Changed for Section 10 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Income-tax Act, 2025 keeps the exempt-income items of old Section 10 — agricultural income, HRA, LTA, gratuity, leave encashment, PF and PPF — but consolidates them into a reorganised exemptions schedule. Salary-linked allowance exemptions like HRA and LTA now apply only in the old regime; core exemptions like gratuity and agricultural income continue regardless.
Overview
Old Section 10 was a sprawling clause listing dozens of incomes that "shall not be included" in total income. The Act 2025 retains these exemptions but tidies the list into a structured schedule and, as with deductions, links some of them to your regime choice.
What the Old Act Said
Under the 1961 Act, Section 10 exempted agricultural income (10(1)), HRA (10(13A)), leave travel concession (10(5)), gratuity (10(10)), commuted pension (10(10A)), leave encashment (10(10AA)), recognised PF (10(11)/(12)), PPF, certain allowances (10(14)), and a long tail of institutional and special exemptions. The list grew organically over decades and was hard to navigate.
What the New Act 2025 Changes
The Act 2025 re-enacts the exemptions in substance but re-homes them. Instead of a single ballooning section with sub-clauses running into the hundreds, the exempt incomes sit in a consolidated schedule/chapter, grouped logically (retirement benefits together, allowances together, institutional exemptions together). The monetary ceilings that governed the old exemptions are carried over — gratuity up to ₹20,00,000, leave encashment up to ₹25,00,000, and so on.
The important behavioural change is the regime split. Salary-structuring exemptions — HRA, LTA and most special allowances under old 10(14) — are treated like old-regime benefits and are not available in the new default regime. By contrast, "core" exemptions that reflect genuine capital or welfare receipts — gratuity, retirement PF/PPF, agricultural income — continue to be exempt regardless of regime.
Old → New Mapping
| Old Section 10 item | Nature | Position under the Act 2025 |
|---|---|---|
| 10(1) Agricultural income | Exempt (rate-integrated) | Continues, both regimes |
| 10(13A) HRA | Allowance exemption | Continues — old regime only |
| 10(5) LTA / LTC | Allowance exemption | Continues — old regime only |
| 10(10) Gratuity | Retirement benefit (₹20,00,000) | Continues, both regimes |
| 10(10AA) Leave encashment | Retirement benefit (₹25,00,000) | Continues, both regimes |
| 10(11)/(12) PF / PPF | Savings accretion | Continues with existing conditions |
| 10(14) Special allowances | Duty-linked allowances | Limited set continue; most old-regime only |
Practical Impact / Examples
A salaried employee living in rented accommodation who relied on a ₹2,40,000-a-year HRA exemption keeps that benefit only if she chooses the old regime. If she moves to the new default regime, the HRA exemption is gone but the standard deduction and lower slabs apply. On the other hand, an employee retiring with ₹18,00,000 gratuity gets it fully exempt under either regime — that exemption is untouched.
Agricultural income continues to be exempt, but remember partial integration still applies: non-agricultural income is taxed at the rate that would apply if agricultural income were included, so it can push you into a higher slab.
Transition Tips
- Re-cost your salary structure. If you were structured heavily around HRA/LTA, that structuring only pays off in the old regime — re-run both.
- Keep rent proofs and travel bills if you claim HRA/LTA under the old regime; documentation requirements are unchanged.
- Retirement receipts are safe. Gratuity, leave encashment and PF planning need no regime worry for exemption.
- Watch the PF interest rule on employee contributions above the notified threshold — that taxability continues.