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Exempt Income List — Section 10 Exemptions under Income Tax

Updated: 3 June 2026

India's Income-tax Act carves out over 50 types of income that are fully or partially exempt from tax under Section 10. From agricultural income and PPF interest to HRA and gratuity — knowing what's exempt can significantly reduce your tax outgo.

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Types of income exempt from tax under Section 10 of the Income-tax Act 2025. Key exemptions include agricultural income, PPF interest, gratuity up to ₹20L, and life insurance proceeds.

Major Section 10 Exemptions at a Glance

Section 10 of the Income-tax Act lists incomes that do not form part of total income. Below are the most relevant exemptions for individual taxpayers:

Section	Income Type	Exemption Limit	Key Conditions
10(1)	Agricultural income	Fully exempt	Land must be situated in India; partial integration rule applies if other income > basic exemption
10(4)	NRE account interest	Fully exempt	Only for Non-Resident Indians (NRIs); account must be NRE type
10(10)	Gratuity on retirement/death	Up to ₹20 lakh (private); unlimited (govt)	Private sector: min of actual, ₹20L, or 15/26 × salary × years
10(10AA)	Leave encashment on retirement	Up to ₹25 lakh (private); unlimited (govt)	Private: min of actual, ₹25L, 10 months avg salary, or cash equivalent of earned leave
10(10C)	VRS compensation	Up to ₹5 lakh	Voluntary Retirement Scheme from specified employers; one-time in lifetime
10(10D)	Life insurance maturity	Fully exempt (if conditions met)	Premium must be ≤10% of sum assured (post-April 2012); ULIP >₹2.5L/yr premium — taxable if issued after Feb 2021
10(11)	PPF interest	Fully exempt	No limit; includes both interest and maturity proceeds
10(13A)	HRA (House Rent Allowance)	Formula-based	Old regime only; min of actual HRA, rent–10% salary, 40%/50% salary
10(14)	LTA (Leave Travel Allowance)	Actual travel cost	Only for domestic travel; two journeys in 4-year block; economy class or AC rail fare
10(15)	Post office savings interest	₹3,500 (single) / ₹7,000 (joint)	Only for post office savings account; not applicable to FDs or other post office schemes
10(23)	Income of charitable/religious trusts	Fully exempt	Trust must be registered under Section 12A/12AB; income must be applied for charitable purposes
FCNR	FCNR deposit interest	Fully exempt	Foreign Currency Non-Resident (Bank) deposits; only for NRIs; exempt while NRI status holds

Section 10(10D) — Life Insurance: When Is Maturity Taxable?

Life insurance maturity is tax-free only when the annual premium stays within prescribed limits. Here's how the rules apply by policy issue date:

Policy Issued	Premium Threshold	Tax Treatment on Maturity
Before 1 April 2003	No restriction	Fully exempt under 10(10D)
1 Apr 2003 – 31 Mar 2012	≤20% of sum assured	Exempt; else fully taxable
1 Apr 2012 onwards	≤10% of sum assured	Exempt; else fully taxable
ULIP after 1 Feb 2021	Annual premium ≤₹2.5L	Exempt; above ₹2.5L — taxable as LTCG at 12.5%
Traditional policy after 1 Apr 2023	Annual premium ≤₹5L	Budget 2023 change: above ₹5L aggregate premium — taxable
Death claim (any)	No restriction	Always fully exempt under 10(10D)

Old vs Current Rules — Exemptions No Longer Applicable

Two high-profile Section 10 exemptions have been withdrawn over the years. Taxpayers often confuse old rules with current law:

Section 10(34) — Dividend exemption: Prior to FY 2020-21, dividends up to ₹10 lakh were exempt in the hands of investors (companies paid Dividend Distribution Tax). This was abolished from 1 April 2020. Dividends are now fully taxable at slab rates in the recipient's hands.
Section 10(38) — LTCG on equity: Long-term capital gains on listed shares and equity mutual funds were fully exempt until 31 March 2018. From FY 2018-19, LTCG above ₹1 lakh was taxed at 10%. Budget 2024 revised this to: LTCG on equity above ₹1.25 lakh taxed at 12.5% (effective 23 July 2024).

Frequently Asked Questions

Is agricultural income taxable in India?

No. Agricultural income derived from land situated in India is fully exempt from income tax under Section 10(1) of the Income-tax Act. This includes income from cultivation, rent from agricultural land, and income from farm buildings. However, for individuals with non-agricultural income exceeding the basic exemption limit, agricultural income is included for rate determination purposes (called "partial integration" or "aggregation method"), which can push the applicable tax rate higher even though the agricultural income itself remains untaxed.

Is PPF interest taxable in India?

No. Interest earned on Public Provident Fund (PPF) is completely exempt from income tax under Section 10(11). PPF enjoys triple tax exemption (EEE status): contributions qualify for Section 80C deduction (up to ₹1.5L), interest earned is tax-free, and the maturity amount is also fully exempt. This makes PPF one of the most tax-efficient long-term savings instruments available to Indian residents. The annual investment limit is ₹1.5 lakh and the lock-in period is 15 years.

What is the gratuity exemption limit under Section 10(10)?

For government employees, gratuity received on retirement or death is fully exempt with no upper limit. For private sector employees covered by the Payment of Gratuity Act, the exemption is the minimum of: (a) actual gratuity received, (b) ₹20 lakh (the statutory cap), or (c) 15/26 × last drawn salary × years of completed service. For private employees not covered by the Act, the formula uses half month's average salary of the last 10 months × years of service, with the same ₹20 lakh ceiling. The ₹20 lakh limit applies across all employers in a lifetime.

Is life insurance maturity amount taxable?

Life insurance maturity proceeds are exempt under Section 10(10D) provided the annual premium does not exceed 10% of the sum assured for policies issued on or after 1 April 2012 (20% for policies issued before that date). If the premium exceeds these thresholds, the maturity amount is fully taxable as income. For ULIPs issued after 1 February 2021, if the annual premium exceeds ₹2.5 lakh, the maturity proceeds are taxable as capital gains. Death claims are fully exempt in all cases regardless of premium-to-sum-assured ratio.

Is HRA exemption available in the new tax regime?

No. HRA (House Rent Allowance) exemption under Section 10(13A) is not available if you opt for the new tax regime. The HRA exemption is an old-regime-only benefit. Under the new regime, HRA received from your employer is fully taxable as salary. If you pay significant rent and receive a large HRA component, this is one of the key reasons many salaried employees find the old regime more beneficial. The exemption under old regime is the minimum of: actual HRA received, rent paid minus 10% of salary, or 40%/50% of salary (non-metro/metro).

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