Income Tax

Exemptions under Section 10 of the Income Tax Act

Exemptions under Section 10 of the Income Tax Act

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.

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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. 
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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

SectionExemption
Section 10(1)Income earned through agricultural means
Section 10(2)Any amount received by an individual through a coparcener from a HUF
Section 10(2A)Income received by the firm’s partner, as shared between them
Section 10(4)(i)Any interest that has been paid to a person who is not a resident Indian
Section 10(4)(ii)Any interest that has been paid to the account of a person who is not a resident Indian
Section 10(4B)Any interest that has been paid to a person who is not a resident Indian but of Indian origin
Section 10(5)Concession on travel given to an employee who is also a citizen of India
Section 10(6)Any income earned or received by a non-Indian citizen
Section 10(6A), (6B), (6BB), (6C)Government tax paid on the income of a foreign firm
Section 10(7)Allowances received by government employees stationed abroad
Section 10(8)Income earned by foreign employees in India under the  Cooperative Technical Assistance Program
Section 10(8A)Income earned by a consultant
Sec 10(8B)Income earned by  the staff of a consultant  or employees
Sec 10(9)Income  which is earned by any family member of a foreign employee in India  as per  the Cooperative Technical Assistance Program
Section 10(10)Gratuity
Section 10(10A)The commuted value of the pension being  earned by an individual
Section 10(10AA)Any amount earned via encashment of leave at the time of retirement
Section 10(10B)Compensation paid to workers due to relocation
Section 10(10BB)Any remittance received as per the Bhopal Gas Leak Disaster Act 1985
Section 10(10BC)Any compensation received in the event of a disaster
Section 10(10C)Compensation in lieu of retirement from a PBC or any other firm
Section 10(10CC)Any income received through taxation on perquisites
Section 10(10D)Any amount acquired  through a Life insurance policy
Sec 10(11)Receipt of payment  via the Statutory Provident Fund
Section 10(12)Receipt of payment  via a recognised or authorised Fund
Section 10(13)Any payment received through a Superannuation Fund
Section 10(13A)House Rent Allowance
Section 10(14)Allowances utilised to meet business expenses
Section 10(15)Income received in the form of interest
Section 10(15A)Income received by an Indian firm  by way of the lease of an aircraft from a foreign firm or government
Section 10(16)Income in the form of a scholarship
Section 10(17)Allowances granted to MLCs, MLAs or MPs
Section 10(17A)Income which is received in the form of a government award
Section 10(18)Income is being received in the form of pensions by winners of awards for heroism.
Section 10(19)Income is received by family members of the armed forces in the form of a pension.
Sec- 10(19A)Income  that is received from a single palace of an ex ruler
Sec- 10(20)Income  that is received by a localised body or authority
Section 10(21)Income received by an association engaged with scientific research
Section 10(22B)Income earned by a news or broadcasting agency
Section 10(23A)Income earned by certain Professional Institutes
Section 10(23AA)Income acquired through Regimental Fund
Section 10(23AAA)Income acquired through an employee welfare fund
Section 10(23MB)Insurance pension fund income
Section 10(23B)Income earned by village industry development institutions
Section 10(23BB)Income earned by state-level Khadi and Village Industries Board
Section 10(23BBA)Income earned by regulatory bodies of institutions affiliated with religion and charity
Section 10(23BBB)Income received by the European Economic Community
Section 10(23BBC)Income received through SAARC-funded regional projects
Section 10(23BBE)Income received by the IRDA
Section 10(23BBH)Income received through Prasar Bharti
Section 10(23C)Income received by any individual through certain specified funds
Section 10(23D)Income earned via Mutual Funds
Section 10(23DA)jIncome earned via a Securitisation Trust
Section 10(23EA)Income earned through an IPF
Section 10(23EB)Income received by the Credit Guarantee Trust for Small Industries
Section 10(23ED)Income exemption of IPF
Section 10(23DFB)Income exemption of specified income received by Venture Capital Firms, Funds or Businesses
Section 10(24)Income earned by authorised trade unions
Section 10(25)Income earned via provident funds and superannuation funds
Section 10(25A)Income earned via Employee’s State Insurance Fund
Section 10(26), 10(26A)Income earned by Schedule Tribe Members
Section 10(26AAN)Income earned by an individual of Sikkimese origin
Section 10(26AAB)Marketing regulation with regard to agricultural produce
Section 10(26B)Income earned by corporations was established for  uplifting the backward tribes and classes
Section 10(26BB)Income earned by corporations established for  protecting the interests of  Minority interests
Sec – 10(26BBB)Income earned by corporations established for former servicemen
Section 10(27)Income earned by cooperative societies established for the protection of scheduled castes and tribe’s interests
Section 10(29A)Income received by Community Boards
Section 10(30)Income earned in the form of subsidies  through the Tea Board
Section 10(31)Income earned in the form of subsidies through  the concerned Board
Section 10(32)Income earned by a child under  Section 64 of the Income Tax Act.
Section 10(33)Income earned through Unit Trust of India capital asset transfer
Section 10(34)Income earned in the form of dividends through an Indian firm
Section 10(34A)Income earned by a shareholder by way of buyback of unlisted companies
Section 10(35)Income received through the sale or transfer of Unit Trust of India units, as well as other mutual funds
Section 10(35A)Income from a securitisation trust that is exempt
Section 10(36)Income received on the sale of shares under specific conditions
Section 10(37)Any capital gains made on the mandatory acquirement of land in relation to urban agriculture
Section 10(38)Any long-term capital gains made from share and security transfers that fall under  the purview of Security Transaction Tax
Section 10(39)Any income being received from any international event or function relating to sports.
Section 10(40)Acquisition of Income  in the form of a grant from a company deemed to be a  parent company’s subsidiary
Section 10(41)Any income  which has been received on any asset transfer of a company or project that conducts power distribution, generation and transmission
Section 10(42)Any income earned by any authority that has been established by more than one country
Section 10(43)Any income in relation to the reversal of the mortgage
Section 10(44)Income generated through the NPS Trust
Sec 10(45)Any allowance or perks granted to  any member or chairman  of the UPSC
Sec 10(46)Any income  coming under the category of ‘specified income’ with regard to specific authoritative bodies
Section 10(47)Any income being exempted under the category of infrastructure debt fund
Section 10(48)Any income earned by a foreign company or firm because of crude oil sales within India.
Sec 10(49)Any income earned by the National Finance Holdings Company, i.e. NFHC

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.

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Frequently Asked Questions 

What Is A Section Of The Income Tax Act?

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 1961 includes all those exemptions that a taxpayer can get while paying income tax.

What Is The Benefit Of Claiming Exemption Under Section 10 Of The Income Tax Act?

This exemption helps in the reduction of the tax liability of the assessee, which is one of the most important benefits of claiming such an exemption.

On What Amount Is The HRA Exemption Allowed?

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

What Is Section 10(23C) Of the Act?

This section deals with educational or medical institutions whose aggregate annual receipts don’t exceed Rs.5 crore and is eligible for exemption under this section.

What Is The Manner Of Claiming The Exemption Under Section 10 Of The Income Tax Act?

The claim of exemption under Section 10 can be made by filing an income tax return.

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

References

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

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