Exemptions Under Section 10 of the Income Tax Act

Last reviewed: September 2026

Section 10 isn't one exemption — it's a long list of separately-conditioned exemptions, and most require the old tax regime specifically, a detail commonly missed when planning around the new regime's simplicity.

• HRA exemption: available under Section 10(13A), old regime only, subject to specific calculation limits
• LTA exemption: available under Section 10(5), old regime only, for actual domestic travel cost
• Agricultural income: exempt under Section 10(1), regardless of regime
• Gratuity: exempt under Section 10(10) up to specified limits, covered in detail separately

• Most Section 10 exemptions require the old regime — confirm this before assuming an exemption applies to your situation

  
  

Check each specific exemption's own conditions individually — Section 10 groups many distinct provisions together, not a single uniform rule.

No, and this is the real planning trap for anyone assuming Section 10 exemptions apply universally. Most — HRA, LTA, and several others — are available only under the old tax regime; a smaller set, including agricultural income exemption, applies regardless of regime choice.

The practical categories Section 10 exemptions fall into are:

• Regime-independent exemptions, like agricultural income, that apply whether you choose old or new
• Old-regime-only exemptions, like HRA and LTA, that disappear entirely if you opt for the new regime
• Conditionally-limited exemptions, like gratuity, that apply under both regimes but with specific caps and conditions

Confirming which category your specific income source falls into, rather than assuming Section 10 as a whole applies uniformly, is essential before finalising your regime choice for the year.

HRA specifically is one of the largest exemptions many salaried employees rely on, calculated as the least of actual HRA received, rent paid minus 10% of basic salary, or a percentage of basic salary depending on city — losing access to it under the new regime is a significant factor in the regime comparison for anyone paying substantial rent.

1. Note your actual HRA received from your employer for the year.
2. Calculate your actual rent paid, minus 10% of your basic salary.
3. Calculate 50% of basic salary if you live in a metro city, or 40% if you live elsewhere.
4. Your exempt HRA is the least of these three figures.

5. The remaining HRA received, above this exempt amount, is taxable as salary income.

   
   

This three-way comparison, taking the smallest of the three figures, is what trips up many taxpayers attempting a rough mental estimate — the actual exempt amount is often lower than simply assuming your full HRA is tax-free.

Consider Rohan, a 32-year-old marketing manager in Mumbai with a basic salary of Rs. 50,000 a month, HRA of Rs. 25,000 a month, paying actual rent of Rs. 28,000 a month, with a CIBIL Score of 747.

Rohan's exempt HRA is Rs. 23,000 a month, not his full Rs. 25,000 received — the remaining Rs. 2,000 a month is taxable, illustrating why the three-way calculation matters rather than assuming full exemption.

If you claim HRA exemption and are also planning a home loan, factor both into your old-versus-new regime decision together, since both HRA and home loan interest deduction are old-regime-only benefits. Check your home loan eligibility as part of your overall tax and financing plan.