Section 10 of the Income Tax Act, Exemptions, Allowances

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Exemption Under Section 10

Section Exemption Limit
Section 10(1) Fully Exempt
Section 10(2) Fully Exempt
Section 10(10D) Fully Exempt
Section 10(13A) Partially Exempt
Section 10(14) Partially Exempt

Section 10 of the Income Tax Act 1961

Section 10 of the Income Tax Act, 1961 majorly consists of income parameters that do not form an essential part of an individual’s total income. The tax calculation such as the income module is immensely easy as the incomes are partially exempted from the different forms of taxation. The primary object establishes Section 10 of the Income Tax Act 1961. It reduces the tax burden on the income-earning individual. 

Income Tax Section 10 


Sections Particulars Exemption Limit
Sec 10(1) Agricultural Income (from agricultural land, farmhouse, or sapling seedling was grown in the nursery) for self-employed Fully exempt from tax
Sec 10(2) Income received from HUF (Hindu-undivided family) by a taxpayer in his capacity as a member of HUF Fully exempt from tax
Sec 10(10C) The compensation received at the time of voluntary retirement for salaried employees     Exempt from tax up to a certain limit of compensation amount ₹ 5,00,000
Sec 10(10D) Amount received under life insurance policy including policy bonus Fully exempt from tax
Sec 10(11)(12) Amount is withdrawn from Provident fund by salaried employees Fully exempt from tax
Sec 10(10BC) The compensation received in case of any disaster from the central government Fully exempt from tax
Sec 10(13A) House rent allowance (HRA) to salaried employees (rent paid by the employees to stay in a rented house) Fully exempt from tax and 50% of salary amount if the residential house is in metro cities otherwise 40% in non-metro
Sec 10(14) Children education allowance (salaried employees can claim a pre-defined allowance for two children) Exemption up to ₹ 100 per month per child
Sec 10(14) Special compensatory allowance for hilly areas or climate allowance or high altitude allowance to salaried employees   Exemption up to ₹ 7,000 per month
Sec 10(14) rule 2BB Border area allowance or remote area or any disturbed area allowance to salaried employees   Exemption up to ₹ 1,300 per month
Sec 10(14) Tribal area allowance in: Madhya Pradesh, Tamilnadu, Assam, UP, Karnataka, West Bengal, Bihar, Orissa and Tripura to salaried employees  Exemption up to ₹ 200 per month
Sec 10(14) Compensatory field area allowance available in various areas of AP, Manipur, Sikkim, Nagaland, HP, UP, and J&K to salaried employees Exemption up to ₹ 2,600 per month
Sec 10(14) Transport allowance granted to an employee for the purpose of commuting from home to office salaried employees Exemption up to ₹ 1,600 ( ₹ 3,200 for blind, deaf and dumb ) per month
Sec 10(15) Income from tax-free securities to all assesses (Income received as interest from securities, bonds, deposits notified by the government) Fully exempt from tax
Sec 10(23D) Income from the mutual fund (Any income earned from mutual funds registered under SEBI or set-up by any PSU or authorized by RBI) Fully exempt from tax
Sec 10(34) Income from dividends (Tax paid by the company over the profits is considered as the final payment of tax no further credit to be claimed as dividends) Fully exempt from tax
Sec 10(38) Long term capital gains on transfer of shares and securities Fully exempt from tax
Sec 10(43) Reverse Mortgage (Any amount received by the individual as loan in lump-sum or in installments in the transaction of the reverse mortgage) Fully exempt from tax
Sec 10(44) New Pension System exemption (Any income received by any person on the behalf of New pension system) Fully exempt from tax
Sec 10(49) Income of National financial holdings company Fully exempt from tax

Special Allowances Under Section 10 for Salaried Employees

Section 10 (14)

Section 10 (14) can be divided and segmented into two different parts. The allowances are the reprimands offered to the salaried individuals or the income-earning individuals while working in an organization. 

Allowances under Section 10 (14) (ii)-

The allowances are subjected to different exemptions levels under the provisions mentioned for the Income Tax Act 1961. Studying them in detail would give us a vivid idea about the taxation structure present for the allowances. 

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FAQs about Section 10 of the Income Tax Act

What are exemptions under section 10 of the Income Tax Act?

Under section 10 of the Income Tax Act, agriculture income is fully exempt. It also includes various allowances, some of which are fully exempt, some partially exempt, and some are taxable.

What is Section 10(14) of income tax?

Section 10(14) covers those allowances which the employer provides to the employee for performing the duties of his employment.