Old Section 10 Exemptions vs Income-tax Act 2025 Exemption Clauses: Transition Map

Reviewed by Ravi Sisodia · Last reviewed 13 August 2026

Finin2min 2-Minute Summary

• For tax years beginning on or after 1 April 2026, the Income-tax Act, 2025 governs the exemption analysis; earlier tax years remain governed by the 1961 Act under the repeal-and-savings framework.
• Old section 10 was a very long clause-based exemption provision. The 2025 Act reorganises the exemption architecture: section 11 points to Schedules II, III, IV, V and VI for exempt income and Schedule VII for exempt persons, subject to the conditions in those schedules.
• Do not carry an old section 10 clause number into a 2026-27 workpaper without mapping it to the current section/schedule row. The exemption may be preserved, relocated, reworded or subject to a transition/savings provision.
• As one official example, the Department confirms that the old section 10(4)(ii) NRE-account interest exemption is retained in Schedule IV, subject to its conditions.
• The safest transition file records the old clause, new section/schedule reference, tax year, eligibility conditions, documentary proof and whether the claim is available under the taxpayer's chosen tax regime.

The legal architecture changed more than the policy headline

Under the 1961 Act, practitioners became accustomed to citing dozens of unrelated exemptions as 'section 10'. The 2025 Act deliberately reorganises that structure. Section 11 is the gateway: exempt incomes are placed across Schedules II to VI, while Schedule VII deals with persons not chargeable to tax when its conditions are satisfied. That means a return-preparation checklist that simply says 'section 10 exemption' is no longer precise enough for Tax Year 2026-27.

The transition should be handled by legal vintage. A receipt earned in a tax year beginning before 1 April 2026 remains tied to the old Act even if the return, appeal or correction occurs later. A receipt belonging to Tax Year 2026-27 starts with the 2025 Act. Section 536 and the Department's transition FAQs preserve earlier rights, proceedings and character where the savings clause applies.

Build a clause-by-clause bridge, not a one-line conversion

A useful exemption register has six columns: old provision, current provision, category of income, taxpayer conditions, amount/period limits, and evidence. That structure prevents an HR or tax team from assuming that every historical section 10 clause moved into the same new schedule.

For example, the Department's NRI FAQ expressly says the old NRE-account interest exemption under section 10(4)(ii) now sits in Schedule IV and continues to depend on FEMA/RBI eligibility. Other exemptions should be mapped through the current Act and the CBDT comparison utility rather than inferred from familiar numbering.

• Freeze the tax year before choosing the governing Act.
• Identify the precise old clause used in legacy payroll, return or ledger coding.
• Use section 11 and the relevant schedule row for the current-year claim.
• Recheck conditions, limits, recipient status and tax-regime restrictions.
• Update payroll/ERP labels so the old citation is not automatically repeated on 2026-27 documents.

Worked example: employee and NRI items in one tax file

Assume a finance team is preparing Tax Year 2026-27 data for an employee with legacy payroll labels referring to section 10 allowances, while the same individual also receives NRE interest. The team should not copy the FY 2025-26 tax master. It should map each employee exemption to the current Act/rules and separately document the NRE interest under the current schedule framework. The old section number can remain in a cross-reference column for audit trail, but the legal conclusion should cite the 2025 Act.

What to preserve for assessment or payroll review

Keep the mapping sheet, current statutory text, employee declarations or third-party evidence, calculations, tax-regime selection and any transitional reasoning. The strongest file explains not only that an exemption is available, but why the taxpayer satisfies the conditions in the current schedule and why the claim belongs to the current tax year.

Questions readers commonly ask

Did every old section 10 exemption disappear?

No. Many exemptions continue, but the 2025 Act reorganises them into section 11 and schedules or other provisions. Each item should be mapped individually.

Which law applies to AY 2026-27 income earned up to 31 March 2026?

That income remains governed by the 1961 Act. The 2025 Act applies prospectively to tax years beginning on or after 1 April 2026.

Can payroll continue to show old section 10 references in TY 2026-27?

For internal cross-reference yes, but statutory computation and declarations should use the current 2025 Act references.

Where is the NRE account interest exemption now?

The Income Tax Department's NRI FAQ says the old section 10(4)(ii) exemption is retained in Schedule IV, subject to the same substantive eligibility conditions.

Official / primary sources

• Income-tax Act, 2025 as amended by Finance Act, 2026 - Section 11 and Schedules II-VII; current consolidated statute
• CBDT old-vs-new Act comparison utility - Use for clause-level correspondence; verify against enacted text
• Income Tax Department transition FAQs - Prospective effect from 1 April 2026 and repeal/savings
• Income Tax Department NRI FAQs - Old section 10(4)(ii) NRE interest -> Schedule IV

Disclaimer

Educational and professional reference only; confirm the current law, rates and the facts of your case before relying on this page.