2 min
05 April 2025
Are you struggling to understand tax exemptions in India? Section 10 of Income Tax Act provides numerous relief opportunities for taxpayers. This provision outlines various incomes that are not included in your total taxable income. Understanding these exemptions can significantly reduce your tax burden.
Most taxpayers miss out on these benefits simply because they are unaware. The Indian tax system offers these exemptions to promote savings and investments. Section 10 of Income Tax Act covers everything from agricultural income to retirement benefits.
This article will explain key exemptions under Section 10 of Income Tax Act and guide you through the claiming process. Just like how home loans from Bajaj Finserv offer financial flexibility, these tax exemptions provide much-needed relief. Check your eligibility for a Bajaj Housing Finance Home Loan today by simply entering your mobile number and OTP. You may already be eligible for loans with interest rates starting at just 7.99%* p.a..
The exemptions under Section 10 of Income Tax Act apply to diverse income sources. These range from agricultural income to retirement benefits and special allowances. Unlike deductions that reduce taxable income, Section 10 of Income Tax Act exemptions completely exclude specific incomes from tax calculation. This makes understanding these exemptions crucial for effective tax planning.
Some prominent exemptions include agricultural income, leave travel allowance, and retirement benefits. Other important exemptions cover educational allowances, special compensation, and income from specific investments. Understanding these exemptions under Section 10 of Income Tax Act can help you plan your finances better. Looking for more ways to save? Check your eligibility for a Bajaj Housing Finance Home Loan and benefit from tax deductions on home loan interest. Simply enter your mobile number and complete OTP verification to explore your personalised offers.
Section 10(1) - Agricultural Income
Agricultural income enjoys complete exemption under Section 10 of Income Tax Act. This includes:
Section 10(2A) - Partner's Share in Profits
Section 10 of Income Tax Act exempts the share of profits received by partners from a partnership firm. This exemption applies only to the profit component distributed to partners. The partnership firm itself pays tax on its total income under separate provisions.
However, any salary, bonus, commission, or remuneration paid to partners is taxable in their hands. This distinction is important as many partners confuse profit shares with other forms of payment from the firm. The exemption aims to avoid double taxation of the same income.
Section 10(5) - Leave Travel Allowance
Leave Travel Allowance (LTA) receives exemption under Section 10 of Income Tax Act when used for domestic travel. The exemption covers the actual travel cost for the individual and family. It applies to journeys undertaken during leave periods.
This benefit is available twice in a block of four calendar years. The current block runs from 2022 to 2025. The exemption does not cover accommodation, food, or other travel expenses. Proper documentation of travel is essential for claiming this exemption.
Section 10(10A) - Commuted Pension
Section 10 of Income Tax Act provides relief on commuted pension received by employees. For government employees, the entire commuted pension amount is exempt from tax. For non-government employees with gratuity, one-third of the commuted pension is exempt.
For non-government employees without gratuity, half of the commuted pension enjoys exemption. This provision helps retirees manage their financial needs with reduced tax burden. The exemption applies only to the lump sum amount received upon commutation.
Section 10(10AA) - Leave Encashment
Leave encashment benefits receive exemption under the following conditions:
This exemption applies only to leave encashment received at retirement or resignation. Leave encashment during service is fully taxable. The calculation considers basic salary and dearness allowance only.
Section 10(10B) - Retrenchment Compensation
Section 10 of Income Tax Act provides exemption for compensation received upon retrenchment. The exemption limit is the lesser of the following amounts: the actual compensation received, Rs. 5,00,000, or the amount calculated as per the Industrial Disputes Act.
This provision aims to provide financial support during job loss. Compensation exceeding the exempt limit is taxable as "income from salary." Documentation proving retrenchment under legal provisions is essential for claiming this exemption.
Section 10(10C) - Voluntary Retirement
Voluntary Retirement Scheme (VRS) compensation receives exemption under Section 10 of Income Tax Act. The maximum exemption limit is Rs. 5,00,000. This applies to employees of public sector companies, statutory corporations, universities, and other specified institutions.
To qualify, the VRS must comply with guidelines issued by the government. An employee can claim this exemption only once in a lifetime. This provision helps ease the financial transition when opting for early retirement.
Section 10(10D) - Exemption on Life Insurance Policy
Section 10 of Income Tax Act exempts maturity proceeds from life insurance policies under specific conditions. For policies issued after April 1, 2012, the annual premium must not exceed 10% of the sum assured. For policies issued between April 1, 2003, and March 31, 2012, this limit is 20%.
The exemption aims to encourage long-term investments in life insurance. Death benefits received by nominees remain completely exempt regardless of premium amount. Planning for your family's future? Check your eligibility for a Bajaj Housing Finance Home Loan today. Enter your mobile number and OTP to discover how a secure home can complement your financial protection strategy.
Section 10(11) - Exemption on Payment Made to Provident Fund and Sukanya Samriddhi Account
Provident Fund contributions enjoy tax exemption under Section 10 of Income Tax Act. This covers statutory provident fund, recognised provident fund, and public provident fund. Interest earned on these funds is also exempt up to certain limits.
The Sukanya Samriddhi Account scheme for girl children receives complete exemption. This covers contributions, interest earned, and maturity proceeds. These exemptions promote long-term savings for retirement and children's welfare.
Section 10(14) - Exemption of Special Allowance
Special allowances for official duties receive exemption under Section 10 of Income Tax Act. These include:
Section 10(14)(ii) - Children Education Allowance
Children Education Allowance receives exemption under Section 10 of Income Tax Act. The exemption limit is Rs. 100 per month per child for up to two children. Additionally, hostel expenditure allowance of Rs. 300 per month per child is exempt.
This allowance must be used specifically for children's education expenses. Any amount exceeding these limits becomes taxable. This provision supports parents in meeting educational expenses for their children.
Section 10(15) - Interest on Savings Certificate
Section 10 of Income Tax Act exempts interest earned on specific savings certificates. These include National Savings Certificates, Post Office Savings Accounts (up to Rs. 3,500 annually), and specified government bonds. Special bonds for non-residents also qualify for exemption.
The exemption encourages investments in government-backed securities. Different certificates have different exemption limits and conditions. These investments provide safe returns while offering tax benefits to investors.
Section 10(23C) - Tax Exemption for Educational and Medical Institutions
Educational and medical institutions receive exemption under Section 10 of Income Tax Act. This applies to institutions existing solely for educational or medical purposes. These institutions must operate on a not-for-profit basis.
The exemption covers income from property held for educational or medical purposes. Any profit must be reinvested in the institution. These provisions support the development of quality education and healthcare facilities in India.
Section 10(26) - Tax Exemptions for Scheduled Tribe Members in Specific Northeastern States
Section 10 of Income Tax Act provides special exemptions for Scheduled Tribe members in specific northeastern states. This applies to residents of Nagaland, Manipur, Tripura, Arunachal Pradesh, and Mizoram. The exemption covers income from any source in these states.
For income earned outside these states, normal tax provisions apply. This exemption aims to support the economic development of tribal communities in these regions. Proper documentation of tribal status and residence is necessary for claiming this exemption.
Section 10(26AAA) - Tax Exemption for Sikkimese Individuals
Sikkimese individuals enjoy special tax exemptions under Section 10 of Income Tax Act. This covers income from any source in Sikkim and dividend income from any source. The exemption does not apply to Sikkimese women who marry non-Sikkimese after April 1, 2008.
This provision respects the special status of Sikkim within the Indian Union. Proper documentation of Sikkimese origin is essential for claiming this exemption. The exemption aims to preserve the economic interests of the Sikkimese population.
Section 10(34) - Exemption on Dividends
Dividend income from Indian companies previously enjoyed complete exemption under Section 10 of Income Tax Act. However, from April 1, 2020, dividends have become taxable in the hands of recipients. A deduction for interest expense is allowed up to 20% of the dividend income.
Companies pay dividend distribution tax before distributing dividends. This change aims to make the tax system more progressive. Dividends from mutual funds also follow similar taxation rules now.
Section 10(34A) - Exemption on Buy-Back of Shares
Income from share buyback by Indian companies receives exemption under Section 10 of Income Tax Act. The company pays a buyback tax of 20% on the difference between buyback price and issue price. This makes the income completely tax-free in shareholders' hands.
This provision applies to both listed and unlisted companies. The exemption aims to simplify taxation of buyback transactions. Proper documentation of share acquisition and buyback is necessary for claiming this exemption.
Section 10(35) - Exemption on Income from Specified Mutual Funds
Income from specified mutual funds previously enjoyed exemption under Section 10 of Income Tax Act. However, from April 1, 2020, these incomes have become taxable. This includes income distributed by mutual funds and specified companies.
The taxation follows the nature of the income - dividend, interest, or capital gains. The change aims to create a level playing field across investment options. Tax deducted at source (TDS) applies to these distributions at applicable rates.
Planning for tax-efficient investments? A home loan can provide significant tax benefits under Section 24 and Section 80C. Check your eligibility for a Bajaj Housing Finance Home Loan with interest rates starting at just 7.99%* p.a. Simply enter your mobile number and verify with OTP to explore your options.
Just as tax planning is crucial, so is financial planning for your dream home. Bajaj Finserv offers home loans with numerous advantages:
Ready to take the next step toward your dream home? Check your eligibility for a Bajaj Housing Finance Home Loan today. Simply enter your mobile number, verify with OTP, and discover your personalised loan options. Your journey to homeownership begins with this simple step.
*Terms and conditions apply
Check also:
Most taxpayers miss out on these benefits simply because they are unaware. The Indian tax system offers these exemptions to promote savings and investments. Section 10 of Income Tax Act covers everything from agricultural income to retirement benefits.
This article will explain key exemptions under Section 10 of Income Tax Act and guide you through the claiming process. Just like how home loans from Bajaj Finserv offer financial flexibility, these tax exemptions provide much-needed relief. Check your eligibility for a Bajaj Housing Finance Home Loan today by simply entering your mobile number and OTP. You may already be eligible for loans with interest rates starting at just 7.99%* p.a..
What is Section 10 of Income Tax Act?
Section 10 of Income Tax Act, 1961, is a comprehensive provision that specifies which incomes are exempt from tax calculation. It encompasses over 40 sub-sections, each dealing with different types of income. Section 10 of Income Tax Act aims to provide relief to taxpayers across various categories.The exemptions under Section 10 of Income Tax Act apply to diverse income sources. These range from agricultural income to retirement benefits and special allowances. Unlike deductions that reduce taxable income, Section 10 of Income Tax Act exemptions completely exclude specific incomes from tax calculation. This makes understanding these exemptions crucial for effective tax planning.
What are Exemptions Under Section 10?
The exemptions under Section 10 of Income Tax Act cover numerous income categories. These exemptions help taxpayers from various backgrounds save on their tax liability. Section 10 of Income Tax Act provides relief for salaried individuals, business owners, and investors alike.Some prominent exemptions include agricultural income, leave travel allowance, and retirement benefits. Other important exemptions cover educational allowances, special compensation, and income from specific investments. Understanding these exemptions under Section 10 of Income Tax Act can help you plan your finances better. Looking for more ways to save? Check your eligibility for a Bajaj Housing Finance Home Loan and benefit from tax deductions on home loan interest. Simply enter your mobile number and complete OTP verification to explore your personalised offers.
Section 10(1) - Agricultural Income
Agricultural income enjoys complete exemption under Section 10 of Income Tax Act. This includes:
- Income from land cultivation
- Income from agricultural produce processing
- Income from farmhouse subject to certain conditions
- Rent received from agricultural land
Section 10(2A) - Partner's Share in Profits
Section 10 of Income Tax Act exempts the share of profits received by partners from a partnership firm. This exemption applies only to the profit component distributed to partners. The partnership firm itself pays tax on its total income under separate provisions.
However, any salary, bonus, commission, or remuneration paid to partners is taxable in their hands. This distinction is important as many partners confuse profit shares with other forms of payment from the firm. The exemption aims to avoid double taxation of the same income.
Section 10(5) - Leave Travel Allowance
Leave Travel Allowance (LTA) receives exemption under Section 10 of Income Tax Act when used for domestic travel. The exemption covers the actual travel cost for the individual and family. It applies to journeys undertaken during leave periods.
This benefit is available twice in a block of four calendar years. The current block runs from 2022 to 2025. The exemption does not cover accommodation, food, or other travel expenses. Proper documentation of travel is essential for claiming this exemption.
Section 10(10A) - Commuted Pension
Section 10 of Income Tax Act provides relief on commuted pension received by employees. For government employees, the entire commuted pension amount is exempt from tax. For non-government employees with gratuity, one-third of the commuted pension is exempt.
For non-government employees without gratuity, half of the commuted pension enjoys exemption. This provision helps retirees manage their financial needs with reduced tax burden. The exemption applies only to the lump sum amount received upon commutation.
Section 10(10AA) - Leave Encashment
Leave encashment benefits receive exemption under the following conditions:
| Category | Exemption limit |
| Government employees | Fully exempt |
| Non-government employees | Least of: (a) Actual amount received (b) 10 months' salary (c) Rs. 3,00,000 (d) Leave encashment based on 30 days for each year of service |
This exemption applies only to leave encashment received at retirement or resignation. Leave encashment during service is fully taxable. The calculation considers basic salary and dearness allowance only.
Section 10(10B) - Retrenchment Compensation
Section 10 of Income Tax Act provides exemption for compensation received upon retrenchment. The exemption limit is the lesser of the following amounts: the actual compensation received, Rs. 5,00,000, or the amount calculated as per the Industrial Disputes Act.
This provision aims to provide financial support during job loss. Compensation exceeding the exempt limit is taxable as "income from salary." Documentation proving retrenchment under legal provisions is essential for claiming this exemption.
Section 10(10C) - Voluntary Retirement
Voluntary Retirement Scheme (VRS) compensation receives exemption under Section 10 of Income Tax Act. The maximum exemption limit is Rs. 5,00,000. This applies to employees of public sector companies, statutory corporations, universities, and other specified institutions.
To qualify, the VRS must comply with guidelines issued by the government. An employee can claim this exemption only once in a lifetime. This provision helps ease the financial transition when opting for early retirement.
Section 10(10D) - Exemption on Life Insurance Policy
Section 10 of Income Tax Act exempts maturity proceeds from life insurance policies under specific conditions. For policies issued after April 1, 2012, the annual premium must not exceed 10% of the sum assured. For policies issued between April 1, 2003, and March 31, 2012, this limit is 20%.
The exemption aims to encourage long-term investments in life insurance. Death benefits received by nominees remain completely exempt regardless of premium amount. Planning for your family's future? Check your eligibility for a Bajaj Housing Finance Home Loan today. Enter your mobile number and OTP to discover how a secure home can complement your financial protection strategy.
Section 10(11) - Exemption on Payment Made to Provident Fund and Sukanya Samriddhi Account
Provident Fund contributions enjoy tax exemption under Section 10 of Income Tax Act. This covers statutory provident fund, recognised provident fund, and public provident fund. Interest earned on these funds is also exempt up to certain limits.
The Sukanya Samriddhi Account scheme for girl children receives complete exemption. This covers contributions, interest earned, and maturity proceeds. These exemptions promote long-term savings for retirement and children's welfare.
Section 10(14) - Exemption of Special Allowance
Special allowances for official duties receive exemption under Section 10 of Income Tax Act. These include:
- Travel and conveyance allowance for official duties
- Daily allowance for out-station duties
- Helper allowance for performing official duties
- Uniform allowance for job requirements
Section 10(14)(ii) - Children Education Allowance
Children Education Allowance receives exemption under Section 10 of Income Tax Act. The exemption limit is Rs. 100 per month per child for up to two children. Additionally, hostel expenditure allowance of Rs. 300 per month per child is exempt.
This allowance must be used specifically for children's education expenses. Any amount exceeding these limits becomes taxable. This provision supports parents in meeting educational expenses for their children.
Section 10(15) - Interest on Savings Certificate
Section 10 of Income Tax Act exempts interest earned on specific savings certificates. These include National Savings Certificates, Post Office Savings Accounts (up to Rs. 3,500 annually), and specified government bonds. Special bonds for non-residents also qualify for exemption.
The exemption encourages investments in government-backed securities. Different certificates have different exemption limits and conditions. These investments provide safe returns while offering tax benefits to investors.
Section 10(23C) - Tax Exemption for Educational and Medical Institutions
Educational and medical institutions receive exemption under Section 10 of Income Tax Act. This applies to institutions existing solely for educational or medical purposes. These institutions must operate on a not-for-profit basis.
The exemption covers income from property held for educational or medical purposes. Any profit must be reinvested in the institution. These provisions support the development of quality education and healthcare facilities in India.
Section 10(26) - Tax Exemptions for Scheduled Tribe Members in Specific Northeastern States
Section 10 of Income Tax Act provides special exemptions for Scheduled Tribe members in specific northeastern states. This applies to residents of Nagaland, Manipur, Tripura, Arunachal Pradesh, and Mizoram. The exemption covers income from any source in these states.
For income earned outside these states, normal tax provisions apply. This exemption aims to support the economic development of tribal communities in these regions. Proper documentation of tribal status and residence is necessary for claiming this exemption.
Section 10(26AAA) - Tax Exemption for Sikkimese Individuals
Sikkimese individuals enjoy special tax exemptions under Section 10 of Income Tax Act. This covers income from any source in Sikkim and dividend income from any source. The exemption does not apply to Sikkimese women who marry non-Sikkimese after April 1, 2008.
This provision respects the special status of Sikkim within the Indian Union. Proper documentation of Sikkimese origin is essential for claiming this exemption. The exemption aims to preserve the economic interests of the Sikkimese population.
Section 10(34) - Exemption on Dividends
Dividend income from Indian companies previously enjoyed complete exemption under Section 10 of Income Tax Act. However, from April 1, 2020, dividends have become taxable in the hands of recipients. A deduction for interest expense is allowed up to 20% of the dividend income.
Companies pay dividend distribution tax before distributing dividends. This change aims to make the tax system more progressive. Dividends from mutual funds also follow similar taxation rules now.
Section 10(34A) - Exemption on Buy-Back of Shares
Income from share buyback by Indian companies receives exemption under Section 10 of Income Tax Act. The company pays a buyback tax of 20% on the difference between buyback price and issue price. This makes the income completely tax-free in shareholders' hands.
This provision applies to both listed and unlisted companies. The exemption aims to simplify taxation of buyback transactions. Proper documentation of share acquisition and buyback is necessary for claiming this exemption.
Section 10(35) - Exemption on Income from Specified Mutual Funds
Income from specified mutual funds previously enjoyed exemption under Section 10 of Income Tax Act. However, from April 1, 2020, these incomes have become taxable. This includes income distributed by mutual funds and specified companies.
The taxation follows the nature of the income - dividend, interest, or capital gains. The change aims to create a level playing field across investment options. Tax deducted at source (TDS) applies to these distributions at applicable rates.
Planning for tax-efficient investments? A home loan can provide significant tax benefits under Section 24 and Section 80C. Check your eligibility for a Bajaj Housing Finance Home Loan with interest rates starting at just 7.99%* p.a. Simply enter your mobile number and verify with OTP to explore your options.
How to Apply for Bajaj Housing Finance Home Loan
Applying for a Bajaj Housing Finance Home Loan is simple and convenient:- Click on the "APPLY" button
- Enter your personal details including name, mobile number, and employment type
- Select your preferred loan type - fresh loan, balance transfer, or top-up loan
- Verify your mobile number with OTP
- Provide additional details like monthly income and required loan amount
- Enter your date of birth, PAN number, and other requested information
- Submit your application
Eligibility criteria to get home loan from Bajaj Finserv
To qualify for a Bajaj Housing Finance Home Loan, you need to meet these requirements:- Indian citizen residing in India
- Age between 23-67 years for salaried applicants and 23-70 years for self-employed
- CIBIL score of 725 or higher
- Steady income source as a salaried employee or self-employed individual
- Required documents including KYC, income proof, and bank statements
Conclusion
Understanding Section 10 of Income Tax Act exemptions can significantly reduce your tax burden. These exemptions cover various income sources from agricultural income to retirement benefits. Proper knowledge and documentation are essential for claiming these benefits effectively.Just as tax planning is crucial, so is financial planning for your dream home. Bajaj Finserv offers home loans with numerous advantages:
- Competitive interest rates starting from 7.99%* p.a.
- Loan amounts up to Rs. 15 crore* based on eligibility
- Flexible repayment tenure of up to 32 years Quick approval within 48 hours*
- No foreclosure fees for individual borrowers with floating interest rates
- Top-up loan facility of up to Rs. 1 crore
Ready to take the next step toward your dream home? Check your eligibility for a Bajaj Housing Finance Home Loan today. Simply enter your mobile number, verify with OTP, and discover your personalised loan options. Your journey to homeownership begins with this simple step.
*Terms and conditions apply
Check also:
| Income Tax Login | Income Tax E Filing |
| Income Tax Slab | Tax Concept |
| Calculate Tax | New Tax Regime Income Tax Slabs |
| New Tax Regime Calculator | New Tax Slab |
| Short Term Capital Gain Tax | Long Term Capital Gain Tax |
