The purpose of saving money is normally to have money when we need the same. It also helps that such money has little risk that it would lose its value. It is very important to monitor your savings by putting a timeline or deadline within which you would like to achieve the goals that you have in this context. There is also a need to attach value in this regard.
Let us say that you are saving money so that you can take your family on the vacation that you go on every year. In that case, you have to decide the time within which you would want to save the money and the amount that you would need for the same. This way, you would be in a position to withdraw that money when you go for the vacation with your family. In this case, you know all the variables – the amount of money you need, the amount that you need to save each month, etc.
When you are investing it is important to be as wise as you can be in this regard. This is true even when you have gone for the best investment plans out there. You can be sure that the earlier you start to invest the better your returns will be. If you wish to be successful with your investments you need to understand the different options that you have in this regard especially the purposes that they serve. You need to know the way to use them the best to fulfill your goals.
The key differences between investment plans and savings plans
To begin with, the biggest area of difference between the two is in the extent of risk that you are taking with each of them. The risk is always higher with the investment vehicles and this is applicable even when you are going for the best investment options out there. However, when you invest in savings options such as savings accounts, CDs (certificates of deposit), and money market accounts the risk levels are a lot lower. But, the gains in these cases are minimal compared to what you can make from the investment plans.
When you are saving money you can withdraw that money whenever you need it. In some cases, you need to wait a bit before you can do so. On the other hand, when you are putting your money into an investment option you have the chance to make a lot more money. However, there is also a good chance that you may lose your money. So basically by investing your money you are taking a big risk for major financial gains. This is why you must review the goals that you have in this regard so that you can find out which one is the most appropriate as far as achieving your goals is concerned.
If you choose the wrong one time investment plan you would not be able to fulfill your goals at the very least. Apart from that, you would lose a lot of money on charges and fees along with what you have invested. You could also earn far less than what you may have originally envisaged in this case.
The difference in terms of the money that you can make from them
These two options also differ from each other in terms of the money that you can make from them – the interest that they provide you with.
People normally go for short term investment plans – as well as long-term ones – to earn a lot of money from the same. On the other hand, they save money so that they can use it when they need it. They know that in these cases the returns would be minimal.
The CDs – what to know about them?
As far as savings tools go, CDs are a popular option. They are available in both short and long-term variants.
You can put money in them for a few months or even for several years if that suits you. In the long term, they can be continued for at least seven years. No wonder this is perhaps the most sought-after savings plan in India. Over here, the interest rate that you get on your deposits would be a bit higher than in the case with a normal savings account. However, there is a period before which you cannot withdraw your money without incurring penalties and fines for the same. Always compare the various options you have in this regard before you choose any one so that you get the best interest rate.
The importance of investments nowadays
This is the age of inflation where everything is getting expensive even as we speak. You may want to save money to meet your future goals without taking any risks. However, you can be sure that with the rate of inflation progressing, the money you have saved would amount to little by the time when you try and fulfill the goals for which you started the process. This is why you need to choose an investment plan so that you can fulfill the major goals you have in life with ease.
.png)
.png)
To enjoy a financially secure life during your working years and throughout your retirement, you must invest in plans which allow you monetary independence. MIPs and SIPs are among some such plans to consider.
To attract more and more people towards insurance a range of new and emerging products were launched suiting the taste buds of different individuals by LIC. In this write-up, let us discuss one such lucrative product – LIC Saral Pension Plan.
.png)
The Post Office Monthly Income Scheme (POMIS) is a government backed savings policy that aims to offer financial security to people in the form of assured monthly proceeds. Let us take a look at the Post Office MIS interest rate 2025 calculator
Speak to our Advisor
+91
