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Useful articles for your finance management by our team of experts

Exemptions under Section 10 of Income tax act

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under section 10Income tax act provides multiple tax exemptions to every individual. A lot of such exemptions fall under section 10 of income tax act. Following are the tax exemptions provided under section 10:

Agricultural Income

Income received from agriculture is totally exempt from tax if it is the only source of income in the financial year. However, if it is accompanied by income from other sources, it is taxable.

Leave Travel Allowance (LTA)

LTA is exempt to a certain extent for domestic travel under section 10(5) of income tax. The exemption is subject to the LTA limit specified in the individual’s salary.

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Life Insurance

The payment proceeds of a life insurance policy are exempt under section 10(10D). This includes maturity amount as well as death claims.

Gratuity

Gratuity amount received by a government employee is totally exempt from tax. For others covered under payment of gratuity act, it is exempt to the least of the following:

1)      15 days salary based on last drawn salary for each year of service.

2)      Rs. 10,00,000

3)      Gratuity received

For those not covered under gratuity act, it is exempt to the least of:

1)      Half month average salary for each year of service completed.

2)      Rs. 10,00,000

3)      Gratuity received

Leave Encashment

For a government employee, leave encashment upon retirement or leaving the job is tax free under section 10. For a non-government employee, it is exempt up to least of the following:

1)      Earned leave (no. of months) * Average monthly salary

2)      10 * Average monthly salary

3)      Rs. 3,00,000

4)      Actual leave encashment received

Commuted Pension

Commuted pension for govt. employees is fully exempt. For others, it is exempt to least of the following:

1)      If gratuity is received, up to 1/3rd of the pension received.

2)      If gratuity not received, ½ of the pension received.

Compensation under VRS

Compensation received under VRS scheme upon voluntary retirement is exempt up to maximum of Rs. 5,00,000.

Provident Fund

Payments received from Provident Fund (PF) are exempt as part of section 10. However, PF withdrawal is taxable for less than 5 years of service. Also, EPF balance can be withdrawn only subject to few conditions.

HRA

House Rent Allowance (HRA) for an employee is exempt to the least of the following:

1)      HRA received

2)      Rent paid – 10% of salary

3)      50% of salary for Delhi, Mumbai, Kolkata and Chennai and 40% elsewhere.

Dividends received

Dividends announced by any company in case of mutual funds or stocks are exempt from tax in the hands of an individual, irrespective of the company paying tax on it.

Equities held for more than 1 year

Any equity instrument, share or mutual fund held for more than 1 year is free from tax at the time of sale. This is also known as long term capital gains.

Superannuation fund

Any amount received from an approved superannuation fund is exempt from tax in the hands of an individual.

Transport allowance

Transport allowance is exempt up to Rs. 800 per month i.e. Rs. 9,600 per annum. Transport allowance here means expenditure incurred for travel between place of residence and place of work.

Education and Hostel allowances for children

Education allowance is exempt up to Rs. 100 per month per child for a maximum of 2 children. Hostel allowance is exempt for hostel expenditure up to Rs. 300 per month per child for a maximum of 2 children.

Interest on Securities

Income from securities in the form of interest, premium, etc from certificates, bonds and deposits is exempt from tax.

Conclusion

These are some of the important exemptions provided to individuals under section 10 as per income tax act. There are also several such exemptions available in this act. Hope this piece of information is useful to you. Do share your views and opinions on this.

  • Av Suresh

    Q. What would be the tax implication on surrendering a unit linked pension plan (before maturity) – does the entire sum received (principal + profit) be added to taxable income (for this FY) or only the “profit”? This plan was started in Jan 2007 and surrendered in Jan 2014 (a week ago).

    A. First of all, the tax benefit you have claimed through this policy under section 80C will be reversed and added to your income upon surrender. Also, the total surrender value will be added to your income and taxed according to your tax slab.

    • Debanjan Ray

      It is not 80C, but 80CCC. Assume one has paid Rs. 50,000 per annum against unit linked pension plan as premium for a 10 year maturity plan, and has paid for 5 years(lock in period), and on 6th year he has surrendered + every year he has claimed exemption u/s 80CCC the full amount, then the whole surrender amount is taxable. If one has not claimed deduction u/s 80CCC, then only surrendered value minus principal value is taxable.

      Reason: One has shown Income Tax dept that every year Rs. 50,000 is deducted from taxable income, and hence has taken advantage of 33% of 50,000 ( if in that tax bracket) less tax, then surrenderring is basically cheating IT dept. So, one has to repay back the exemption, meaning that on principal also, one needs to pay tax.

      But I am not clear whether section 10(10D)) is applicable or not.

      Link: http://www.tax.fintotal.com/Sections/10-10D-Tax-Rebate/3976/68 says 10(10(D) is not applicable for pension plan.
      See also:
      http://www.caclubindia.com/forum/surrender-of-life-insurance-policy-233462.asp

  • venu

    whether the benefits under this section are addition to 1,00,000 saved under 80c ?

    • Av Suresh

      These are exemptions under section 10. The Rs. 1 lakh which you have specified is deduction under section 80C.

      • Anubhav Asati

        Hi Suresh,

        Could u plz tell us maximum hw much deduction we get under section 10.

        • Av Suresh

          Section 10 is a mix of various deductions. Hence, there is no such stipulated limit in common for this section. For example, LTA limit will be up to the LTA part in your CTC/Salary.

          • Manja Naik

            Hi Suresh,
            If our CTC/Salary slip doesn’t have LTA can we claim it ? and what proff do we need submit to our employer?

          • Av Suresh

            Unfortunately, not. LTA can be claimed only if its part of Salary/CTC.

          • Manja Naik

            Suresh, thanks for the clarification.

  • vibhor

    I forgot to provide the transport allowance (section 10) in IT declaration. Can i claim in IT return?

    • Av Suresh

      Yes Vibhor, you can claim those exemptions with IT dept. which you could not claim with the employer.

  • Rajeev K Nagpal

    Suresh, Thanks for the useful information. Can you please elaborate what kind of securities you referring “Interest on Securities” section

    • Av Suresh

      Rajeev, the securities here refer to tax free bonds, PPF, dividends on stocks and mutual funds, savings account interest up to Rs. 10,000, FD interest from a single branch up to Rs. 10,000.

  • Arvind

    Suresh, Your advice is very good & promising BUT tax on fixed Deposits in Indian Banks are taxable for elderly NRI. How come? Though Indian Citizen over 60 gets Rs 2.5 lacs of Senior Citizen allowance per year but not for NRI over 60. Why is that/ I need to produce certificate from CA to the Bank to avail of the ‘allowance ‘ facility. Please explain. Thanks

    • Av Suresh

      The certificate for getting allowance you are talking about is because of the DTAA agreement between India and other countries. For resident Indian Senior Citizens, this does not apply. Hence, they don’t need any certificate. They just have to fill in form 15H.

  • Arvind

    Suresh Could you please advise me about ‘Money transfer’ to overseas country from India. As RTGS & NEFT is applied to Ibdian citizens only, not for NRI, where he has to prove the source of Income or money brought from., that’s funny & tricky. How easily & swiftly any NRI can transfer money abroad without any incumberance/difficulty & hassle thro’ Bank or RBI, Any suggestions…..Please explain , Thanks.
    Arvind

    • Av Suresh

      You can use NRO/NRE accounts for transferring money from India to abroad. A nationalized bank would be offering you these.

  • Arvind

    Suresh, I do not want to ask you more undue questions BUT it does matter each & every NRI getting income from Renting a house. Any income over Rs1 lac is taxed & needs filling tax form & have to submit
    pan card to Building society & also to tenant’s employer to get him HRA.
    How does this work without any hassle. Even , the agent takes his exhorbitant fees to produce ‘House-rent’contract document. It is so
    complicated & catchy as agent wants POA in front before he gets a client for you(Landlord). What are real rent acts? Is that I have to run every 11 months to renew his/her L&L agreement.. Who is going to fly every now & then to renew the 11 month contract…..Think.

    • Av Suresh

      The system in India is different for different cities. For a city like Hyderabad, most of the landlords don’t provide rental agreements at all. However, for a city like Bengaluru, rental agreements are present almost everywhere along with the 11 month lease.

  • Arvind

    Suresh you are real Godsend to lot of NRIs in terms of advice & tax laws
    Keep going…. You are simply wonderful! Thanks ever so much

    • Av Suresh

      You are welcome, Arvind.

  • Arvind

    Suresh , If I am late in submitting my tax-return last few years (2010-2011 and 2011-2012) Do you think I can still claim my tax from the income from my Bank fixed Deposits? Any procedure that I need to go thro’/ Please say few words, Thanks

    • Av Suresh

      No, Arvind. You cannot claim refund for these years now. In fact, even the refunds for FY 2012-13 have not been completed till date.

  • Arvind

    Suresh, Do NRI have to fill annual Tax-return,even tho’ they do not want to claim the tax incurred on Bank Fixed Deposits.What happens then?
    One can forgo tax if the amount is miniscule & not worth the hassle with Tax authorities. Would Indian Tax ask me to fill the annual form?
    Please let me know, Thanks

    • Av Suresh

      NRI’s need to file tax returns if their Indian income is above the exemption limit i.e. Rs. 2 lakh p.a. Forgoing tax is your option, though.

  • Nikhil Rungta

    Hi,

    I made a travel in the month of December 2013 and I am making a
    claim of LTA for the same in February 2014 for the earlier block only
    (2010-2013).

    I have not used any LTA in the previous block of 2010-2013.

    Further, I am going on leave in March 2014 and wants’ to claim
    the same in March 2014 for the current block of 2014-2017.

    So Can I claim two LTAs in FY14 though both of them are for different blocks?

    Regards,
    Nikhil Rungta

    • Av Suresh

      Yes, you can claim two LTA’s in the first year of fresh block.

  • W. Shital

    Whether employee of Public Sector Undertaking/Nationalized Bank is treated as Govt Employee for getting full exemption of leave encashment received at the time of retirement.

    • Yogi Cfp

      Yes.

  • Laxmi

    I have declared my LTA as non taxable amount and I get the LTA amount in my monthly salary. I travelled two times in last year 2013-14. Can I claim that amount while filing in ITR form?

  • Imran Shaikh

    What is the Car Allowance limit so that it is not taxable.

  • Sushila Pursnani

    Dividend recd. on short term investment, does this become exempt? I was told that if you do dividend stripping then it becomes taxable; what is the crieteria.

  • Sushila Pursnani

    Does the dividend received from non listed companies or on shares of co-op banks also exempt?

  • Prasannakumar B

    Is permanent conveyance allowance granted to a government employee is exempted from income tax? if so under which section of IT Act & Rule

  • chitranjan

    R/sir
    My wife is working in a nationalized bank and is suffering from heart disease. The treatment is certified as domiciliary treatment by the doctor and bank is reimbursing the actual cost occurred on medicines which comes out to be around 10000 per month. This reimbursement is added into her salary for tax purpose. Is there any rule for tax benefit in this case. Please advise.
    Chitranjan Kumar
    ch_kapila@rediffmail.com

  • Dhan B. Subba

    I am an State govt employee in Sikkim. I am paying TDS but I don’t know how my TDS is being deducted from my salary. I tried IT calculator from the web but it too became so complicated. Hence, please suggest me the simplee process of calculating TDS.

  • Prasad

    Hi Suresh…Nice article with lot of details. I have resigned from a company after 5 years and withdrew my PF and Gratuity as I moved out of country. I understand that the amount is not taxable. My question is where do I show this amount in the Tax Return. Could you clarify? Thanks in advance.

    • vipul kumar

      If we receive tuition fee for 24 month of one child and 12 month of one child then 3600 amount diductable under sec 10 or only 2400 diductable please solve the same

  • Srikanth Gutha

    Hi Suresh,
    Suppose I am receiving rent >1lakh in a financial year. I have to pay Tax only if I earn >1.5Lakh through other means. If i dont have other income sources,my Gross income is 1L, do i need to pay tax on 1L also ?

  • Ayush

    Hello, is there any limit for exemption under section 10 ?

  • dinesh

    my company gives me lump sum salary without mentioning any travel allowance. i make expendituire for travelling from my home to my office more than rs 350 per day by my car. can i claim rebate of rs 9600 under section 10.

  • dinesh

    my company gives me lump sum salary without mentioning any travel allowance. i make expendituire for travelling from my home to my office more than rs 350 per day by my car. can i claim rebate of rs 9600 under section 10.

  • Vikram Desai

    withdrawal of PPF is taxable or not

  • Vimal Gupta

    HI Suresh

    I have received a graduity amount of Rs. 85000 and a ULIP surrendered after 5 years (165000) plus a LIC Jeevan saral moneyback of Rs. 20000. I want to know how can i show all these in my return. which FORm should i Use and where to specify these excempt income.

  • Prabhakaran Valiyayi

    Dear Sir,

    I have bought 2 Unit Linked Pension Plan in Dec,2005 ( Annual premium Rs.2.5 lacs for 10 year. Paid up after 3 yrs-7.5 lacs as per original retirement planning done by HDFC Fin consultant. At that time, 3 premiums are enough to make it paid up) The 2 ULPPs are maturing this December,2015. The premiums were tax exempt u/s 80-CCC. These HDFC ULPPs were invested wholly in Equity fund as per my choice. Now are the
    maturity amount 15.78 lacs X 2 taxable ?
    ( at the time of investment, HDFC said the redemption is tax exempt and now
    they are silent). I am not availing Annuity plan. Will sec 10(10D) or sec10 (10A) or 10 (23AAB) can relieve me the tension? Can I redeem before maturity? Kindly enlighten me about the tax liability.

    Await for your views. Thanks, Regards,

    PRABHAKARAN

  • nitin gupta

    As per the standard IT policy, there is an exemption of Rupees 100 per month per child for child education allowance. The employee enjoys the benefit of this exemption under Sec 10. Also, the employee claims the benefit under aggregate of Chapter VI by claiming tuition fees expenses for the children. My question is: Can the employee claim dual benefit for 1 cause…?

  • SANJEEV

    SIR HOW MUCH REBATE I CAN CLAIM FOR CHILDREN EDUCATION ALLOWANCE

  • SANJEEV

    SIR HOW MUCH REBATE I CAN CLAIM FOR CHILDREN EDUCATION ALLOWANCE

  • SANJEEV

    please tell the amount of rebate for children education allowance

  • SANJEEV

    please tell the amount of rebate for children education allowance

  • Ankit

    where can i claim exemption under section 10(5) in ITR-1..if not in ITR-1 then in which itr form..please explain

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