This table covers the key provisions and conditions under Section 10 for exempt incomes. Each type of exempt income has specific conditions and limits, which must be met to claim the exemption.

Section 10 of the Income Tax Act, 1961 lists various categories of income that are fully or partially exempt from taxation. These exemptions are provided for specific types of income, such as agricultural income, allowances, and certain capital gains. Here’s a detailed explanation of the key provisions under Section 10 related to exempted income:

1. Section 10(1) – Agricultural Income

• Exempt Income: Income earned from agricultural activities is fully exempt from tax.
• Definition of Agricultural Income:
  • Income from the sale of agricultural produce grown on land situated in India.
  • Rent or revenue derived from land used for agricultural purposes.
  • Income from farmhouses subject to certain conditions.
• Note: Though agricultural income is exempt, it is used for rate purposes to determine the applicable tax rate on non-agricultural income (this is known as the partial integration of agricultural income).

2. Section 10(2) – Share of Income from HUF

• Exempt Income: The share of profit received by a member of a Hindu Undivided Family (HUF) is exempt from tax.
• Condition: The income must be derived from the income of the HUF, which is taxed as a separate entity.

3. Section 10(2A) – Share of Profit from a Partnership Firm

• Exempt Income: The share of profit received by a partner from a partnership firm is fully exempt.
• Condition: The partnership firm must pay tax on its income, and the share of profits distributed to the partners is not taxed again in their hands. However, salary, interest, or commission received from the firm is taxable in the hands of the partners.

4. Section 10(4) – Interest on Non-resident (External) Account (NRE)

• Exempt Income: Interest earned by a Non-Resident Indian (NRI) on amounts deposited in a Non-Resident External (NRE) account is exempt from tax.
• Conditions:
  • The individual must qualify as a Non-Resident Indian (NRI) under the Income Tax Act.
  • The exemption applies only as long as the individual maintains NRI status.

5. Section 10(10) – Gratuity

• Exempt Income: Gratuity received by employees under the following conditions:
  • Government Employees: Fully exempt.
  • Non-Government Employees covered under the Payment of Gratuity Act: Exemption up to ₹20 lakh.
  • Non-Government Employees not covered under the Payment of Gratuity Act: Exemption is the least of the following:
    • Actual gratuity received.
    • ₹20 lakh (as amended in Budget 2019).
    • 15 days’ salary for each year of service.
• Note: Any amount above the exempt limit is taxable under the head “Salaries.”

6. Section 10(10A) – Pension

• Exempt Income:
  • Commuted Pension: For government employees, the commuted portion of pension is fully exempt. For other employees, commuted pension is partially exempt (if gratuity is received, 1/3rd of the pension is exempt; if no gratuity, 1/2 of the pension is exempt).
  • Uncommuted Pension: Fully taxable for all employees.

7. Section 10(10B) – Retrenchment Compensation

• Exempt Income: Compensation received by a worker due to retrenchment is exempt up to the least of the following:
  • ₹5 lakh.
  • Actual retrenchment compensation received.
  • Amount calculated as per Section 25F(b) of the Industrial Disputes Act, 1947.
• Note: Any amount above the exempt limit is taxable under the head “Salaries.”

8. Section 10(10C) – Voluntary Retirement Scheme (VRS) Compensation

• Exempt Income: Compensation received under the Voluntary Retirement Scheme (VRS) is exempt up to a maximum limit of ₹5 lakh.
• Conditions:
  • The exemption is available only once in a lifetime.
  • The VRS scheme must be in compliance with Rule 2BA of the Income Tax Rules.

9. Section 10(11) – Payment from Provident Funds

• Exempt Income: Payments received from a Statutory Provident Fund or a Public Provident Fund (PPF) are fully exempt from tax.
• Condition: The Provident Fund must be recognized by the government for the exemption to apply.

10. Section 10(12) – Recognized Provident Fund

• Exempt Income: The accumulated balance paid from a Recognized Provident Fund is exempt from tax.
• Conditions:
  • The employee must have rendered continuous service for five years or more.
  • If the service is less than five years, exemption is available only if the termination is due to reasons beyond the control of the employee (such as ill health, company shutdown, etc.).

11. Section 10(13A) – House Rent Allowance (HRA)

• Exempt Income: House Rent Allowance (HRA) received by a salaried employee is partially exempt.
• Exemption Limit: The least of the following is exempt:
  • 50% of salary (in case of metro cities: Delhi, Mumbai, Kolkata, Chennai) or 40% of salary (in case of non-metro cities).
  • Actual HRA received.
  • Rent paid in excess of 10% of salary.

12. Section 10(14) – Special Allowances

• Exempt Income: Certain special allowances granted to employees for specific purposes are exempt to the extent of actual expenditure incurred. Common allowances include:
  • Travel allowance for official duties.
  • Uniform allowance for maintenance of uniform required for official duties.
  • Academic or Research allowance.
  • Conveyance allowance.
• Conditions: The exemption applies only if the allowance is used for the specified purpose.

13. Section 10(15) – Interest Income Exemptions

• Exempt Income: Interest income on various specified instruments is exempt from tax, including:
  • Interest on Post Office Savings Bank Account (up to ₹3,500 for individual accounts and ₹7,000 for joint accounts).
  • Interest on certain government securities.
  • Interest on bonds or savings certificates issued by the central government.

14. Section 10(16) – Scholarships

• Exempt Income: Scholarships granted to meet the cost of education are fully exempt from tax.
• Conditions: The scholarship must be granted to cover educational expenses.

15. Section 10(17) – Allowances of MPs and MLAs

• Exempt Income:
  • Daily allowances received by Members of Parliament (MPs) or Members of Legislative Assembly (MLAs).
  • Constituency allowance up to ₹3,000 per month for MPs and MLAs.

16. Section 10(18) – Pension for Gallantry Awardees

• Exempt Income: Pension received by an individual who has been awarded certain gallantry awards, such as the Param Vir Chakra, Maha Vir Chakra, or Vir Chakra, is fully exempt from tax.

17. Section 10(19) – Family Pension for Armed Forces

• Exempt Income: Family pension received by the family members of armed forces personnel who have died in service is exempt from tax.

18. Section 10(23C) – Exemptions for Charitable Institutions

• Exempt Income: Income of certain charitable institutions, educational institutions, and hospitals is exempt if they are approved by the government.
• Conditions: The institution must be engaged in charitable, educational, or healthcare activities, and the annual receipts should not exceed a certain limit.

19. Section 10(34) – Dividend Income

• Exempt Income: Dividends received from domestic companies are fully exempt from tax.
• Note: As of FY 2020-21, dividends are taxable in the hands of the shareholders, and the Dividend Distribution Tax (DDT) has been abolished. However, for earlier years, the exemption was applicable.

20. Section 10(38) – Long-term Capital Gains on Equity Shares

• Exempt Income: Long-term capital gains (LTCG) on the sale of equity shares listed on a recognized stock exchange are exempt if Securities Transaction Tax (STT) has been paid.
• Note: This exemption was available until FY 2017-18. From FY 2018-19, LTCG on listed shares is taxed at 10% if it exceeds ₹1 lakh in a financial year.