Income Tax

Section 10 Income Tax Exemptions: Complete List for FY 2025-26

CA Nikhil Gupta·June 2026·9 min readEXEMPTIONS GUIDE

Reviewed by CA Nikhil Gupta · Last reviewed 17 June 2026

Section 10 of the Income Tax Act lists incomes that are fully or partially exempt from tax — meaning they don't get added to your total income at all. From HRA and LTA to gratuity, leave encashment and agricultural income, this section covers some of the most commonly claimed exemptions by salaried employees and others. Here's the full list with limits and conditions for FY 2025-26.

What Is a Section 10 Exemption?

An exemption under Section 10 means the income is excluded from your Gross Total Income altogether — unlike a deduction (under Chapter VI-A like Section 80C), which is subtracted after the income is included. Exempt income doesn't appear in your taxable income computation, though some exemptions still need to be reported in your ITR for disclosure.

Many Section 10 exemptions are only available under the old tax regime — the new regime (Section 115BAC) withdraws most of them, with a few exceptions noted below.

Key Section 10 Exemptions for Salaried Employees

Section	Exemption	Limit / Condition	New Regime?
10(13A)	House Rent Allowance (HRA)	Least of: actual HRA, rent paid – 10% salary, 50%/40% of salary	Not available
10(5)	Leave Travel Allowance (LTA)	Economy/AC fare for travel within India, twice in a block of 4 years	Not available
10(10)	Gratuity	Up to ₹20 lakh (govt employees: fully exempt)	Available
10(10AA)	Leave encashment on retirement	Up to ₹25 lakh (non-govt employees)	Available
10(10C)	Voluntary Retirement Scheme (VRS)	Up to ₹5 lakh, one-time	Available
10(10D)	Life insurance maturity proceeds	Exempt if premium ≤ 10% of sum assured (conditions for ULIPs apply)	Available
10(11)/(12)	PF and PPF interest/withdrawal	Exempt subject to specified conditions on contribution thresholds	Available

Other Important Section 10 Exemptions

Section 10(1): Agricultural income is fully exempt from income tax (though it may affect the tax rate on non-agricultural income via partial integration)
Section 10(2): Share of income received from an HUF by a member is exempt (since the HUF itself pays tax on it)
Section 10(16): Scholarships granted to meet the cost of education are fully exempt
Section 10(34A)/(38): Certain dividend and buyback income exemptions (subject to amendments — verify current applicability each year)
Section 10(15): Interest on specified bonds (e.g., notified tax-free bonds) is exempt

Old Regime vs New Regime: What Survives

If you opt for the new tax regime, most Section 10 exemptions tied to salary structure (HRA, LTA) are not available. However, retirement-related exemptions — gratuity, leave encashment, VRS, and PF/PPF — remain available under both regimes, since these are treated as one-time/terminal benefits rather than regular salary perks.

⚠ Disclosure still required: Even though exempt income doesn't add to your taxable income, several exempt incomes (like agricultural income above ₹5,000 and exempt allowances) must still be reported in the "Exempt Income" schedule of your ITR. Not reporting them can trigger mismatches with AIS data.

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Common Mistakes With Section 10 Exemptions

Claiming HRA exemption without actual rent payment proof (rent receipts, landlord PAN above ₹1 lakh/year)
Claiming LTA without actual travel — only travel cost is exempt, not hotel/food
Not checking the ₹20 lakh gratuity ceiling when an employee has worked at multiple employers in the same year
Forgetting that exempt allowances under the old regime are simply added back as taxable salary under the new regime

Frequently Asked Questions

Can I claim Section 10 exemptions under the new tax regime? ▼

Most salary-structure exemptions like HRA (Section 10(13A)) and LTA (Section 10(5)) are NOT available under the new tax regime (Section 115BAC). However, terminal benefits like gratuity (10(10)), leave encashment (10(10AA)), VRS compensation (10(10C)), and PF/PPF-related exemptions (10(11), 10(12)) remain available under both the old and new regimes, since they are not considered part of the regular salary structure that the new regime simplifies away.

Is agricultural income completely tax-free in India? ▼

Yes, agricultural income is exempt from income tax under Section 10(1) of the Income Tax Act, as agriculture falls under the State List in the Constitution and only state governments can tax it. However, if you have both agricultural and non-agricultural income and your agricultural income exceeds ₹5,000 in a year, the agricultural income is used to compute a notional tax rate that is then applied to your non-agricultural income — a process called 'partial integration.' This can increase the effective tax rate on your non-agricultural income, even though the agricultural income itself remains untaxed.

Do I need to report exempt income in my ITR even though it's not taxed? ▼

Yes. Most ITR forms have a dedicated 'Schedule EI' (Exempt Income) where you must report exempt incomes like agricultural income above ₹5,000, exempt allowances (HRA, LTA portions), exempt dividend income, and interest on tax-free bonds. While these amounts don't add to your taxable income, failing to report them can create mismatches with the Annual Information Statement (AIS), which now captures most of these transactions, and can trigger a notice for clarification even if no tax is actually due.

Source and review trail

Use the current official instrument, portal or regulator publication before acting.

Primary category: Income Tax
Official starting point: www.incometax.gov.in

Primary sources & related provisions

Statutory provisions referenced in this guide: