Section 10 of Income Tax Act

Section 10 of the Income Tax Act is a particular clause designed for salaried individuals who can reduce their tax liability by claiming an exemption. This section of ITA aims at individual taxpayer income that falls under the exempted category.

Such income cannot be included in their gross annual income. The government offers the exemptions to promote and encourage exempted list activities and provide some relief to taxpayers. Taxpayers can claim these exemptions while filing income tax returns.

• Income Tax Section 10 ensures that the total income of salaried employees is analysed comprehensively, including their tax liabilities.
• Salary employees are entitled to a tax deduction under Section 10 (10D) of the Income Tax Act.
• The primary purpose of the Income Tax Act Section 10 is to reduce the tax burden on taxpayers by providing exemptions for various allowances and benefits. These include rent, child tuition fees, gratuities, and travel allowances.

Also Read: Income Tax Exemptions for Salaried Individuals

Individuals will get exemptions under various Section 10 sub-clauses, which we will discuss in this section.

Section 10(1)

This is the sub-clause of Section 10 of the Income Tax Act, which offers relaxation to individuals earning their living from agriculture. In this section, it is specified the type of agriculture income that is exempted under this category, such as:

• Income or rent is generated from agricultural land holdings in India.
• Income generated from the selling of farm-produced goods.
• Income earned from agriculture activities such as plowing, cultivation, etc.
• Other income is from doing agricultural activities such as irrigation, cutting, etc.

Lastly, income can be obtained by renting out land or buildings to preserve agricultural farm goods or other agricultural operations.

Section 10(2)

This is the other sub-section of income tax Section 10, which clarifies the profit or income from investment or business made by a member of the Hindu Undivided Family will be tax exempted in some cases. These cases are:

• If the profit or income share has been paid to family members from the family's total income.
• If there is an impartible estate, the income or profit is generated from the business activities on the estate that belongs to the family.

Section 10(2A)

Section 10(2A) of ITA states that profit earned by a member being the co-owner of a partnership firm is tax exempted. However, members need to fulfil the listed conditions to get the tax exemption, which is:

• The firm should pay the tax under ITA, 1961 provisions.
• The shareholder or partners of the firm should receive the profit share as mentioned in the partnership deed.
• The tax exemption of the partner is based on the income of the shareholder and partner.

Section 10(3)

Another sub-section of Section 10 is Section 10 (3), which states that grants and monetary awards from the state or central government, literature, arts, science, etc., are tax-exempt.

Section 10(4)

Section 10 of the Income Tax Act focuses on the income or profit made by NRI citizens. Under Section 10(4), NRI can claim tax exemption under the following conditions which are:

• The profit or interest earned from the Government specified securities and bonds.
• The NRI can claim tax exemption on premium payments to redeem such securities or bonds.
• The interest or profit from depositing non-resident (external) savings accounts under the Foreign Exchange Management Act (FEMA), 1999.

The interest income earned outside of India by NRI for a deposit made in an NRE account.

Section 10(5)

This is the subsection of tax exemption for individual taxpayers that states salaried individuals can claim on the Leave Travel Concession(LTA) element of their salary. Foreign and Indian employees can both be part of this tax exemption.

• The benefit is not limited to employees; their children, siblings, spouses and parents can also take advantage of it. To get the tax exemption, the following conditions must be met by employees:
• The exemption is only for LTA given by the employer to employees during the financial year.
• It should include employees' current and former travel details.
• The exemption limit is decided by the amount the employee or dependents spend on travel during the financial year.
• If the employee is not traveling with their family, the exemption will not apply.

Section 10(6)

• This income tax section 10 provides tax exemption to individuals representing India in their working capacity as employees of India. These individuals can work in the Indian embassy, commission, and consulates.
• Further, these sections also include foreign representatives visiting India for official business. The eligibility criteria for availing the tax benefit in this category are:
• The foreign employee’s remuneration should not be included in the trade income in India.
• The tenure of stay for representatives should not be more than 90 days.
• Employees' income or remuneration from the foreign employer must not be deducted from employer income in India.

Section 10(7)

This section states that Indian government employees working outside India can claim tax exemptions on allowances, such as medical allowances, which the government of India offers to furnish their services.

Section 10(10CC)

Under this section, the individual will receive the tax exemption on the non-monetary benefits or prerequisites offered by the employer. Since the employer already pays the tax for non-monetary benefits, it becomes tax-free for employees.

Section 10(10C)

This section states that employees who receive funds on voluntary retirement or others are tax-exempt. This section also includes the employees whose service is terminated due to any condition. However, to avail of the tax exemption benefits, the following conditions need to be met:

• The employee can belong to central or state government services.
• Employees can belong to public sector companies.
• An employee of a cooperative society.
• The employee of any company that the gazetted officer of India notifies.
• An employee of the IIT(Indian Institute of Technology).
• A gazetted officer should notify an employee from the Institute of Management.
• An employee is an employee from an institution set up by the central, state, and provisional government.
• An employee from an organisation that is set up by central, state and provisional Government

Also Read: The Best Income Tax Benefits for Senior Citizens

Section 10(10D)

Section 10(10d) of the Income Tax Act states that individuals who receive profit and maturity on the life insurance policy are eligible for tax exemption. However, to get tax exemption, the policyholder needs to fulfil the following conditions such as:

• The life insurance policy was issued before April 1, 2012, and the premium should not exceed 20% of the sum insured.
• The life insurance policy is issued after the 1st of April, 2012, and the premium amount does not exceed 10% of the sum insured.
• The life insurance policy is issued to disabled and ill individuals as specified by Section 80U and 80DDB.
• Lastly, tax exemption can apply to profits received on ULIP(Unit Linked Insurance Plan) and other life insurance schemes.

Section 10(11)

Under this sub-section of Section 10 of the Income Tax Act, the employees can claim an exemption on interest or maturity from retirement saving plans such as the Employees' Provident Fund. In addition, payments to the Sukanya Samriddhi Scheme are also tax-free.

Section 10(10BC)

Under this subclause of tax section 10, the remuneration or amounts received by individuals, the state, central or local government, and man-made or natural disasters are exempt from tax.

Section 10(13A)

This section states that salaried employees receive a house rent allowance (HRA) in their salary, which is tax-exempt. However, the following conditions need to fulfil such as:

• It should be the actual amount of an HRA that an employee receives.
• For 50% of the basic salary and employees living in metro cities and 40% of the basic salary for employees living in non-metro cities, the
• Employees' actual rent should be less than 10% of the basic salary.

Also Read: What is House Rent Allowance (HRA)? Calculation, Tax Exemption and More

Section 10(14)

Subsection 10 of the Income Tax Act states that employees can claim tax exemptions for special allowances offered by employers. Employers offer various special allowances, and there is no specified limit for special allowances. The allowances are classified into two categories which are:

Exemptions under Section 10 (14)(i)

This category includes some special allowances such as:

• Conveyance Allowance- This is the transportation allowance offered to employees for doing their job.
• Uniform Allowance- This is the unique allowance organisations offer with dress or uniform codes.
• Research or Academic Allowance- Employees are offered Research and academic allowance to encourage training and academic activities.
• Travel Allowance- This is the travel allowance employees get for official duties.
• Helper Allowance- Employees needing assistance or help to do their job need a helper allowance.
• Daily Allowance— Lastly, employees receive an allowance for carrying out their day-to-day duties when they are not at their actual place of work.

Also Read: Are Travel Expenses Tax Deductible?

Exemption Section 10 (14)(ii)

These are the various exempt allowances under section 10 (14)(ii) offered to an employee that occurs while performing their duties, such as:

• Children's Education allowance—This is an allowance of ₹100 per month for an employee's child. It is limited to two children per employee.
• Compensatory Field Area Allowance- The employee can take advantage of a compensatory field area allowance with a maximum of ₹2,600 per month.
• Counter Insurgency Allowance—This allowance is for individuals working in the armed forces and living away from families. Members can receive up to ₹3,900 per month.
• Island Duty Allowance-Eligible armed forces individuals or members who are placed in Lakshadweep group island or Andaman Island can receive this allowance. The maximum limit for this allowance is ₹3,200 per month.
• Border Area Allowance—This is an allowance for armed forces members, with ₹200 to ₹1,300, depending on the area.
• Tribal Area Allowance- This is the allowance for employees posted in tribal, agency or scheduled areas.
• Special Compensatory Allowance- This is for employees working in hilly parts of the country. The employee will receive an allowance from ₹300 to ₹7000 per month based on area and risk factors.

Also Read: Special Allowance Explained: Taxation, Exemption Limits and More

Section 10(15)

Under this sub-section of Income Tax Section 10, the individual will receive tax exemption on profit or interest earned from investments in this section of ITA. There are various subsections, which are listed below:

Section	Taxpayer Type	Investment Type
10(15)(i)	All taxpayers	Exemption on profit, maturity amounts, and sum insured on bonds, securities and certificates.
10(15)(iiB)	HUFs and Individual	Interest or profit earned on capital investment before 1st June 2001
10(15)(iiC)	HUFs and Individual	Interest and profit earned on relief bonds.
10(15)(iiD)	NRI Individual/ Indian individuals who receive as a gift from NRI	Interest and profit earned on declared foreign exchange bonds before 1st June 2001
10(15)(iii)	Securities that are issued by the Central Bank of Ceylon	Interest on securities
10(15)(iiiA)	Incorporation of a scheduled bank abroad	Interest and profit earned from scheduled bank with the approval from RBI
10(15)(iiiB)	Nordic Investment Bank	Interest paid to Nordic Investment Bank
10(15)(iiiC)	European Investment Bank	Interest payable of loan to European Investment Bank
10(15)(iv)(a)	Assets that have lent money from sources that are outside India to the government	Interest or Profit earned by loaning money to government and local authority before the date 1st June 2001
10(15)(iv)(b)	Approved or recognised foreign financial institutions	Interest and profit were earned by lending money to the government of India before 1st June 2001 for industrial undertakings.
10(15)(c)	All taxpayers who are committed to paying money or who have incurred debt to finance the said industrial undertaking	Interest and profit earned on raw materials, machinery, etc., for industrial undertaking outside India before 1st June 2001
10(15)(d)	All assesses who are committed to paying the given money.	Interest paid by the financial institution of India for borrowed money before 1st June 2001
10(15)(e)	All assesses who lent money as part of given loan agreements
10(15)(f)	All assesses who lent money as per the given loan agreements	Interest or profit gained from Indian industrial undertaking on invested funds raised in foreign currency before 1st June 2001 from sources outside India as per loan agreements

There are maximum exemption limits under Section 10 of the Income Tax Act, which are

Age Limit	Maximum Tax Exemption	Special Condition
Under 60 years	₹2.5 Lakh per financial year	NA
Between 60 and 80 years	₹3 Lakh	Applicable to Indian Residents only
Over 80 years	₹5 Lakh	Applicable to Indian Residents only

Also Read: Tax Deductions and Exemptions Under the New Tax Regime

Some specific individuals received an exemption from allowances under Section 10:

• UNO employees
• Government employee outside India
• High court judges
• Sumptuary allowance to the Supreme Court and high court judges.
• Allowances are granted to government employees who are Indian citizens living abroad.
• As per Section 10 (11A) of the Income Tax Act, this income tax exemption applies to anyone working outside India who represents India in that country.
• The exemption Section 10 provides is also for employees working in foreign companies, provided their living tenure in India should not exceed 90 days, and the company should not have trade or business in India.
• High-ranking Embassy officials, trade officials and other officers are eligible for the Section 10 exemptions.

Here is the standard procedure to claim an exemption under Section 10 of the Income Tax Act.

• Collect the crucial information and related documents to your income tax and exemptions you are eligible for under Income Tax Section 10.
• You can download the form from the Income Tax Department website for offline filing, or you can visit the website and complete the process online.
• Complete the form with details of all your income sources, including those eligible for exemption under Section 10 of the Income Tax Act. These may include capital gains, agricultural activities, dividends, etc.
• You must provide clear information regarding the exemptions you are claiming under Section 10. Make sure to provide information on specific subsections and clauses as applicable.
• Submit the documents as required for the exemption you have made claims for, such as investment proofs, certificates, or other relevant documents.
• Please cross-check all the information on the income tax form and all the supporting documents. Once you have completed the form, you can submit it electronically or mail it in person.
• Please keep a copy of your form and all the submitted documents as proof for future reference.

Also Read: Income Tax Return (ITR)- How To File ITR?

• Income tax portal login credentials
• PAN Card
• Aadhar Card
• Bank statement/ Passbook
• Relevant documents for various incomes

No, the Section 10 Income Tax Act exemption does not apply to all Indian taxpayers. Although the section provides several exemptions from Income Tax, these exemptions apply to specific types of income and under special circumstances.

For example, the section might provide exemptions for house allowance, agricultural income and certain retirement benefits. Eligibility for these exemptions depends on factors like the source of income, the taxpayer’s employment status and other individual scenarios.

Income Tax Section 10 provides several exemptions to salaried employees, including rent allowance, tuition fees for children, travel allowance gratuity, and more. The government offers these exemptions to relieve some of the Income Tax burden on individuals, helping them boost their financial standing.

Similarly, you can get tax benefits for buying the best health insurance policy under section 80D of the ITA. Medical insurance plan premiums can be deducted up to ₹25,000 during the financial year. However, the limit for senior citizens exceeds ₹50,000 per year. Individuals with medical insurance plans can claim their tax deductions when filing income tax returns.

TATA AIG offers various medical insurance plans to cater to different medical needs. You will find everything from family health insurance plans to critical insurance plans here. Not just this, you can compare health insurance based on coverage and premium before making a purchase decision.

Also Read: Health Insurance Tax Benefits- Section 80D