Income Exempted From Tax: Income Tax Exemptions and Deductions in India

Last Updated on Apr 25, 2022 by Aradhana Gotur

The income tax allows you to claim exemption on various incomes. Such non-taxable incomes are known as income exempt from tax. These are not added to the total gross income while calculating your tax liability. 

The subsections of Section 10 of the Act list the incomes exempt from tax. Individuals, HUFs, associations, bodies of individuals, companies, and other assessees can claim such exemptions. Moreover, if the total exemption amount is more than Rs 5,000, you must file ITR-2 instead of ITR-1.

Let us have a look at the provisions.

Income exempt from tax under Section 10 of the Income Tax Act, 1961

Section 10 (1)

Agricultural income from growing or processing produce or renting agricultural land. 

Section 10 (2)

A share in family income received by a HUF’s coparcener. However, the salary received is taxable.

Section 10 (2A)

Profit earned by a partner in a partnership firm or an LLP. However, income by any other way, such as salary, interest, and so on is taxable.

Section 10 (4)

Section 10 (4) (i) states that interest earned by an NRI on specified securities is exempt. Section 10 (4) (ii) exempts the interest earned on a Non-Resident External (NRE) Account from tax.

Section 10 (4B)

Interest earned by non-residents on notified savings certificates. 

Section 10 (5)

Leave Travel Allowance (LTA) given by an employer to an employee. It is calculated based on your actual spending, the amount received, and the mode of travel.

Section 10 (6)

Section 10 (6) (ii) exempts the income of Ambassadors and Embassy officials and their staff. Section 10 (6) (vi) makes income from a foreign company’s employee coming to India to provide services for less than 90 days non-taxable.

Section 10 (6A), 10 (6B), 10 (6BB), and 10 (6C) exempt the income received by a foreign company or non-resident who provides services to the Indian Government or company.

Section 10 (7)

Allowances and perquisites of a government employee working outside India. 

Section 10 (8)

Income of foreign employees working in India under the Co-operative Technical Assistance Program.

Section 10 (8A) and 10 (8B)

Section 10(8A) exempts income earned by a consultant from a foreign company. They must be a non-resident or a non-Indian citizen or a citizen who is not ordinarily a resident. The income of such consultant’s staff is exempt under Section 10 (8B).

Section 10 (9)

Income earned outside India by a family member accompanying the foreign employee as mentioned in Section 10 (8).

Section 10 (10)

Gratuity received by employees is income exempt from tax. The exemption differs based on whether you are a government employee or not.

Section 10 (10A)

The value of the commuted pension earned by an assessee is exempted income. The exemption limit differs for government and non-government employees.

Section 10 (10AA)

Leave encashment received on retirement.

Section 10 (10B)

Compensation given to employees due to retrenchment.

Section 10 (10BB)

The compensation received for the Bhopal Gas Tragedy.

Section 10 (10BC)

The compensation received for any man-made or natural disaster.

Section 10 (10C)

The amount received as compensation if you undertake the Voluntary Retirement Scheme. However, there is an exemption limit of Rs 5,00,00. 

Section 10 (10CC)

Non-monetary perquisites on which your employer has paid tax.

Section 10 (10D)

Benefits received on your insurance policy, including bonuses. 

Section 10 (11)

The amount received by an employee from a Statutory Provident Fund.

Section 10 (11A)

Amount received from your Sukanya Samriddhi Yojana Account, including interest income, withdrawals, or maturity benefits.

Section 10 (12)

The accumulated amount received from a recognized provident fund.

Section 10 (13)

Payment received by an employee or his family from a superannuation fund.

Section 10 (13A)

The House Rent Allowance component of the salary is exempt up to a certain extent. 

Section 10 (14) 

Allowances that are used to meet employment-related expenses.

Section 10 (15)

Different kinds of interest incomes received.

Section 10 (15A)

Rent paid on the lease of aircraft from a foreign government or company. 

Section 10 (16)

Any scholarship received for educational purposes. 

Section 10 (17)

Allowances received by Members of Parliament, MLAs, and MCAs.

Section 10 (17A)

Monetary and non-monetary awards recieved from the government.

Section 10 (18)

Pension received by gallantry awardees. 

Section 10 (19)

Pension received by the family of members of the armed forces. 

Section 10 (19A)

Value of one palace of a former ruler. 

Section 10 (20)

Income of a local body or authority.

Section 10 (21)

Earnings of an organization working on scientific research.

Section 10 (22B)

Earnings of an agency collecting and providing news.

Section 10 (23A)

Revenue of an institution engaged in professional services.

Section 10 (23AA)

Income through a Regimental Fund.

Section 10 (23AAA)

Income earned from a fund established for the welfare of employees. 

Section 10 (23B)

Earnings of an institution set up for the development of village industries and khadi.

Section 10 (23BB)

Income at the state level earned by Khadi and Village Industries Board. 

Section 10 (23BBA)

Income received by authorities looking after charitable and religious trusts. 

Section 10 (23BBB)

European Economic Community’s income

Section 10 (23BBC)

Income of a SAARC Fund. 

Section 10 (23BBE)

Earnings of Insurance Regulatory and Development Authority (IRDA). 

Section 10 (23BBH)

Income of Prasar Bharti, the broadcasting corporation of India.

Section 10 (23C)

Amount received against funds specified by the Government.

Section 10 (23D)

Income from a mutual fund if it fulfills the conditions mentioned under Sections 115R to 115T.

Section 10 (23DA)

Earnings from a securitization trust.

Section 10 (23EA)

Earnings from Investor Protection Fund.

Section 10 (23EB)

Earnings of the Credit Guarantee Trust for Small Industries. 

Section 10 (23EC)

Income of IPF that the commodity exchange set up. 

Section 10 (23ED)

Income of IPF that the depositories set up. 

Section 10 (23FB)

Income (as specified) earned by Venture Capital Firms/Funds.

Section 10 (24)

Income via house property or other sources earned by trade unions.

Section 10 (25)

Income earned under certain circumstances via Provident Funds. 

Section 10 (25A)

Earnings through Employees’ State Insurance Fund.

Section 10 (26)

Income of a member of Scheduled Tribe.

Section 10 (26A) 

Income earned from Ladakh.

Section 10 (26AAA) 

Earnings of a Sikkimese.

Section 10 (26AAB)

Income from regulation of the agricultural produce market.

Section 10 (26B)

Income of committees that promote the Scheduled Caste/Tribe.

Section 10 (26BB)

Income of committees that promote minorities. 

Section 10 (26BBB)

Income of organizations that uplift ex-servicemen. 

Section 10 (27)

Income of cooperatives that work for the interests of SCs and STs.

Section 10 (29A)

Income of boards as specified by the Government.

Section 10 (30)

Income of and subsidy given by businesses related to tea.

Section 10 (31)

Subsidy received by manufacturers of commodities like rubber, coffee, and cardamom.

Section 10 (32)

Minor’s income after being clubbed with the income of an assessee.

Section 10 (33)

Capital asset transfer under the Unit Scheme.

Section 10 (34)

Dividend income earned from Indian companies.

Section 10 (34A)

Amount received from the buyback of shares of an unlisted company.

Section 10 (35)

Amount received from transfer or sale of units of UTI and mutual funds.

Section 10 (35A)

Distributed income received from a securitization trust.

Section 10 (36)

Capital gains on transferring equity shares. 

Section 10 (37)

The amount earned by transfer of land used for agricultural purposes. 

Section 10 (38)

Long-term capital gain from transfer of equity shares.

Section 10 (39)

Income received on account of a sports event organized in India. 

Section 10 (40)

Income of a subsidiary company engaged in the distribution of power.

Section 10 (41)

Earning of a company engaged in power generation through the transfer of a capital asset.

Section 10 (42)

Income of specified non-profit organizations. 

Section 10 (43)

Amount earned in case there is a reversal of mortgage.

Section 10 (44)

Income earned from NPS.

Section 10 (45)

Any allowance or perquisite received from UPSC by specified persons.

Section 10 (46)

Specific income earned by notified organisations.

Section 10 (47)

Amount received from an infrastructure debt fund.

Section 10 (48)

Foreign company’s income in India on the sale of crude oil.

Section 10 (49)

Earnings of the National Finance Holdings Company.

In conclusion

Section 10 of the Income Tax Act provides a list of incomes that are exempt from tax. Understand what provisions apply to you. Moreover, keep in mind the rules for disclosure of income and which ITR is required to be filled. This shall help you increase your tax savings. Consult your CA or tax advisor for more information on exceptions.