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Section 10 of the Income Tax Act

Highlights

  • Know all about Section 10 of the Income Tax Act and the Exemptions under it.
  • Check all the incomes that fall under Section 10.
  • Explore the Sub-Sections of Section 10 and their rules related to allowance exemption.

It is the duty of every Indian Citizen to pay taxes once his income crosses the income threshold. But the government has given certain reliefs to the taxpayers by allowing deductions and rebates on their income So, there are some incomes that are partially or fully exempted from taxes. You can take a look at Section 10 of the Income Tax Act in which various incomes are exempted from taxes. Section 10 removes the tax burden from the individual and provides an exemption to the salaried individuals. Therefore, you must explore the exemptions that available under this section and see how you can get rid of paying heavy taxes.

Income Tax Section 10

There are many sub-sections included in Section 10 that gives exemptions to various incomes. So, here is all about section 10 of the Tax Laws.

Sub-Sections of Section 10Form of IncomesExemption
Sec 10(1)Agricultural Income for Self EmployedFully Exempted from Tax
Sec 10(2)Income Received from Hindu Undivided Family (HUF)Fully Exempted from Tax
Sec 10(10C)Income Received at the Time of Retirement for Salaried EmployeesExempted up to ₹500000
Sec 10(10D)Amount Received under Life Insurance Policy with Policy BonusFully Exempted from Tax
Sec 10(11)(12)Amount withdrawn from PF by salaried individualsFully Exempted from Tax
Sec 10(10BC)Compensation Received from the Central Government in case of any disasterFully Exempted from Tax
Sec 10(13A)House Rent Allowance to Salaried IndividualsLeast of the following is Exempted:-
- Actual HRA
- 40% of the Salary in Non-Metro Cities and 50% of the Salary in Metro Cities.
- Rent Paid - (10% of Salary)
Sec 10(14)Children Education Allowance to Salaried Individuals₹100 per month is Exempted per child and up to 2 children
Sec 10(14)Climate allowance or high altitude allowance or Special compensatory allowance for hilly areas to salaried employeesExemption up to ₹7000 per month
Sec 10(14) rule 2BBRemote area Allowance or any disturbed area allowance or Border area allowance or to salaried employeesExemption up to ₹1,300 per month
Sec 10(14)Tribal area allowance in Tamilnadu, Assam, Madhya Pradesh, UP, Karnataka, West Bengal, Bihar, Orissa, and Tripura to salaried employeesExemption up to ₹200 per month
Sec 10(14)Compensatory field area allowance available in various areas of AP, Manipur, Sikkim, Nagaland, HP, UP, and J&K to salaried employeesExemption up to ₹2,600 per month
Sec 10(14)Transport allowance for the purpose of commuting from home to office for salaried employeesExemption up to ₹1,600 per month and up to ₹3200 per month for blind, deaf, and dumb
Sec 10(15)Income from tax-free securities to all assesses notified by the governmentFully Exempted from Tax
Sec 10(23D)Income from mutual fundFully Exempted from Tax
Sec 10(34)Income from dividendsFully Exempted from Tax
Sec 10(38)Long term capital gains on transfer of shares and securitiesFully Exempted from Tax
Sec 10(43)Reverse MortgageFully Exempted from Tax
Sec 10(44)New Pension System exemptionFully Exempted from Tax
Sec 10(49)Income of National financial holdings companyFully Exempted from Tax
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Types of Allowances

You must explore the types of allowances that are exempted under Section 10 of the Income Tax Act and you can also find them in Form 16 from your employer. Understand the meaning of these allowances given to the salaried professionals.

  • Climate Allowance– This allowance is given to those individuals who work at high altitudes and in hilly areas.
  • Tribal Area Allowance– This allowance is given to those employees who are working in pre-classified Tribal, Schedule, or Agency areas such as Karnataka, West Bengal, Madhya Pradesh, Assam, Orissa, Tamil Nadu, Bihar, Uttar Pradesh, and Tripura.
  • Border Area Allowance– Individuals working as armed Forces personnel serving in the border area, remote places, or in any disturbed areas get this allowance.
  • Compensatory Field Allowance- This allowance is given to individuals delivering duties in unusual fields such as Nagaland, Jammu & Kashmir, Himachal Pradesh, Uttar Pradesh, Sikkim, Andhra Pradesh, and Manipur.
  • Island Dury Allowance- This alliance is given to the members of the Armed Forces serving in the Andaman and Nicobar Islands or Lakshadweep Group of Islands.

Conclusion

Now you can reduce your tax liability with the help of Section 10 of the Income Tax Act by reducing the overall income. On the other hand, deductions are allowed under Section 16 of the Income-tax Act in which you get reliefs on the entertainment allowance. So, while computing your income, you must use deductions to lower down the tax liability. Rebate under Section 87A also gives the freedom to the individuals to enjoy a tax-free income of up to ₹5 lacs.

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