What is the main purpose of section 10 of the Income Tax Act?

The main purpose is to list specific incomes that are exempt from income tax, thereby reducing the overall tax burden on taxpayers.

Is HRA fully exempt from tax?

No, HRA is not always fully exempt. The HRA exemption in the Income Tax Act under Section 10(13A) is subject to a minimum of three conditions: actual HRA received, rent paid minus 10% of salary, or 40%/50% of salary, depending on city type.

Can I claim exemptions under section 10 if I opt for the new tax regime?

Most common exemptions, like HRA, LTA, and many special allowances, are not available if you opt for the new tax regime. However, some, like gratuity within limits, may still be available.

Is agricultural income always exempt under section 10?

Yes, agricultural income exempt under the Income Tax Act (Section 10(1)) is generally exempt if it’s from land situated in India and used for agricultural purposes. There are, however, nuances if your non-agricultural income is high, which might affect the tax calculation method but not the exemption of agricultural income itself.

Do I need to show exempt income in my ITR?

Yes, you must report income exempt in the relevant schedules of your income tax return for disclosure purposes, even though it’s not taxed.

What happens to the family pension exemption under the Income Tax Act?

Family pension received by legal heirs gets a standard deduction under Section 57(iia), reducing its taxable amount, though not under Section

Commuted pension for employees is exempt under Section 10(10A) of the Income Tax Act. 7. Are all allowances exempt under the Income Tax Act?

No, not all allowances are exempt. Section 10, particularly Section 10(14), specifies certain allowances exempt under the Income Tax Act either fully or partially, based on actual expenditure or prescribed limits.

Is there any medical allowance exemption under the Income Tax Act currently?

The fixed medical allowance is now fully taxable. While employers may offer other medical reimbursements, their taxability depends on specific rules and the chosen tax regime. There’s no direct exemption for a “medical allowance” under the Income Tax Act, though some medical reimbursements may offer limited relief, separate from general allowances under Section 10(14).

How does Section 10 affect the basic exemption limit?

Section 10 of the Income Tax Act lists incomes that are not included in your gross total income. This reduces your taxable income before the basic exemption limit under the Income Tax Act is applied. So, effectively, section 10 helps more people fall below or within lower tax slabs after the basic exemption limit under the Income Tax Act is considered.

Is the dividend exempt under the Income Tax Act now?

No, generally, dividend exempt under the Income Tax Act (which was available under Section 10(34) previously) is no longer applicable for most individual investors. Dividends are now taxable in the hands of the shareholders at their applicable slab rates.

Taxation

Section 10 Explained: Maximize Your Tax Savings Through Exemptions and Allowances

Shaggun V Singh

June 03, 2025

15 min read

Shaggun V Singh

Holds a Bachelor’s degree in BBA LLB, along with a certification in Artificial Intelligence. Specializes in Intellectual Property Rights (IPR) and taxation, helping clients manage legal and tax complexities. Graduated in 2024, a proactive individual with strong analytical skills, adept at navigating problems efficiently to deliver effective solutions.

Section 10 Explained: Maximize Your Tax Savings Through Exemptions and Allowances

Shaggun V Singh

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Shaggun V Singh

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