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Heres the Lowdown on Section 10 of the Income Tax Act

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Here’s the Lowdown on Section 10 of the Income Tax Act
April 24, 2023

Table of Content

 

Section 10 of the Income Tax Act in India provides essential deductions for salaried employees while filing their income tax returns, aiding in reducing their tax burden. This act particularly benefits individuals falling within specific income tax slabs. It is crucial to have knowledge of the permissible deductions under Section 10# to take advantage of them and save on taxes. Furthermore, it is also essential to consider obtaining life cover to ensure financial security for your loved ones in case of unforeseen circumstances. By investing in a suitable life cover, you can safeguard your family's future and also claim tax benefits under Section 80C of the Income Tax Act.

Sources of Income Exempted from Tax under Section 10 of the Income Tax Act

Broad category of exempted incomes is covered below, including certain provisions related to exemptions for salaried individuals:

  • Section 10(1)#: Exemption of Agriculture Income

    Individuals earning any income from sources of agriculture are exempt from taxation. This includes any rental income from agricultural land, income from land cultivation, income from agricultural goods, income from building and construction of farm structures.

  • Section 10(2) #: Exemption on the Income of the HUF

    Amount received out of family income, or in case of impartible estate, amount received out of income of family estate by any member of such HUF is exempt from tax

  • Section 10(2a) #: Exemption of Income from a Partnership Firm

    In case an individual is a partner in a firm, the profit earned from the partnership is not liable for taxation.

  • Section 10(4) #: Exemption on certain interest to non-residents

    Within Section 10 of the Income Tax Act, Section 10 (4) stipulates that NRIs, non-resident Indians, can avail tax exemptions if they earn any income through government sources, like bonds, securities, credit income from interest, or interest which is earned from an account outside India.

  • Section 10(5) #: Exemption on Leave Travel Concession

    Under this section, employees with a leave travel allowance may enjoy exemptions of tax if the allowances are received for official purposes of leave and travel by employees in the fiscal year and the allowances are for the purposes of leave and travel within India.

  • Section 10(6) #: Exemption on Remuneration to Indian Citizens Working Outside India

    It is a special concession that Indians working outside India receive. This is allowed for those Indians who represent India in an official capacity. Such Indians include those employed in foreign embassies, or are representatives of trade abroad. Indian employees of companies situated abroad are also allowed this exemption, but these Indians should not be residing in India for a period of over three months at any single time.

  • Section 10(7) #: Exemption on Allowances and Perquisites Paid by the Government

    Under Section 10(7) of the Indian Income Tax Act, any perquisites or allowances received by government employees for providing services outside India are exempt from tax.

  • Section 10(10C) #: Exemption on Voluntary Retirement

    The amount an individual receives on his voluntary retirement or termination of his service under voluntary retirement scheme is exempt subject to specific conditions fulfilment.

  • Section 10(10CC) #: Exemption on Perquisites Paid by the Employer

    Employers may pay income tax on behalf of their employees for any perks of a non-monetary nature provided to them. However, the tax paid is treated as an exemption with regard to the employee.

  • Section 10(10D) #: Exemption on the Tax at the time of maturity of life insurance policy

    The insurance companies issue several kinds of life insurance policies, and any benefits earned from insurance policy, subject to specified conditions mentioned under section 10(10D), have a tax exemption.

If policies are issued after 1 April 2012 but on or before 31st March 2023, exemptions can be availed if premium payable for any of the years (during the policy term) is not higher than 10% of the sum assured.

In case of ULIP issued after 1st February 2021, exemptions can be availed if premium payable for any of the years (during the policy term) is not higher than Rs. 2,50,000/-.

For policies, other than ULIP, issued after 1 April 2023, exemptions can be availed if premium payable for any of the years (during the policy term) is not higher than 10% of the sum assured and the aggregate premium amount for any of the years does not exceed Rs. 5,00,000/-.

Exemptions can also be availed if premium payable for any of the years (during the policy term) is not higher than 15% of the sum assured only if the policy is issued after 1st April 2013 and is for :

  • The person with a disability or the person with severe disability (as referred under section 80U); or
  • The person suffering from disease or ailment (as referred in rules made under section 80DDB)

In case any sum received on death of a person such sum shall be exempt irrespective of various conditions listed above.

  • Section 10(11) # & Section 10(11A) #: Exemption on Payment made in Provident Fund and Sukanya Samriddhi Account

    The interest or contribution that an individual receives out of a provident fund account when a person retires or terminates service, subject to certain conditions, is exempt from tax. Any income received from the Sukanya Samriddhi Account Scheme is also exempted from tax under this part of Section 10 of the Indian Income Tax Act.

  • Section 10(10BC) #: Exemption on the Compensation Received against a Disaster

    In case an individual receives any government-based compensation in the event of a natural disaster, this is exempted from tax.

  • Section 10(13A) #: Exemption on House Rent Allowance (HRA)

    Employees of organisations are eligible for allowances for payment of rent in respect of residential accommodation. Such allowances are exempt from income tax subject to limits prescribed therein.

  • Section 10(14) #: Exemption of Special Allowance

    In case any specific allowances are given to employees to perform duties of the organisation, then such allowances are exempted from tax.

  • Section 10(15) # The Income Earned from Government Bonds & Securities

    Any income that is earned from interest, premium on redemption or other payments sourced from bonds, securities & certificates issued by central government is exempt from tax.

Conclusion

Certain investments plans and insurance plans like life insurance policies are eligible for tax deductions under Section 80C# of the Income Tax Act. Although not all the provisions of Section 10 may apply to you, it is essential to know about your tax liabilities and deductible income tax so you can make the most out of tax savings.

Related Article

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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#Tax benefits are subject to conditions under Section 10 and other provisions of the Income Tax Act, 1961.

#Tax Laws are subject to change from time to time.

#The customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law

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