What is Section 10 of the Income Tax

Act?
Section 10 of the Income Tax Act of 1961 aims to provide exemptions to a salaried
professional while paying income tax. This section mainly focuses on income
sources that are not a part of the total income.

Features of Section 10 of the IT Act,

1961:
 Total Income Calculation: The total income is primarily calculated by
analyzing a salaried professional's total amount of tax liability.
 Benefits For: The tax rebate given to salaried professionals fall under this
Income Tax Act section.
 Tax Exemptions Allowed For: The objective of Section 10 is to reduce the
burden of the different structures of the tax, such as rent allowance,
tuition fee for children's education, travel allowance, gratuity, and so on.

Individuals Receiving Allowances

Exemption
There are certain kinds of allowances that are considered special allowances under
Section 10 of the Income Tax Act.

Exemption of Special Allowance under Section 10(14) (i) and Section 10(14) (ii) is
granted to specific individuals, who are:

 High Court judges

 UNO employees
  Supreme Court and High Court judges are entitled to receive the
Sumptuary Allowance

 Indian citizens working as government employees outside of India

1. Section 10(1): Exemption of Agriculture Income

According to this section, agricultural income from land situated in India is
entitled to get tax exemptions.

The income could be in the form of the following:

o Rent or revenue received from agricultural land situated in India

o Basic operations such as cultivation, tilling, and sowing

o Subsequent operations for the growth and preservation of the

product, such as weeding, cutting, pruning, etc.

o Sale of agricultural produce

o Income derived from farm building required for agricultural

operations

2. Section 10(2): Exemption on the Income of a HUF

As per Section 10(2), those who earn the income of HUF are entitled to get
tax exemption, provided:
o The income received by the individual must be paid out of the
family's income.

o In the case of an impartible estate, the income must be paid out of

the income of the estate belonging to the family.

Please go through the given illustration for a better understanding:

Example:
 Mr. Mahesh is part of a HUF. Now he earns an income of Rs. 1,00,000 from
the HUF and Rs. 10,000 as interest income. The interest income, in this case,
becomes his income. The income of Rs. 1,00,000 is not taxable since it is
received from the HUF. However, the interest income of Rs. 10,000 is
taxable.

3. Section 10(2A): Exemption of Income from a

Partnership Firm
Several benefits are enjoyed by the partner of a firm under Section 10(2A).
Under this section, the profit which a co-owner or the partner earns is
exempted from tax. The partnership firm must be classified and taxed as a
Partnership Firm under the Income Tax Act of 1961. Such tax exemption is
limited to the share of the profit earned by the partners of the LLP/Firm.

Example:
XYZ partnership firm's profit for FY 2021-22 is Rs. 5,00,000. Mr. Sharma's
share in the partnership firm is 40%. Thus, the income from the firm earned
by Mr. Sharma is Rs. 2,00,000, which is 40% of Rs. 5 lakh. This amount of Rs.
2 lakh is exempt from tax.

4. Section 10(4): Exemption of Income Received by

an NRI from India:
Those who are Non-Resident Indians (NRI) are entitled to enjoy tax
exemptions on certain investments. These include:

o Income earned by way of interest on bonds or securities specified by

the government for exemption

o Premium income on redemption of such bonds

o Interest income from the credited amount in a Non-Resident

(External) Account
 o Interest income earned by a resident outside India from the credit in
a Non-Resident (External) Account

5. Section 10(5): Exemption on Leave Travel

Concession
According to Section 10(5), an employee can get a tax exemption on his
leave travel. Under this section of the Income Tax Act, all the employees
(including Indian and foreign citizens) are entitled to enjoy this benefit.

Conditions for this section are:

o The travel concession must be received from the existing employer

for the travel of the employee/ individual and their family in the
particular financial year

o The existing or previous employer must receive it in connection with

their future travel.

o The employees are entitled to get travel concessions with respect to

any amount from their employer on leave across India.

6. Section 10(6): Exemption on Remuneration to

Indian Citizens Who are Working outside India
This is a special package for individuals working outside India and
representing India in that country. Individuals who are officials at an
embassy, high commission, consulate, or trade representative of a foreign
state, or individuals acting as a member of these officials, enjoy the benefits
of this section.

The employees of the foreign companies are also entitled to enjoy the tax
benefit under this act, subject to the following limitations:
 o The foreign company should not be engaged in any business or
trade in India

o The living tenure of the employees should not be more than 90 days
in India

o Under this act, the remuneration of the employer is not entitled to

be deducted

7. Section 10(7): Exemption on Allowances and

Perquisites Paid by the Government
All the allowances and the perquisites that are provided by the Government
of India to its employees for furnishing its services outside India are
entitled to tax exemptions. Indian citizens who are government employees
are entitled to avail of this benefit.

8. Section 10(10CC): Exemption on Tax on

Perquisites Paid by the Employer
Sometimes, employers pay taxes for non-monetary perquisites on behalf of
their employees. In such a case, the tax paid by the employer is treated as a
tax exemption in the hands of the employee.

9. Section 10(10D): Exemption on the Tax of Life

Insurance Policy Maturity
The maturity amount and the bonus of a LI policy earned by a citizen of
India are exempt from tax under Section 10(10D) of the Income Tax Act.
However, the following are some of the criteria to receive the benefit:
o Policies issued before 1st April 2012 and the premium paid on this
policy is not more than 20% of the sum assured.
 o Policies issued after 1st April 2012 and the premium paid on this
policy is not more than 10% of the sum assured.

o Maturity and bonus amount on the life insurance policy to a person

with disability or disease specified under Section 80U and 80DDB.

According to the Union Budget 2023:

Under the Section 10(10D), the tax exemption benefits on the maturity
amount of the LI policy issued after 1st April 2023 are as follows:

o For a ULIP policy, if the total premium amount paid is allowed up to

Rs. 2.5 lakhs.
o If the total premiums paid for other life insurance policies are up to
Rs. 5 lakhs.

10. Section 10(11): Exemption on Payment Made

in Provident Fund and Sukanya Samriddhi
Account
Any amount received in terms of contribution or interest from a provident
fund account on retirement or termination of service is exempted. In
addition, any payment made from the Sukanya Samriddhi Account is eligible
for tax exemption under Section 10(11).

11. Section 10(10BC): Exemption on the

Remuneration Received Against a Disaster
The employee is entitled to enjoy the exemption on tax if he receives
compensation for natural disasters from the Central Government, the State
Government, or a local authority.

12. Section 10(13A): Exemption on House Rent

Allowance (HRA)
 The salaried employees are entitled to receive the allowance on the house
rent paid, which is exempted from tax. The part of the salary an employee
receives towards rent and accommodation is exempt from tax under this
section. The following are the conditions:

o Actual HRA received by the employee

o HRA is 40% of the salary for the rented property in non-metro cities
or 50% for metro cities.

o Actual rent paid is less than 10% of salary.

13. Section 10(14): Exemption of Special

Allowance
An employer can offer a special allowance to its employees to support the
employee's expenses. These expenses should be incurred by the employee
while performing his duties. There is no specified limit on the amount an
employer provides his employee as a special allowance, but allowances
must be utilized only for the mentioned purpose.
This section is further subdivided into two parts, namely,
1. Exemption of Allowance under Section 10(14) (i)

Travel Allowance: This allowance is provided by the employer to

meet the employee's expense of traveling while performing office
duties.
Daily Allowance: The employee can receive a daily allowance to
meet his daily expenses. Such a type of allowance is given when the
employee is not at his actual place of duty.
Uniform Allowance: Employees who need to purchase or maintain
their uniforms while on duty can receive a uniform allowance.
Academic or Research Allowance: The allowance is granted to aim
encouragement for research, academic or training pursuits among
the employees.
 Helper Allowance: This allowance is given to meet the expense of
hiring a helper to perform office duties.
2. Exemption of Allowance under Section 10(14) (ii)

The allowance is granted to meet expenses that are incurred while

performing one's duties. If these allowances are received above the
prescribed limits, they are then taxable in the hands of the
employees. For this section, the allowances are prescribed in Rule
2BB.

 Children's Education Allowance: An allowance of Rs. 100 each

month per child, up to two children is given.
 Tribal Area Allowance: An allowance of Rs. 200 per month for
tribal areas, schedule areas, and agency areas.
 Compensatory Field Area Allowance: The employee can claim
either a Compensatory Field Area Allowance of Rs. 2,600 per
month or a Border Area Allowance.
 Border Area Allowance: This allowance is allowed for army
personnel and ranges from Rs. 200 to Rs. 1,300 per month.
 Special Compensatory Allowance: For employees working in
hilly regions of the country, allowances like high altitude
allowance, uncongenial climate allowance, snowbound area
allowance, or avalanche allowance are offered, which range
from Rs. 300 to Rs. 7,000 per month.
 Counter Insurgency Allowance: Individuals from the armed
forces living away from their homes receive this allowance
with a limit of Rs. 3,900 per month.
 High Active Field Area Allowance: Members of the armed
forces receive this allowance with a limit of Rs. 4,200 per
month.
 Island Duty Allowance: Members of armed forces posted in
the area of Andaman and Nicobar Islands and Lakshadweep
 Group of Islands are eligible to receive this allowance with a
limit of Rs. 3,200 per month.

14. Section 10(15) the Income Earned from

Interest on Investments
Those who earn income from interest are exempted as per the rules of
Section 10(15). The below-mentioned table provides the details.

Section Income Tax exemption to

10(15)(i) The exemption would be availed on the interest, All assesses

redemption, or premium on bonds, securities, deposits, and
certificates that are subject to some conditions and
limitations.

10(15)(iib) Interest on the bonds of Capital Investment should be HUF/Individual

notified before the date of 01-06-2002

10(15)(iic) Interest on Relief bonds HUF/Individual

10(15)(iid) Interest on declared bonds (which should be declared NRI-Individual/NRI gift the
before 1-6-2002) and should be bought in foreign bonds to the individual.
exchange, which must be subject to some limitations and
conditions.

10(15)(iii) Securities' interest Issue department under the

central bank of Ceylon

10(15)(iiia) The interest on deposits with the scheduled bank with the Incorporation of bank broad
approval from RBI

10(15)(iiib) Paying off interest to Nordic Investment Bank Nordic Investment Bank

10(15)(iiic) In the execution of an agreement on 25-11-1993, the European Investment Bank

interest is payable to the European Investment Bank for
granting the loan between that bank and the central
government.

10(15)(iv)(a) Receiving the interest from the local authority or the All the assets which are
government on money lent to it prior to 1-6-2001 committed to lent on money
from sources outside the
nation

10(15)(iv)(b) Under the agreement of loan, received the interest from the Approved the financial
industrial undertaking in India prior to 1-6-2001. institution of foreign nations

10(15)(iv)(c) Receiving the interest on a certain rate from the industrial All the assesses who have
 undertaking of India on debt or lent prior to the date of 1-6- committed to lending such
2001 in a foreign nation for purchasing the capital plant, cash
raw materials, and machinery within certain limitations and
conditions.

10(15)(iv)(d) Receiving the interest prior to 1-6-2001 at an approved rate All the assessee which have
from certain financial institutions on the lending money in committed to lend such
India money

10(15)(iv)(e) Receiving the interest at an approved rate from the All the assessee which have
country's financial institutions on the lending of money committed to lend such
from outside India prior to 1-6-2001 under the certain loan money
agreement

10(15)(iv)(h) Receiving interest from any company concerning approved All assesses
debentures or bonds

Maximum Income Tax Exemption

Allowed under Section 10
The following are the Income Tax exemption limits allowed under Section 10 of
the IT Act:

 Below 60 years of age: Rs. 2.50 lakhs

 Between 60-80 years of age: Rs. 3 lakhs (only for the citizens resident in
India)

 Above 80 years of age: Rs. 5 lakhs (only for the citizens resident in India)

Conclusion:
Section 10 of the Income Tax Act focuses on the income tax exemptions that a
salaried Indian citizen can avail of. In addition, various subsections of the act can
legally enable the taxpayer to avoid paying taxes under specified allowances or
incomes.