Section 10 of Income Tax Act

  • Author :
  • TATA AIG Team
  • Published on :
  • 03/11/2023

Paying taxes on time is the responsibility of the taxpayer citizens of India. But sometimes, individuals do wish for tax exemptions to release some financial burden. To help individuals, the Government provides tax exemption under Section 10 of the Income Tax Act.

Section 10 of the Income Tax Act (ITA) specifies that some incomes are not taxable, reducing individuals' tax burden. So, if you are wondering about the section 10 exemption, then here in this blog, we will find answers to what income tax section 10 is and what are section 10 exemptions.

What is Section 10 of the Income Tax Act?

Section 10 of ITA is a particular clause designed for salaried individuals where they can reduce their tax liability by claiming 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.

What are the Exemptions Under Section 10?

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 sec 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 generated from agricultural land holding in India.

  • Income generated from the selling of farm-produced goods.

  • Income earned from agriculture activities such as ploughing, cultivation, etc.

  • Other income from doing agriculture activities such as irrigation, cutting, etc.

Lastly, income by renting out land or building 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 are:

  • 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 as shareholder and partner.

Section 10(3)

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

Section 10(4)

  • This section of ITA 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 payment 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 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. 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 current and former travel details of employees.

  • The exemption limit is decided by the amount the employee or dependents spend on travel during the financial year.

  • If the employee is not travelling with their family, the exemption will not apply.

Section 10(6)

  • This section provides tax exemption to individuals representing India in their working capacity by working outside of India. These individuals can work in the Indian embassy, Indian high commission, consulates and legations.

  • 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 employer paying the income or remuneration should not be a part of business or 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 the Indian government employees working outside India can claim tax exemption on allowances, such as medical allowance, etc that the Government of India offers for furnishing their service.

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.

  • 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 from an institution set up by the central, state and provisional Government.

  • Employee from an organisation that is set up by central, state and provisional Government

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 issued before the 1st of April 2012 and the premium amount of the policy should not be more than 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 section, the employee can claim the tax exemption on interest or maturity amount received from retirement saving plans such as the Employees' Provident Fund. Not only this, the payment from the Sukanya Samriddhi Scheme is also tax-free.

Section 10(10BC)

In this sub-clause of income tax section 10, the remuneration or amount received by the individual from state, central or local government due to man-made or natural disaster 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 an HRA that employee receives.

  • For employees living in metro cities, the HRA is 50% of the basic salary and for employees living in non-metro cities, the HRA is 40% of basic salary .

  • Employees' actual rent should be less than 10% of the basic salary.

Section 10(14)

This subsection 10 of the Income Tax Act states that the employees can claim tax exemption on special allowance offered by the employer. 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 in the actual place of work.

Exemptions under section 10 (14)(ii)

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

Children's Education allowance- It is the allowance of ₹100 to an employee's child per month. 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 is the allowance for individuals working in the armed forces and living away from families. These 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 for armed forces member allowance where they receive up to ₹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.

Section 10(15)

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 bond before 1st June, 2001 
10(15)(iii) Securities that are issued by 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 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 earned for lending money to the government of India  before 1st June, 2001 for industrial undertaking.
10(15)(c) All taxpayers, who are committed to pay 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 pay 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 Interest earned on the decided rate from the nation’s financial institutions on the lending of money from outside India as per loan agreement before 1st June, 2001 
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

Maximum Exemption Under Sec 10 of the Income Tax Act

There are maximum exemption limits under sec 10 of 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

Individuals Who Received Allowances Exemptions

Some specific individuals received exemption from allowances under Section 10(14) (i) and Section 10(14) (ii):

  • UNO employees

  • Government employee outside India

  • High court judges

  • Sumptuary allowance to the supreme court and high court judges.

Is Health Insurance Exempted From Income Tax?

Under section 80D of ITA, there are tax deductions on medical insurance plan premiums for up to ₹25,000 during the financial year. However, for senior citizens, the limit exceeds ₹50,000 per year. Individuals with health insurance plans can claim their tax deduction when filing income tax returns.

This is the particular clause released by the authorities to encourage individuals to purchase health insurance plans for themselves and their families. Further, health insurance plans also release financial burdens during medical crises.

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

Conclusion

Section 10 of the income tax act is the special section that offers tax exemption benefits to individuals, entities, etc. Various subsections can help taxpayers in reducing their tax liabilities. However, to take advantage of these benefits, you have to file the income tax returns on time every financial year.

FAQS

What is Section 10(10D) exemption?

This section of the income tax act focuses on taxation benefits on life insurance policies in India.

What is the exemption u/s 10 in salary slip?

This section focuses on tax exemption on various allowances and benefits employees get, such as rent, travel, etc.

Who can claim the benefit of Section 80D of the Income Tax Act?

HUF and individual taxpayers can claim Section 80D benefits.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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