Summary of Section 10 of the Income Tax Act, 1961
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Summary of Section 10 of the Income Tax Act, 1961

Publish Date: Feb 5
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Section 10 of the Income Tax Act, 1961 provides various exemptions to reduce the income tax burden for taxpayers in India. Here are the key points:

  1. Definition: Section 10 outlines specific income sources that are exempt from being included in total income for tax calculations.

  2. Exemptions:

    • House Rent Allowance (HRA): Exempt under Section 10(13A), calculated based on actual HRA received, a percentage of basic salary, or actual rent paid minus a portion of salary.
    • Leave Travel Allowance (LTA): Exempt under Section 10(5) for domestic travel expenses incurred by employees.
    • Scheduled Tribe Exemption: Section 10(26) provides exemptions for members of Scheduled Tribes in certain northeastern states.
    • Business Expenses: Section 10(14)(i) allows exemptions for expenses incurred for employer's business.
    • Provident Fund Interest: Exempt under Section 10(11) upon resignation or retirement, with limits on contributions.
    • Dividends: Exempt under Section 10(34) up to Rs. 10,000 for dividends received from Indian companies.
    • Sikkimese Individuals: Section 10(26AAA) provides exemptions for income earned in Sikkim.
    • Long-term Capital Gains: Exempt under Section 10(38) for gains from selling equity shares or mutual funds, subject to Securities Transaction Tax.
    • Educational/Medical Institutions: Exempt under Section 10(23C) for institutions with annual receipts not exceeding Rs. 5 crore.
    • Compulsory Acquisition of Land: Exempt under Section 10(37) for capital gains from the compulsory acquisition of agricultural land.
    • Pension and Gratuity: Exemptions under Sections 10(10A) and 10(10) for government employees.
    • Food and Internet Allowances: Exempt under Section 10(14) with specific limits.

  3. Claiming Exemptions: Taxpayers can claim these exemptions by disclosing the income and corresponding exemptions while filing their income tax returns.

  4. Leave Encashment: Fully taxable for private sector employees, but government employees may have exemptions upon retirement.

Taxpayers are advised to consult a tax professional for guidance on claiming these exemptions effectively.

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