Section 10 Income Tax Act 1961 - Incomes Not Included in Total Income
Section 10 of the Income Tax Act, 1961 contains a wide range of exemptions under which specified income is excluded from total income, subject to the conditions, limits and time periods laid down in the relevant clause.
This page explains the role and major categories of section 10 under the Income Tax Act, 1961. It is intended as a readable guide rather than a substitute for the exact statutory text, applicable Rules, notifications, circulars or judicial decisions.
Meaning and Scope of Section 10
Under the Income Tax Act, 1961, total income is computed after applying the charging, scope, computation and exemption provisions of the Act. Section 10 identifies specified receipts or incomes that are not included in total income when the statutory requirements of the relevant clause are satisfied.
An exemption under section 10 is not automatic merely because a receipt resembles an exempt category. The taxpayer must satisfy the wording of the applicable clause, including any prescribed conditions, monetary ceiling, holding period, residential-status requirement, approval, notification or other qualification.
Important Exemptions Under Section 10
| Provision | Broad subject | Practical point |
|---|---|---|
| Section 10(1) | Agricultural income | Agricultural income is excluded from total income, although it may be considered for rate purposes in cases where partial integration applies. |
| Section 10(2) | Amount received by a member from a Hindu undivided family | Applies to qualifying sums paid out of the income of the HUF or specified impartible estate, subject to section 64(2). |
| Section 10(2A) | Partner's share in the total income of a firm | The partner's qualifying share of profit from a firm assessed as such is exempt; remuneration and interest received by a partner are governed separately. |
| Section 10(4) | Specified interest income of non-residents | Includes specified securities or bonds and, subject to conditions, interest on qualifying NRE accounts. |
| Section 10(5) | Leave travel concession or assistance | Exemption is subject to prescribed conditions, eligible journeys and actual expenditure. |
| Section 10(10) | Gratuity | Exemption depends on the category of employee, governing gratuity law and applicable monetary limits. |
| Section 10(10A) | Commuted pension | Government and other employees are covered differently; the exempt fraction depends on statutory conditions. |
| Section 10(10AA) | Leave encashment on retirement | Government employees and other employees are subject to different exemption rules and limits. |
| Section 10(10B) | Retrenchment compensation | Exemption is limited by the statutory formula and notified ceiling, subject to specified exceptions. |
| Section 10(10C) | Voluntary retirement or separation | Qualifying receipts under an eligible scheme are exempt up to the statutory ceiling, subject to the prescribed conditions. |
| Section 10(10D) | Life insurance policy receipts | Exemption is subject to policy date, premium-to-sum-assured conditions and special rules for specified high-premium policies; death benefits are treated separately. |
| Section 10(11), 10(12) | Provident fund payments | Exemption depends on the nature of the fund and conditions governing contributions, interest and withdrawal. |
| Section 10(12A), 10(12B) | National Pension System payments | Specified closure, opting-out and partial-withdrawal payments receive exemption to the extent provided by law. |
| Section 10(13A) | House rent allowance | Exemption is linked to actual rent expenditure and the prescribed Rule 2A computation; it is generally not available where the relevant new-regime restriction applies. |
| Section 10(14) | Prescribed allowances | Only specified allowances and prescribed amounts or actual qualifying expenditure are exempt. |
| Section 10(20) | Specified income of a local authority | Applies to income falling within the statutory description and conditions. |
| Section 10(23C) | Specified funds, educational and medical institutions | Exemption is subject to the applicable approval, income-application, investment, compliance and other statutory requirements. |
Salary and Retirement-Related Exemptions
Several frequently used exemptions in section 10 concern employees and retirees. These include leave travel concession under section 10(5), gratuity under section 10(10), commuted pension under section 10(10A), leave encashment under section 10(10AA), retrenchment compensation under section 10(10B), voluntary retirement receipts under section 10(10C), house rent allowance under section 10(13A), and prescribed allowances under section 10(14).
The amount exempt is often not the entire receipt. The calculation may depend on salary, completed service, actual expenditure, a notified ceiling, prescribed formula or the employee's category. The provision and applicable Rule or notification should therefore be checked for the relevant year.
Life Insurance Receipts Under Section 10(10D)
Section 10(10D) historically exempts qualifying sums received under a life insurance policy, including allocated bonus, but contains exclusions and conditions. Policy issue date, premium relative to actual capital sum assured, the nature of the policy and later amendments concerning specified high-premium policies can affect the result. A death claim is subject to special statutory treatment.
Provident Fund and National Pension System
Sections 10(11), 10(12), 10(12A) and 10(12B) deal with specified provident fund and National Pension System payments. The exemption can depend on the type of fund, the character of contributions and interest, the event giving rise to payment, and statutory withdrawal limits.
Exemptions for Institutions, Funds and Specified Bodies
Section 10 also contains exemptions for specified authorities, funds, institutions, universities, educational institutions, hospitals, medical institutions, local authorities and other notified or statutorily described bodies. In particular, section 10(23C) has detailed approval and compliance conditions. Eligibility should be tested against the provision applicable to the relevant assessment year rather than older versions of the clause.
Clauses That Have Changed or Become Historical
Section 10 has been amended many times. Some clauses were omitted, restricted to historical periods, or ceased to provide exemption for later receipts. For example, the former dividend exemption under section 10(34) does not operate as a general exemption for dividends received on or after 1 April 2020. Likewise, older provisions concerning specified securities, undertakings, funds or transactions may apply only to defined periods.
Old Tax Regime and New Tax Regime Restrictions
For years governed by the Income Tax Act, 1961, section 115BAC restricts a number of exemptions and deductions when the applicable concessional regime is used. A commonly encountered example is house rent allowance under section 10(13A), which is not available under the restricted new-regime computation. The availability of a particular section 10 exemption must therefore be read together with section 115BAC for the relevant assessment year.
Income-tax Act 2025 From 1 April 2026
The Income-tax Act, 2025 applies prospectively from 1 April 2026. Instead of reproducing the former section 10 structure, the new Act places the general exclusion rule in section 11 and organises exempt incomes and exempt persons through Schedules II, III, IV, V, VI and VII, subject to the conditions specified there.
Accordingly, for a tax year beginning on or after 1 April 2026, the current provision in the Income-tax Act, 2025 and its relevant Schedule should be checked. For an earlier assessment year, appeal, reassessment, rectification, prosecution, refund or other saved proceeding, the Income Tax Act, 1961 and the law applicable to that year may continue to be relevant.
Official Sources
For authoritative text and current compliance information, refer to the Income-tax Act, 2025, the Income Tax Act, 1961 as amended, and the Income Tax e-Filing portal.
Frequently Asked Questions
What is Section 10 of the Income Tax Act, 1961?
Section 10 is the principal provision in the 1961 Act listing specified incomes that are not included in total income, subject to the conditions of each clause.
Is every receipt listed in Section 10 fully tax-free?
No. Some exemptions are complete, while others are limited by a ceiling, formula, period, prescribed condition or taxpayer status.
Is agricultural income exempt?
Qualifying agricultural income is exempt under section 10(1) of the 1961 Act. In specified cases it may nevertheless be taken into account for determining the rate applicable to non-agricultural income.
Is HRA exempt under the new tax regime?
For the 1961 Act regime governed by section 115BAC, the HRA exemption under section 10(13A) is not available where the statutory new-regime restrictions apply.
Does Section 10 continue to govern income from 1 April 2026?
For tax years beginning on or after 1 April 2026, the Income-tax Act, 2025 applies prospectively. Its section 11 and relevant Schedules should be consulted. Section 10 of the 1961 Act remains relevant to earlier years and saved matters.
Updated: 27 September 2026. Tax law changes frequently. Verify the provision, Rules, notifications and circulars applicable to the relevant year before relying on an exemption.