Section 10 of the Income Tax Act: Exemptions & How to Claim?

Section 10 of the Income-tax Act, 1961, provides several exemptions and allowances to reduce income tax burdens for taxpayers, particularly salaried professionals. Introduced by the Government of India, these provisions offer tax rebates on various income components, such as house rent allowance, travel allowance, gratuity, and leave encashment. Additionally, Section 10 includes exemptions on maturity benefits from life insurance policies, subject to specific conditions. To claim Section 10 exemptions, you must provide relevant documents and details in your income tax return, verifying that your income falls under the specified exempt categories. This article provides detailed information on Section 10 of the Income tax act and the respective exemptions. IndiaFilings simplifies your ITR filing process & maximises your tax benefits by utilizing the Section 10 exemptions!!

What is Section 10 of the Income Tax Act?

Section 10 of the Income Tax Act provides a list of incomes exempt from taxation under the Act. These exemptions cover a variety of income sources, such as agricultural income, certain allowances for government employees, specific types of insurance proceeds, and income received by certain institutions or funds. The objective of Section 10 is to offer relief and promote certain activities or sectors by exempting particular incomes from taxation, helping individuals and organisations benefit from these tax provisions.

What are the Exemptions under Section 10?

Here is a detailed look at the several exemptions under section 10 of the Income Tax Act,

Section 10(5) of the Income Tax Act

Section 10(5) of the Income Tax Act provides tax exemption for travel concessions or assistance an individual receives from their employer for themselves and their family. This exemption applies to travel within India in connection with leave or retirement. The amount exempt is limited to the actual expenses incurred. The definition of "family" includes the individual's spouse, children, parents, brothers, and sisters who are wholly or mainly dependent on them.

Section 10(10D) of the Income Tax Act

Section 10(10D) of the Income Tax Act provides tax exemption for life insurance policy proceeds, including bonuses, with certain exceptions. The exemption does not apply to sums received under specific sections related to disability or keyman insurance, or to policies with high premiums. The exemption is also subject to certain conditions based on the date of the policy and the premium paid. However, there are exceptions for policies issued to individuals with disabilities or specific diseases, and for policies issued before February 1, 2021. Additionally, the section includes provisions for guidelines to address potential difficulties in applying these rules.

Section 10(13A) of the Income Tax Act

Section 10(13A) of the Income Tax Act provides tax exemption for special allowances granted by an employer to employees to cover the cost of residential accommodation rent. This HRA exemption is limited to the amount of rent actually incurred, considering factors like the location and size of the accommodation. However, the exemption does not apply if the employee owns the accommodation or has not paid any rent.

Section 10(14) of the Income Tax Act

Section 10(14) of the Income Tax Act provides tax exemption for certain special allowances or benefits granted to employees to cover expenses related to their employment. These exemptions include allowances for expenses incurred in performing job duties and allowances for personal expenses or compensation for increased living costs. However, the exemption for personal allowances is limited to allowances related to the employee's place of posting or residence.

Section 10(23C) of the Income Tax Act

Section 10(23C) of the Income Tax Act provides tax exemption for income received by individuals on behalf of certain government-established funds and institutions. These include the Prime Minister's National Relief Fund, the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND), the Prime Minister's Fund (Promotion of Folk Art), the Prime Minister's Aid to Students Fund, the National Foundation for Communal Harmony, the Swachh Bharat Kosh, the Clean Ganga Fund, Chief Minister's Relief Funds or Lieutenant Governor's Relief Funds, universities or educational institutions, and hospitals or other medical institutions.

Section 10(34) of the Income Tax Act

Section 10(34) of the Income Tax Act provides tax exemption for dividends received from Indian companies that are subject to tax under Section 115-O. However, this exemption does not apply to dividends that are taxable under Section 115BBDA. Additionally, for dividends received on or after April 1, 2020, the exemption is only available if the tax under Sections 115-O and 115BBDA has already been paid.

Section 10(37) of the Income Tax Act

Section 10(37) of the Income Tax Act provides tax exemption for capital gains arising from the transfer of agricultural land by individuals or Hindu undivided families. This exemption is applicable if the land is located in a specified area, was used for agricultural purposes in the two years prior to the transfer, is transferred through compulsory acquisition or with government approval, and the compensation or consideration is received on or after April 1, 2004.

Section 10(26) of the Income Tax Act

Section 10(26) of the Income Tax Act provides tax exemption for certain members of Scheduled Tribes residing in specified areas. This exemption applies to income generated from sources within these areas or from dividends or interest on securities. However, The areas covered include those specified in Part I or Part II of the Sixth Schedule to the Constitution, certain northeastern states, and the Ladakh region of Jammu and Kashmir.

Section 10(38) of the Income Tax Act

Section 10(38) of the Income Tax Act provides tax exemption for long-term capital gains arising from the sale of equity shares or units in equity-oriented funds or business trusts. This exemption is applicable if the transaction is subject to securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004. However, there are certain conditions and exceptions to this exemption, including the date of acquisition of the shares or units, the location of the stock exchange, and the type of transaction. Additionally, for companies, the long-term capital gains are included in book profit for tax purposes under Section 115JB.

Section 10(46) of the Income Tax Act

Section 10(46) of the Income Tax Act provides tax exemption for certain specified income earned by bodies, authorities, boards, trusts, or commissions that are established or constituted by or under a central, state, or provincial act or by the central or state government. This exemption applies if the entity is not engaged in commercial activities and is notified by the central government for this purpose.

Section 10 Exemption List

The below Section 10 Exemptions list provides an overview of various subsections of Section 10:

Section 10(1): Agricultural income – Exempts income derived from agricultural land in India.
Section 10(2): Income of Hindu Undivided Family (HUF) – Amounts received by a member from the family income.
Section 10(2A): Share of profit from a partnership firm – Exempt in the hands of the partners as the firm pays tax on its income.
Section 10(4)(i): Interest on certain non-resident (External) accounts.
Section 10(4)(ii): Interest payable to a non-resident on moneys lent to the government or any Indian concern.
Section 10(5): Leave Travel Concession (LTC) – LTC received by employees.
Section 10(6): Income of foreign individuals – Exemption for specified foreign employees (like diplomats, consular officials).
Section 10(6A): Exempts income from technical services provided by a foreign national in India.
Section 10(6BB): Tax paid by the government or Indian concern on behalf of a non-resident or foreign company engaged in the business of operation of aircraft.
Section 10(6C): Income derived from technical services rendered in or outside India by a non-resident.
Section 10(7): Allowances or perquisites paid by the government to its employees posted abroad.
Section 10(8): Income of foreign employees of foreign governments working in India under national technical research organisation.
Section 10(9): Remuneration and pensions of certain individuals working for international organizations in India.
Section 10(10): Gratuity – Subject to certain limits.
Section 10(10A): Pension – Commuted value of pension subject to conditions.
Section 10(10AA): Leave encashment on retirement.
Section 10(10B): Retrenchment compensation received by workers.
Section 10(10D): Exemptions on Life Insurance Policy
Section 10(10C): Amount received under a voluntary retirement scheme (VRS) subject to limits.
Section 10(11): Payments received from a provident fund to which the Provident Fund Act, 1925 applies.
Section 10(12): Accumulated balance due to an employee from a recognized provident fund (under certain conditions).
Section 10(13): Payment from approved superannuation funds.
Section 10(13A): House Rent Allowance (HRA).
Section 10(14): Special allowances or benefits granted to employees to meet certain expenses.
Section 10(15): Interest on specified securities, bonds, and savings certificates.
Section 10(16): Scholarships granted for educational purposes.
Section 10(17): Income received by Members of Parliament (MP) and State Legislatures, including daily allowances.
Section 10(17A): Awards, rewards, and other sums received from the government for public services.
Section 10(18): Pension received by individuals who have been awarded certain gallantry awards.
Section 10(19): Family pension received by family members of armed forces personnel killed in service.
Section 10(19A): Income of a former ruler by way of privy purse.
Section 10(20): Income of local authorities (such as municipalities).
Section 10(21): Income of scientific research associations.
Section 10(22B): Income of approved news agencies.
Section 10(23A): Income of professional associations for the promotion of trade, commerce, or industry.
Section 10(23B): Income of funds or institutions established for charitable purposes.
Section 10(23BB): Income of certain regulatory bodies like the Agricultural Marketing Board.
Section 10(23BBA): Income of statutory bodies established for religious or charitable purposes.
Section 10(23C): Income of certain funds, institutions, educational institutions, and hospitals (subject to specific conditions).
Section 10(24): Income of registered trade unions.
Section 10(25): Income received by trustees on behalf of recognized provident, superannuation, or pension funds.
Section 10(26): Income of scheduled tribe members residing in certain areas.
Section 10(26A): Income of residents of Ladakh from specific sources.
Section 10(26AAA): Income of Sikkimese individuals subject to certain conditions.
Section 10(27): Income from co-operative societies engaged in marketing agricultural produce grown by its members.
Section 10(30): Subsidy received from the government by tea growers for replantation.
Section 10(31): Subsidies received by individuals growing rubber, coffee, cardamom, or other specified crops.
Section 10(32): Income of a minor child included in the parent’s income (up to a specified limit).
Section 10(33): Dividends from specified sources.
Section 10(34): Dividend income (except for certain dividends subject to DDT).
Section 10(35): Income from units of mutual funds, UTI, or specified undertakings.
Section 10(36): Long-term capital gains on shares purchased between 1st March 2003 and 1st March 2004.
Section 10(37): Capital gains from the compulsory acquisition of urban agricultural land.
Section 10(38): Long-term capital gains from listed equity shares or units of equity-oriented mutual funds (now subject to tax under new provisions).
Section 10(39): Income from international sporting events held in India.
Section 10(40): Income of certain subsidiaries of overseas financial organizations.
Section 10(41): Capital gains arising from the transfer of specific assets for shifting of an industrial undertaking from urban to non-urban areas.
Section 10(42): Income of notified bodies.
Section 10(43): Amount received under a reverse mortgage scheme.
Section 10(44): Income from New Pension System Trust established on the 27th day of February, 2008.
Section 10(45): Compensation received under specified agreements related to the nationalization of coal mines.
Section 10(46): Income of certain notified bodies, authorities, boards, or commissions set up by the central or state governments for the administration of public functions.
Section 10(47): Income of certain infrastructure debt funds, as notified by the government.
Section 10(48): Income received in India in Indian currency by a foreign company on account of the sale of crude oil to any person in India under certain specified agreements.
Section 10(48A): Exempts income of a foreign company from the storage and sale of crude oil in India, under an agreement with the Central Government
Section 10(48B): Exempts income of a foreign company from selling leftover crude oil from strategic reserves after the agreement with the Indian government ends, subject to specific conditions
Section 10(49): Exempts income of the National Financial Holdings Company Limited for any financial year up to April 1, 2014.
Section 10(50): Exempts income from specified services or e-commerce transactions subject to equalisation levy under Chapter VIII of the Finance Act, 2016, from April 1, 2020.

This Section 10 exemption list covers various income tax-exempted categories, which maximize the tax benefits.

How to claim the Exemptions under Section 10?

Here are the steps to claim the exemptions under section 10 of the Income Tax Act,

Step 1: Understanding Applicable Exemptions

The first step is identifying which specific exemptions under Section 10 are relevant to your income sources and personal circumstances. This could include exemptions for house rent allowance, leave travel allowance, agricultural income, or other specified categories.

Step 2: Disclosing Income and Exemptions

When filing your income tax return (ITR), you need to:

Declare all sources of income: This includes both taxable and exempt income.
Specify exempt income: Indicate the income sources that qualify for exemptions under Section 10 and the corresponding exemption amounts.

Step 3: Maintaining Supporting Documents

To substantiate your claims, keeping relevant documents and proofs is essential. This might include:

Salary slips
Expense vouchers
Investment proofs
Form 16
Certificates from employers

Step 4: Calculating Taxable Income

After deducting the exempted income under Section 10, calculate your taxable income.

Step 5: Choosing the Right ITR Form

Select the appropriate ITR form based on your income sources and the exemptions you claim.

Step 6: Accurate Filing

Fill out the ITR form accurately and submit it within the deadline set by the Income Tax Department. Note: For specific guidance and to ensure accurate compliance, consider consulting with IndiaFilings tax professionals. We can help you identify eligible exemptions, provide expert advice on documentation, and assist in filing your income tax return effectively.

Is it Section 10 Exemptions Applicable to all Indian Taxpayers?

No, Section 10 exemptions are not applicable to all Indian taxpayers. While Section 10 offers various exemptions from income tax, these exemptions are specific to certain types of income or situations. For instance, exemptions might be available for house rent allowance, leave travel allowance, agricultural income, or specific types of retirement benefits. The applicability of these exemptions depends on factors such as the nature of income, employment status, and other individual circumstances.

Conclusion

In conclusion, Section 10 of the Income Tax Act’s exemptions helps you reduce your overall taxable income. You might fall into any of the mentioned exempted categories given in the article. It is important to gather all the required documents proving the eligibility of the Section 10 exemptions to get the tax benefits. Make sure to choose the appropriate ITR form, fill in the accurate details and file it. It takes a large portion of your time as it involves identifying the exemptions and calculating and filing the ITR. However, filing an ITR and paying taxes is necessary to avoid penalties and legal problems. Identify your Section 10 exempted category & file your ITR effortlessly with IndiaFilings experts!!