Taxation is an integral part of any country's economic system, and India is no exception. However, to ease the burden on taxpayers and promote specific activities, the government provides various exemptions. In this article, we will delve into the concept of tax exemption in India, exploring who is eligible, the procedures for filing taxes, and the different sections offering exemptions.
What is tax exemption?
Tax exemption is a relief provided by the government to certain individuals or entities from paying taxes on specific income or activities. These exemptions are a provision under the Income Tax Act, 1961, and are designed to encourage economic growth, social welfare, and financial prudence.
Who is eligible to pay tax in India?
Every citizen earning an income is liable to pay taxes in India. The Income Tax Act of 1961 governs taxation, and it categorises taxpayers based on their income levels and sources. Individuals, Hindu Undivided Families (HUFs), companies, and other entities fall under different tax slabs.
A detailed breakdown of the procedure for filing tax: Filing taxes in India involves a step-by-step process, including income computation, deductions, and submission of returns. Taxpayers can file their returns online or offline, and adherence to deadlines is crucial to avoid penalties.
Various sections of tax exemptions in India for FY - 2024-25
Section |
Nature of Income |
10(1) |
Income which is to be exempted under the provisions of the Income-tax Act, 1961. This includes income that is not liable to tax. |
10(2) |
Income from property held for charitable or religious purposes, subject to certain conditions. |
10(2A) |
Income of a registered trade union. |
10(3) |
Income of a political party. |
10(4) |
Interest on certain securities and bonds, such as National Savings Certificates. |
10(6) |
Income of a foreign diplomat or a foreign mission. |
10(7) |
Allowances or perquisites received by an employee of the Government of a foreign state. |
10(8) |
Remuneration received by a foreign national as an employee of a foreign enterprise. |
10(10) |
Commutation of pension received by a government employee. |
10(10A) |
Gratuity received by a government employee. |
10(10AA) |
Leave encashment received by a government employee. |
10(10B) |
Gratuity received by an employee other than a government employee. |
10(10D) |
Maturity proceeds of life insurance policies, subject to certain conditions. |
10(16) |
Scholarships granted to meet the cost of education. |
10(17) |
Allowances received by Members of Parliament. |
10(17A) |
Allowances received by Members of State Legislature. |
10(18) |
Pension received by an individual who has been in the service of the Central Government or State Government. |
10(19) |
Income of a local authority. |
10(26) |
Income of a Scheduled Tribe residing in certain areas. |
10(26A) |
Income of a member of a Scheduled Tribe residing in certain areas. |
10(30) |
Income of a cooperative society engaged in the business of fishing, dairy farming, or cattle breeding. |
10(31) |
Income of a cooperative society engaged in the supply of milk, oilseeds, and cotton. |
10(32) |
Income of a cooperative society engaged in the marketing of agricultural produce. |
10(33) |
Income of a mutual fund or a unit trust. |
10(A) |
Income of a newly established undertaking in a free trade zone. |
10(B) |
Income of a newly established undertaking in a Special Economic Zone (SEZ). |
10(C) |
Income of a newly established undertaking in a notified backward area. |
10(15)(i)(iib)(iic) |
Interest on certain deposits in a savings account. |
10(15)(iv)(h) |
Interest on certain deposits with a banking company. |
10(15)(iv)(i) |
Interest on certain deposits with a cooperative bank. |
10(15)(vi) |
Interest on certain deposits with a public company. |
10(15)(vii) |
Interest on certain deposits with a scheduled bank. |
10(5) |
Remuneration received by a foreign national as an employee of a foreign enterprise. |
10(5B) |
Income of a foreign company from the business of civil construction or turnkey projects. |
10(11) |
Income of a trust or institution established for charitable or religious purposes. |
10(12) |
Income of a trust or institution established for educational purposes. |
10(13) |
Income of a trust or institution established for medical relief. |
10(13A) |
Income of a political party. |
10(14) |
Income of a trust or institution established for charitable or religious purposes, subject to certain conditions. |
10(18) |
Pension received by an individual who has been in the service of the Central Government or State Government. |
The Income Tax Bill 2025 is expected to simplify and consolidate these provisions, but it will not be effective until April 1, 2026. Therefore, the current Act remains applicable for FY 2024-25.
Benefits of home loan for tax exemptions
Here are the benefits of home loans from Bajaj Finserv for tax exemptions:
- Interest deduction: Claim up to Rs. 2 lakh as a deduction on home loan interest under Section 24(b) for self-occupied properties. There is no cap for let-out properties.
- Principal repayment deduction: Avail a deduction of up to Rs. 1.5 lakh on principal repayment under Section 80C. This includes stamp duty and registration charges.
- Additional deductions for affordable housing: First-time homebuyers can claim an additional interest deduction of up to Rs. 1.5 lakh under Section 80EEA if the property value is below Rs. 45 lakh.
- Joint home loan benefits: Co-borrowers can each claim deductions of up to Rs. 2 lakh on interest and Rs. 1.5 lakh on principal repayment, provided they are co-owners of the property.
Understanding tax exemptions is crucial for every taxpayer in India. It not only helps in optimising financial planning but also promotes activities that contribute to societal and economic well-being. By staying informed about the various sections and exemptions available, individuals can navigate the taxation landscape more efficiently and make informed financial decisions.
