Tax Exemption and Its Sections

Indian citizens are eligible to enjoy tax exemptions on income tax under the various sections of the Income Tax Act, 1961. However, the eligibility for exemption depends on multiple factors like age, status, net income, public service etc.

Anybody who has paid their taxes would have come across the mention of the Income Tax Act of India 1961. The three tiered tax structure that is applied in India has provisions for tax exemption particularly for income tax. Reasons for providing tax exemptions range from providing a sense of equilibrium and helping certain sections of society to bringing about an influx for certain economic activities. A prime example would be an exemption in case of property tax based off the age of the individual taxpayer and the number of dependents he/she has.

Conditions for Tax exemptions:

Tax exemptions can bring about a much needed influx for certain economic activities as well as alleviate social conditions for certain sections of society and bring about a sense of equilibrium but tax exemptions have consequences of being misused as well. Hence there are certain purviews and conditions for tax exemptions and people need to meet this in order to avail it. The following conditions determine whether one would be valid to avail an exemption

  • Age and status of the individual such as people over the age of 65, widows, war retired veterans, disabled persons and other protected classes of people.
  • Public service provided by the individual taxpayer such as 50% of the donation towards an NGO.
  • Certain types of property due to its value and geographic location.
  • And the net income of the individual taxpayer.

Sections of Tax Exemptions:

The various sections of tax exemption provided in the Income Tax Act of 1961 are as follows

  • Sec 10(1) where the provision is made for exemption of tax on income earned from agriculture and agricultural activities.
  • Sec 10(2) where tax exemption is provided for the income earned from a Hindu Undivided family or HUF where the income earned is either part of the family income or has been earned from a family estate.
  • Sec 10(2A) where exemptions on tax are provided on the income of a partner of a particular firm who has filed his or her tax returns separately.
  • Sec 10(3) provides exemption on non-recurring income or casual form of income that does not exceed Rs 5000 and if income is earned through winnings from a Horse Race it should not exceed Rs 2000.
  • Sec 10(4) (i) provides exemption on income earned through interests on bonds and securities which includes premium on repurchase of bonds.
  • Sec 10(4B) states that income earned from interest on specific savings certificate issued by the central government is exempt from tax.
  • Sec 10(5) provides exemption on the value of the Leave Travel Concession (LTC) which does not exceed actual amount spent.
  • Sec 10(5A) states that amount paid to either a non-resident person or a foreigner for the purpose of shooting a film in India is tax exempt.
  • Sec 10(5B) provides exemption on income tax that is paid by an employer on behalf of the salary of particular employees from outside the country, or that has been utilized in scientific research.
  • Sec 10(6)(ii) provides for tax exemption on income earned/received by the diplomats, ambassador, etc.
  • Sec 10(6)(vi) provides exemption on income tax for income earned by the employees of the foreign companies.
  • Sec 10(6)(vi a) provides exemption of tax on income earned or received from any international philanthropic organizations.
  • Sec 10(11) states that income earned from Statutory Provident Fund and Public Provident Fund is exempt from tax.
  • Sec 10(13) states that income received from Superannuation Fund is tax exempt to a specific limit.
  • Sec 10(13A) income earned as specific allowances provided to employees such as house rent allowance is tax exempt.
  • Sec 10(30) income earned through subsidies provided by the Tea board are tax exempt.
  • Sec 10(31) income earned through subsidies received from specific boards of commercial crops such as cardamom, coffee, rubber etc.

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