Section 10 Of Income Tax Act: Exemptions, Allowances & How To Claim It?

For salaried individuals who are in the tax paying slab, Section 10 Of Income Tax Act is a relief provider. It defines different kinds of income not taxable in India to help bring down tax liability on such income sources. From house rent and medical allowances to education and travel perks, there are numerous opportunities to explore. This article discusses Section 10 of Income Tax Act, its inclusions, exemptions and benefits to individuals.

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What’s Section 10 of Income Tax Act?

Section 10 Of income tax Act lists all exemptions a taxpayer could claim after the benefits/returns are received. These exemptions apply to income which isn’t part of your overall income.

Features associated with the Section 10 Exemptions

Important features Of Section 10 of Income Tax Act Of 1961:

1. Comprehensive Coverage: Section 10 ensures that at least two sources of income generated afford sufficient relaxation in computing income tax. This includes the assured sum, bonuses & maturity proceeds.
2. Protection Across Life Stages: From the initial investment phase to the policy maturity or surrender, Section 10 grants consistent tax exemption, offering financial protection and peace of mind all through the life of the policyholder.
3. Income from Reinvestment: If the policyholder decides to reinvest the maturity proceeds in another life insurance policy, the resulting income tax-free under Section 10 continues uninterrupted for tax-planning purposes.

Who May Claim Tax Exemptions Under Section 10?

The Tax exemption limit under Section 10 of Income tax Act depends upon the age of the individual:

• Below 60 years: Rs. 2.7 Lakhs each financial year.
• 60 – 80 years: Rs. 3 Lakhs.
• Above 80 years: Rs. five Lakhs.

The increased tax exemptions of Rs. 3 Lakhs & Rs. five Lakhs are given to Indians only.

Income Tax Exemptions Under Section 10

Here are the IT exemptions under S.10:

What are the Exemptions Under Section 10?

The following are the subsections describing various kinds of tax exemptions under Section 10 of Income tax Act:

Section 10 (1): Earnings From Agricultural Activities in India

Indian farmers, people or Hindu Undivided Families (HUFs) earning a livelihood from agriculture are exempt from taxes under Section 10 (1). The following kinds of income coming from agriculture are exempted :

• Income from farm produce selling.
• Rent, or earnings from agriculture land.
• Income from agricultural operations (producing, raising or keeping land).

Section 10 (2): Income Received as a Member of a HUF

Any earnings or earnings from the business or investments such as a fellow member of a Hindu Undivided Families (HUFs) will be tax-exempted under the following situations under Section 10 (2):

• The profit share or income is paid to the member from the overall income of the family.
• The income is the result of business performed by the family.

Note: Any interest earned by way of this income generated as a member of HUF is taxable.

Section 10 (2A): Tax Exemption on Profit Share Received as Co-owner of Partnership Firm

Section 10 (2A) exempts taxes on profits share received by each partner from a partnership firm under the following conditions:

• The partnership firm is taxed under the Income Tax Act, 1961.
• Each shareholder should get the same proportion of profit as mentioned in the partnership firm.
• Each partner will be limited to tax exemptions as co-owner or shareholder of The firm.

Section 10 (3): Income from Eligible Awards for Outstanding Contributions Exempt from Taxes

Section 10 (3) gives tax exemptions for monetary awards and grants made by the Central or State Governments for literary, arts, science or sports merits.

Section 10 (4): Income Made by an NRI coming from India is exempt from tax

Under Section 10 (4) an NRI may claim complete tax exemption on investment or savings account income in India provided the following conditions:

• Interest earned on rupee denominated bonds and securities specified by the Government of India.
• From income from redemption of these securities and bonds.
• Interest income of Non-Resident on money deposits in non-resident external accounts in any bank.

Section 10 (5): Salaried Individuals Receive Tax Exemption on Leave Travel Concession

A salaried individual may claim complete tax exemption on LTA received under their salary under Section 10 (5) of the Income tax Act, 1961. The benefits are given to dependent family as spouses, parents, kids and siblings travelling in India.

Section 10 (6): Exemption for Income Received by An Individual Working Abroad as an Indian Representative

An individual working outside India as a representative of India or a dignitary / employee visiting India as a foreign representative of a company / state can claim tax exemption under Section 10 (6).

Section 10 (7): Allowances & Perquisites Paid by the Indian Government are exempted from Tax

An employee might qualify for Tax exemption under Section 10 (7) of the Income tax Act, 1961 on all allowances & perquisites paid out by the Government of India for furnishing its services abroad.

Section 10 (10A): Gratuity Benefits Tax Exemption

Government workers receive gratuity benefits under Section 10 (10A).

Section 10 (10BC): Tax Exemption on Compensation Received by Victims of Disaster

The tax exemptions are on the compensation amount received by the State/Central Government or local authority on the victims of the disaster or their legal heirs under Section 10 (10BC).

Section 10 (10C): Voluntary Retirement or Termination Benefits Exemption from Taxes

The money received by a government employee at time of voluntary retirement or termination is Tax exempt under Section 10 (10C) of the Income tax Act of 1961. The maximum exemption is Rs. 5 Lakhs.

Section 10 (10CC): Exemption from Tax for Perquisites Paid by An Employer

Several employers collect the taxes on non-monetary advantages or prerequisites for their workers. In such circumstances, the employer has already paid taxes and it’s tax-free to the employees under Section 10 (10CC).

Section 10 (D): Exemption from Tax on Life Insurance Policy Payouts

The benefits (such as maturity, survival, death, or bonus payout) coming from a life insurance policy are Tax deductible under Section 10 (10D) of the Income tax Act, 1961.

Section 10 (11): Exemption from Tax on Payment from Statutory Provident Fund

The earnings and interest paid on the contribution of employee provident fund are exempt under Section 10 (eleven).

Section 10 (13A): House Rent Allowance Tax Exemption

A salaried employee may get an allowance on house rent paid under Section 10 (13A) of the Income tax Act of 1961.

Section 10 (14): Exemption on Special Allowances Received

Employers may offer employees certain allowances to cover their expenses. Section 10 (fourteen) exempts such allowances at time of tax calculation.

Section 10 (15): Earnings From Interest on Investments – Tax Exemption

Individuals earning Income from interests are exempted from Tax under Section 10 (15) of the income tax Act, 1961. Types of income and exemptions are listed as:

Documents Required to Claims Section 10 Exemption

The following documents are required to claim Tax exemption under Section 10 Of income tax Act when filing an Income Tax return:

• Income tax login credentials.
• PAN card.
• Aadhaar card.
• Bank statement/passbook.
• Relevant documents of different incomes.

How to Claim Exemptions Under Section 10?

Claiming exemptions under income tax section 10 involves a few steps to ensure the eligible income is deducted out of the taxable income. Here is how you can claim sec 10 exemption list:

1. Determine Eligibility: Verify you qualify for the exemption under Section 10 by verifying the criteria in that subsection.
2. Collect Required Documents: Collect papers confirming your eligibility for the exemption. That includes salary slips, rent receipts, insurance policy documents.
3. Fill in the Details in Income Tax Return (ITR): In the relevant sections of the ITR form, jot down the Income exempted under Section 10.
4. Submit Proofs: Attach or even send the required proofs and documents with your ITR to prove your claim for exemptions.
5. Verification: The Income Tax Department will verify the particulars and documentation submitted after submission. Make sure all information matches the proofs submitted.

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Final Words

Section 10 Of Income tax Act offers numerous exemptions that taxpayers may make use of to lower their tax liabilities. Knowing which exemptions Under Section 10 apply and how to claim them can save you considerable tax savings. This particular comprehensive provision extends over several sources of income and gives tax relief at various stages in life and on various sources of income. But you always want to speak to a tax professional about how to get the best from the Income tax Act but still follow the law.

Utilising income tax section 10 provisions, taxpayers can deal with their finances and lower their overall tax burden for improved financial wellness and planning for the future.

FAQs

What is section 10 of the Income Tax Act & What Income is exempted from this Section?

Section 10 of the income Tax Act lists certain kinds of Income exempt from taxation in India. This enables taxpayers to exclude particular kinds of income from their tax liability. Types of income exempted from this section are :

• Earnings from the agriculture industry.
• Income as member of a Hindu Undivided Family (HUF).
• Profit share obtained as co-owner of a partnership firm.
• Income from eligible awards for outstanding contributions.
• Income of Non Resident Indians (NRIs) coming from investments or savings accounts in India.
• Leave Travel Allowance (LTA)
• Income from individuals working abroad as Indian representatives.
• Gratuity benefits.
• Compensation to victims of disasters.
• Voluntary retirement or termination benefits Income.
• Perquisites paid by employers.
• Life insurance payouts.
• Payment from the statutory provident fund.
• Sukanya Samriddhi Yojana Income.
• House Rent Allowance (HRA)
• Special allowances during employment.
• Interest earned on investments.

What allowances are covered by Section 10 exemptions and how can they lower taxable income?

Some allowances are covered by Section 10 exemptions, which might decrease taxable income. They include:

• House Rent Allowance (HRA): Lowers taxable income via exemptions on rent paid.
• Leave Travel Allowance (LTA): Covers travel expenses for employees and their families inside India.
• Special Allowances: Includes daily allowance, travel allowance, uniform allowance, academic or research allowance, helper allowance, conveyance allowance, kids education allowance, tribal area allowance, compensatory field area allowance, border region allowance, special compensatory allowance, counter insurgency allowance, high active field area allowance and island duty allowance.

By claiming such allowances, individuals reduce their tax liability and lessen their total tax liability.

How do taxpayers claim exemptions under Section 10 in their tax return?

To claim exemptions under Section 10 on their income tax return taxpayers should follow these steps:

1. Determine Eligibility: Be sure you qualify for the exemption you want to claim under Section 10.
2. Collect Required Documents: Take all documents confirming your eligibility for the exemption – salary slips, rent receipts, insurance policy documents – etc.
3. Fill in the Details in Income Tax Return (ITR): In the relevant sections of your ITR form, enter the details of the income exempted under Section 10.
4. Submit Proofs: Attach or even submit the needed proofs and paperwork along with your ITR to prove your case for the exemptions.
5. Verification: The Income Tax Department will confirm the particulars and documents provided. Make sure all information matches the proofs submitted.

What limits or situations apply to claiming exemptions under Section 10 of the Income Tax Act?

Yes, there are limits and conditions concerning exemptions below Section 10 of the Income Tax Act:

• Age-Based Limits: Tax exemption limits depend upon age. For all those below 60 years the limit is Rs. 2.7 Lakhs per financial year; For people between 60 and 80 years it is Rs. 3 Lakhs; – and for those above 80 years it’s Rs. five Lakhs.
• Specific Criteria: Each kind of exemption under Section 10 has certain requirements. For instance, HRA exemptions are restricted to the actual HRA received, 40% or 50% of basic salary depending on the city of residence or rent amount paid after 10% of salary deduction.
• Policy Conditions: For life insurance policy payouts below Section 10 (10D), the exemption applies to policies issued after April 1, 2012 with premiums not exceeding 20% of the sum assured or even for policies issued before April 1, 2012 with premiums not exceeding ten% of the sum assured.

What documentation is required to accompany claims for exemptions and allowances under Section 10?

Documentation necessary for claims for exemptions and allowances under Section 10:

• Income Tax Login Credentials: Required to log into the income tax reporting portal.
• PAN Card: Identification proof of Permanent Account Number.
• Aadhaar Card: Identity & address proof.
• Bank Statement/Passbook: To verify financial transactions and income sources.
• Relevant Documents of Different Incomes: Specific documents can consist of salary slips, rent receipts, insurance policies, investment certificates, travel tickets etc. based on the exemption claimed.

With all the documentation in place, you can claim the applicable exemptions under Section 10 of the income Tax Act and decrease your taxable Income.

Aishwarya Agrawal

Ms. Aishwarya Agrawal is a graduate from Hidayatuallah National Law University, Raipur [HNLU Raipur]. Aishwarya holds a great interest in adding value to the legal fin-tech sector. She joined "StartupFino" with a motive to help budding lawyers in their day-to-day journey in the field of Law.