Section 10 of Income Tax Act

The government of India offers certain exemptions that significantly reduce the burden on taxpayers of paying income tax. Section 10 of the Income Tax Act deals with incomes that are exempt from your total taxable income. This post covers information on the most common exemptions included under Section 10.

Meaning of Section 10 of Income Tax Act

As you calculate your tax liability and file your income tax returns, it is important to be aware of the exemptions (tax deductions) that you can claim. These exemptions apply to certain income sources that are not included in your total income. The details of these exemptions, along with their terms and conditions, are listed in Section 10 of the Income Tax Act.

Exemptions under Section 10

Mentioned below are the exemptions under Section 10 of the Income Tax Act in detail:

  •  Section 10 (10D) of Income Tax Act

Section 10 10d of Income Tax Act outlines the exemptions for a life insurance policy or bonus. However, you will not be eligible for exemption if the insurance is taken out for a specially-abled dependent family member or if the premium amount is more than 10% of the insured sum. 

  • Section 10(10) of Income Tax Act

Section 10 (10) of the Income Tax Act pertains to income received from the government in the form of gratuity. This section is particularly relevant to private sector employees, as it determines whether or not they are eligible for gratuity based on their coverage under the Act. Simply put, it outlines the gratuity eligibility criteria for individuals in the private sector.

  •  Section 10(34) of Income Tax Act

Section 10(34) relates to the exemption from dividends you get from investing in Indian companies. However, the exception would be limited to an amount of Rs. 10,000. If it is more than Rs. 10,000, you need to pay taxes.

  •  Section 10 (13A) of Income Tax Act

Section 10(13a) covers house rent allowance or HRA. HRA is a component of your salary that covers house rental expenses that are exempt from taxes. However, a few exceptions are included in Section 10(13a) Rule 2A. These are:

  • 50% of the basic salary and DA for persons residing in Delhi, Mumbai, Chennai, and Kolkata 
  • 40% of the basic salary and DA for residents of cities other than Delhi 
  • Actual rent paid minus 10% of basic salary and DA.
  •  Section 10(5) of Income Tax Act

Section 10(5) pertains to exemptions related to leave travel allowance, or LTA. It applies to individuals who travel domestically for work and covers air, bus, and train fares. Other expenses like transportation to the destination, hotels, sightseeing, and food are not covered. Additionally, the exemption is limited to the LTA element in the cost to the company, or CTC, of the employed. 

  • Section 10 14(i) of Income Tax Act

Section 10 14(i) specifies the exemptions on expenses that are incurred because of your employer's business. It involves travelling, research allowance, conveyance, and much more. It needs to be proven that these expenses were actually spent for the mentioned purpose. 

  •  Section 10(26) of Income Tax Act

Section 10(26) ensures tax exemption if the taxpayer is a member of a Scheduled Tribe or ST of Mizoram, Nagaland, Arunachal Pradesh, or Manipur. So, if you belong to the ST category in any of these states and you are earning through dividends, interest, and more, you will be eligible for this exemption. 

  •  Income Tax Section 10(11) of the Income Tax Act

In Section 10(11), you will get an exemption for interest from a provident fund, or PF, upon resignation or retirement. 

  • Section 10(26AAA) of Income Tax Act

Section 10(26AAA) says if you belong to Sikkim and are earning from any source in Sikkim or through dividends and interest on securities, that part of your income would fall under this section for exemption. 

  •  Section 10(38) of Income Tax Act

Section 10(38) pertains to long-term capital appreciation made on the sale of equity shares of an equity-oriented fund. It is exempt from income tax. However, the Securities Transaction Tax (STT) needs to be paid. This is applicable only for long-term capital gains earned until March 31, 2018.    

  •  Section 10(37) of Income Tax Act

Section 10(37) offers exemption from capital gains upon mandatory acquisition of urban agricultural land in a scheme approved by the central government.

  •  Section 10(23)(c) of Income Tax Act

Section 10(23)(c) pertains to exemptions given to educational and medical institutions with aggregate annual receipts not exceeding Rs 5 crore. 

  •  Section 10(10a) of the Income Tax Act

Section 10(10a) gives tax exemptions on the accumulated pensions to government employees. 

  •  Section 10(14) of Income Tax Act

Under Section 10(14), the Internet allowance provided by your employer is exempted from taxation. Section 10(14) also includes a tax exemption for food allowance provided by your employer.

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