Exempt Income - Complete List of Exempted Income under Section 10
Under Section 10, there are different sub-sections that define what kind of income is exempt from tax. This can range from agricultural income to house rent allowance.
The term "Exempt Income" refers to Any income that a person gets or earns throughout the course of a financial year and is judged to be non-taxable.
- Exempt income can take on a variety of shapes, including interest from agricultural sources, PPF interest, long-term capital gains from shares and stocks, and much more.
According to the Income Tax Act, certain sources of income are exempt from taxation as long as they adhere to the rules and regulations established in the Act.
Exempted income differs from income tax deduction in that tax deduction refers to an amount deducted from the total income whereas exempted income refers to income that is not at all taxed. The comprehensive list can be found below.
Income Exempt from Tax as Per Section 10
Most income that is exempted from tax is listed under Section 10 of the Income Tax Act. This section contains a list of income that is deemed or considered to be free from taxation. Exempted income specified under Section 10 is as follows:
Section | Exemptions |
Section 10(1) | Income earned through agricultural means |
Section 10(2) | Any amount received by an individual through a coparcener from an HUF |
Section 10(2A) | Income received by partners of a firm, as shared between them |
Section 10(4)(i) | Any interest that has been paid to a person who is not a resident Indian |
Section 10(4)(ii) | Any interest that has been paid to the account of a person who is not a resident Indian |
Section 10(4B) | Any interest that has been paid to a person who is not a resident Indian, but of Indian origin |
Section 10(5) | Concession on travel given to an employee who is also a citizen of India |
Section 10(6) | Any income earned or received by a nonIndian citizen |
Section 10(6A), (6B), (6BB), (6C) | Government tax paid on the income of a foreign firm |
Section 10(7) | Allowances received by government employees stationed abroad |
Section 10(8) | Income earned by foreign employees in India under the Cooperative Technical Assistance Program |
Section 10(8A) | Income earned by a consultant |
Section 10(8B) | Income earned by a consultant's staff or employees |
Section 10(9) | Income earned by any family member of a foreign employee in India under the Cooperative Technical Assistance Program |
Section 10(10) | |
Section 10(10A) | The commuted value of the pension earned by an individual |
Section 10(10AA) | Any amount earned via encashment of leave at the time of retirement |
Section 10(10B) | Compensation paid to workers due to relocation |
Section 10(10BB) | Any remittance obtained as per the Bhopal Gas Leak Disaster Act 1985 |
Section 10(10BC) | Any compensation obtained in the event of a disaster |
Section 10(10C) | Compensation in lieu of retirement from a PBC or any other firm |
Section 10(10CC) | Any income received through taxation on perquisites |
Section 10(10D) | Any amount acquired via a Life insurance policy |
Section 10(11) | Any payment received via the Statutory Provident Fund |
Section 10(12) | Any payment received via a recognised or authorised Fund |
Section 10(13) | Any payment received through a Superannuation Fund |
Section 10(13A) | House Rent Allowance |
Section 10(14) | Allowances utilised to meet business expenses |
Section 10(15) | Income received in the form of interest |
Section 10(15A) | Income received by an Indian firm through the lease of an aircraft from a foreign firm or government |
Section 10(16) | Income in the form of a scholarship |
Section 10(17) | Allowances granted to MLCs, MLAs or MPs |
Section 10(17A) | Income received in the form of a government award |
Section 10(18) | Income received in the form of pension by winners of awards for heroism |
Section 10(19) | Income received by family members of the armed forces in the form of pension |
Section 10(19A) | Income received from a single palace of an exruler |
Section 10(20) | Income received by a localised body or authority |
Section 10(21) | Income received by an association involved with scientific research |
Section 10(22B) | Income earned by a news or broadcasting agency |
Section 10(23A) | Income earned by certain Professional Institutes |
Section 10(23AA) | Income acquired through Regimental Fund |
Section 10(23AAA) | Income acquired through an employee welfare fund |
Section 10(23MB) | Insurance pension fund income |
Section 10(23B) | Income earned by village industry development institutions |
Section 10(23BB) | Income earned by state level Khadi and Village Industries Board |
Section 10(23BBA) | Income earned by regulatory bodies of institutions affiliated with religion and charity |
Section 10(23BBB) | Income received by the European Economic Community |
Section 10(23BBC) | Income received through SAARC funded regional projects |
Section 10(23BBE) | Income received by the IRDA |
Section 10(23BBH) | Income received through Prasar Bharti |
Section 10(23C) | Income received by any individual through certain specified funds |
Section 10(23D) | Income earned via Mutual Funds |
Section 10(23DA)j | Income earned via a Securitisation Trust |
Section 10(23EA) | Income earned through an IPF |
Section 10(23EB) | Income received by the Credit Guarantee Trust for Small Industries |
Section 10(23ED) | Income exemption of IPF |
Section 10(23DFB) | Income exemption of specified income received by Venture Capital Firms, Funds or Businesses |
Section 10(24) | Income earned by authorised trade unions |
Section 10(25) | Income earned via provident funds and superannuation funds |
Section 10(25A) | Income earned via Employee's State Insurance Fund |
Section 10(26), 10(26A) | Income earned by Schedule Tribe Members |
Section 10(26AAN) | Income earned by an individual of Sikkimese origin |
Section 10(26AAB) | Marketing regulation with regards to agricultural produce |
Section 10(26B) | Income earned by corporations established for the upliftment of backward tribes and classes |
Section 10(26BB) | Income earned by corporations established for the protection of Minority interests |
Section 10(26BBB) | Income earned by corporations established for former servicemen |
Section 10(27) | Income earned by cooperative societies established for protection of scheduled castes and tribes interests |
Section 10(29A) | Income received by Community Boards |
Section 10(30) | Income earned in the form of subsidies via the Tea Board |
Section 10(31) | Income earned in the form of subsidies via the concerned Board |
Section 10(32) | Income earned by a child in accordance with Section 64 of the Income Tax Act |
Section 10(33) | Income earned through Unit Trust of India capital asset transfer |
Section 10(34) | Income earned in the form of dividends through an Indian firm |
Section 10(34A) | Income earned by a shareholder through the buyback of unlisted companies |
Section 10(35) | Income received through the sale or transfer of Unit Trust of India units as well as other mutual funds |
Section 10(35A) | Income from a securitisation trust that is exempt |
Section 10(36) | Income received on the sale of shares under specific conditions |
Section 10(37) | Any capital gains made on the mandatory acquirement of land in relation to urban agriculture |
Section 10(38) | Any long term capital gains made from share and security transfers that fall under the purview of Security Transaction Tax |
Section 10(39) | Any income received from any international event or function relating to sports |
Section 10(40) | Any income acquired in the form of a grant from a company deemed to be a subsidiary of the parent company |
Section 10(41) | Any income received on any asset transfer of a company or project that conducts power distribution, generation and transmission |
Section 10(42) | Any income earned by any authority that has been established by more than one country |
Section 10(43) | Any income in relation to reversal of mortgage |
Section 10(44) | Income generated through the NPS Trust |
Section 10(45) | Any allowance or perks granted to the chairman or any member of the UPSC |
Section 10(46) | Any income that comes under the category of 'specified income' with regards to specific authoritative bodies |
Section 10(47) | Any income that is exempt under the category of infrastructure debt fund |
Section 10(48) | Any income earned by a foreign firm or company due to crude oil sales within India |
Section 10(49) | Any income earned by the NFHC (National Finance Holdings Company) |
Examples of Exempted Income under Section 10
- Income from Agriculture: Any income earned from agricultural activities within India is tax-exempt under Section 10(1).
- House Rent Allowance (HRA): HRA exemptions depend on factors like the actual HRA received, the rent paid, and components of your salary.
- Income for Hindu Undivided Family (HUF): Money received by a member of an HUF or from an impartible estate is exempt under Section 10(2).
- Profits from Partnership Shares: Profits given to a partner by a partnership firm are exempt under Section 10(2A).
- Interest Earned by Non-Residents (NRIs): Certain types of interest earned by NRIs are exempt from tax under Section 10(4).
Eligibility Criteria to Claim Deduction under Section 10
- Individuals under the age of 60 years are usually eligible for a basic tax exemption limit of Rs.2.50 lakh.
- The exemption is capped at up to Rs.3 lakh in case of senior citizens.
- However, all Indian salaried professionals are subject to the many conditions and subsections outlined in Section 10 of the Income Tax Act.
Documents Required to Claim Deduction under Section 10
In case you are eligible for Section 10 income tax exemption, you must file an income tax return to notify the government. You need to submit the following documents:
- Bank statement/bank passbook
- Login information for income taxes
Disclosure of Exempted Income for Salary Allowances
Those individuals or taxpayers who receive income in the form of salaries are permitted specific allowances that are non-taxable. Disclosure of this type of exempted income is required to be made under ''Schedule S - Details of Income from Salary'' when filing tax returns under ITR-2.
Exemptions allowed under the following heads are required to be disclosed by a salaried individual when filing his or her income tax returns:
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Encashment of Leave
- Pension
- Gratuity
- Voluntary Retirement Scheme
- Perquisites
Disclosure of Exempted Income for Non-Salary Allowances
The Income Tax Act additionally lists specific non-salary income categories that are tax-exempt. These earnings include dividends, revenue from farming, interest on savings, and capital gains, among others.
When submitting tax returns using ITR-1, the taxpayer must disclose certain sorts of income under "Schedule EI - Details of Exempt Income."
Why You Must Disclose Exempt Income: Legal and Financial Impact
- Many people neglect to declare information about this type of income since certain money is exempt from taxes.
- However, since they won't be able to identify the source of such revenue, anyone who fail to provide these details risk being scanned by the Income Tax Department.
FAQs on Exempt Income
- What types of income are exempt from tax in India?
Income such as agricultural earnings, dividends, interest from specified investments, and tax-free capital gains are exempt under Section 10. These should be disclosed in ITR Schedule EI.
- Which incomes are covered under Section 10 exemptions?
Section 10 covers exemptions like agricultural income, specific life insurance payouts, and allowances such as HRA and LTA.
- Is it mandatory to declare exempt income in ITR?
Yes, all income including exempt income must be declared in the ITR for accurate tax assessment.
- Which salary allowances are exempt under Section 10?
HRA, LTA, Transport Allowance, and Uniform Allowance are commonly exempt under Section 10. Conditions apply.
- What are the benefits of claiming tax exemptions?
Tax exemptions help reduce taxable income legally, offering savings on income tax liability.
- How to declare exempt income while filing ITR?
In ITR-1, declare exempt income under Schedule EI or the "Exempt Income" column in the relevant section.
- Is House Rent Allowance (HRA) fully exempt from tax?
HRA is partially exempt under Section 10(13A); exemption depends on salary, rent paid, and city of residence.
- Which ITR should be filed if only exempt income is earned?
File ITR-1 for exempt income below ₹5,000. If agricultural income exceeds ₹5,000, use ITR-2.
- Is the maturity amount from life insurance taxable under Section 10(10D)?
No, maturity proceeds are exempt if the premium doesn’t exceed 10% of the sum assured annually.
- What is the maximum limit of tax exemption under Section 10(10D)?
For ULIPs, exemption applies if total premiums are ≤ ₹2.5 lakh annually; for other policies, the limit is Rs.5 lakh annually.
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