Exemptions under Section 10 of the Income Tax Act

Shubhangi Jain

26 Jun, 2023

The Government of India provides some exemptions for the reduction of the tax burden of the assessee. Section 10 of the Income Tax Act deals with those exemption provisions and the terms and conditions on which one can avail  a tax exemption.

The present article shall discuss the Exemptions under Section 10 of the Income Tax Act.

Section 10 of Income Tax Act: Meaning

During the calculation of the tax liability of an individual, there are certain income sources that don’t form a part of the total income. Section 10 of the Income Tax Act 1961¹ includes all those exemptions that an assessee can get while paying income tax. 

Exemptions under Section 10

There are various exemptions u/s 10 of the Income Tax Act. The major exceptions are discussed below-

• Section 10 (13A) Of The Income Tax Act : Section 10 (13A) of the Income Tax Act deals with House Rent Allowance (HRA). Part of the salary received by the assessee 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 the 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 The Income Tax Act

Section 10 (5), or leave travel allowance exemption, is applicable for individual assessees. The LTA exemption is applicable 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 instance, if an employee is given an 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 The Income Tax Act : If the assessee is a member of a Scheduled Tribe in Tripura, Nagaland, Mizoram, Manipur, and Arunachal Pradesh, they are eligible for tax exemptions under Section 10 (26) Of the Income Tax Act.
• Section 10 (14) (I) Of The Income Tax Act : This section provides exemptions for expenses incurred due to the employer’s business. It includes travelling, conveyance, research allowance and more.  
• Section 10 (11) Of The Income Tax Act:Under this section, the assessee receives exemptions for the interest received from a provident fund upon resignation or retirement. Moreover, it also includes any payment that is made from a Sukanya Samriddhi Account. 
• Section 10 (34) Of The Income Tax Act:This section includes exemptions from the dividends received 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 The Income Tax Act :If the assessee is a Sikkimese individual earning either in Sikkim or earning through dividends or interest on securities, this part of the income comes under tax exemption under Section 10 (26AAA). 
• Section 10 (38) Of The Income Tax Act : When earning long-term capital gains by selling equity shares of an equity-oriented mutual fund, such earning is exempted from Income Tax computation. However, the Securities Transaction Tax must be paid. 
• Section 10 (23C) Of The Income Tax Act :Educational or medical institutions whose aggregate annual receipts don’t exceed Rs.5 crore are eligible for exemption under this section. 
• Section 10 (37) Of The Income Tax Act :This section provides exemptions for capital gains owing to the compulsory acquisition of urban agricultural land. 
• Section 10 (10A) Of The Income Tax Act:If the assessee is a Government employee, under this section, they shall receive tax exemption on the money obtained from accumulated pensions. 
• Section 10 (10D) Of The Income Tax Act : Under this section, the assessee gets an exemption for the income received from a life insurance policy or bonus. 
• Section 10 (35) Of The Income Tax Act:Any income that is gained 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 Sections 10 (11) and 10 (12) of the Income Tax Act.
• Internet Allowance Exemption Under Section 10 : Under Section 10 (14), the internet allowance provided by the 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 the employer of the assessee, assuming two meals a day and 22 working days in a month.
• Maximum Exemption, Which Can Be Availed Under Section 10 : Section 10 of the Income Tax Act maximum limit is Rs.2.50 lakhs for assessee below 60 years of age, Rs.3 lakhs for individuals above 60 below 80 years and Rs 5 lakhs for assessee aged 80 years or more. The higher limit of Rs 3 & 5 lakhs is available only for those citizens who are Residents of India.
• Manner of Claiming Section 10 Exemptions? :The claim of exemption under Section 10 can be made by filing an income tax r return. 

Detailed List of All the Exemptions U/S 10 of the Income Tax Act 

Given below is the list of the exemptions u/s 10 of the ITA ie Income Tax Act

Conclusion

The above-mentioned exemptions can surely reduce the tax burden of the assessee, which shall, in turn, encourage them for the timely filing of their income tax returns and help in avoiding any penalties consequential to the late or non-filing of the same.

Frequently Asked Questions 

Read Our Article: Overview of Section 276B of the Income Tax Act 1961

1. https://incometaxindia.gov.in/Tutorials/11.Tax%20free%20incomes%20final.pdf