Quick Answer
Section 10 of the Income-tax Act lists incomes that are fully exempt — they are never added to your total income. Key items: agricultural income (S.10(1)), HRA (S.10(13A)), LTA (S.10(5)), gratuity up to Rs20 lakh (S.10(10)), leave encashment up to Rs25 lakh (S.10(10AA)), PPF/EPF maturity (S.10(11)/(12)) and life-insurance maturity under conditions (S.10(10D)). Under the new tax regime (the default for AY 2026-27), most exemptions still apply — but HRA and LTA do not.
Agricultural income Exempt
Gratuity Rs20L
Leave encashment Rs25L
HRA / LTA (new regime) Removed
At a glance
Major Section 10 Exemptions — AY 2026-27
The most-used exemptions under Section 10, their limits, and whether they survive the new tax regime. Dividends and listed-equity LTCG are no longer exempt — they are taxed.
| Section | Income Type | Condition / Limit | New Regime? |
|---|---|---|---|
| 10(1) | Agricultural income from Indian land | No limit (partial integration if other income exists) | Exempt |
| 10(5) | Leave Travel Allowance (LTA) | Actual travel fare; 2 journeys in a 4-year block | Removed |
| 10(10) | Gratuity received | Up to Rs20 lakh (govt employees fully exempt) | Available |
| 10(10A) | Commuted pension (govt employees) | Fully exempt for government employees | Available |
| 10(10AA) | Leave encashment on retirement | Up to Rs25 lakh (non-govt); unlimited for govt | Available |
| 10(10D) | Life-insurance maturity proceeds | Premium within limits; death claim unlimited | Available |
| 10(11) | PPF maturity / withdrawal | No limit — fully exempt (EEE status) | Available |
| 10(12) | EPF withdrawal after 5 years of service | Exempt; taxable if withdrawn before 5 years | Available |
| 10(13A) | House Rent Allowance (HRA) | Min of: actual HRA / rent−10% basic / 50%–40% basic | Removed |
| 10(16) | Scholarship / stipend for education | Any amount — fully exempt | Available |
| 10(32) | Minor child income clubbed with parent | Rs1,500 per child, max 2 children | Available |
| 10(34) | Dividend from domestic companies | Withdrawn — dividends now taxed at slab rates | Taxable |
| 10(38) | LTCG on listed equity | Withdrawn — LTCG above Rs1.25L taxed at 12.5% | Taxable |
Exemption is different from a Chapter VI-A deduction (80C etc.). Section numbers follow the position under the Income-tax Act; verify limits on the official portal before filing.
The core question
Which Exemptions Survive the New Regime?
For AY 2026-27 the new tax regime is the default. It keeps most Section 10 exemptions but drops the two most popular salary perks — HRA and LTA — plus Chapter VI-A deductions. Compare the two on our old vs new regime calculator.
Kept
Still exempt under the new regime
- Standard deduction Rs75,000 (salary/pension)
- Gratuity (S.10(10)) & leave encashment (S.10(10AA))
- PPF / EPF maturity (S.10(11)/(12))
- Life-insurance maturity (S.10(10D))
- Employer NPS contribution (S.80CCD(2))
- Agricultural income, scholarships, VRS
vs
Gone
Not available under the new regime
- House Rent Allowance — HRA (S.10(13A))
- Leave Travel Allowance — LTA (S.10(5))
- 80C, 80D, 80E, 80G, 80TTA and other VI-A
- Home-loan interest on self-occupied house (S.24b)
- Professional tax deduction (S.16(iii))
- Most special allowances
Rebate makes tax nil up to Rs12 lakh
Under the new regime for AY 2026-27, the Section 87A rebate makes tax fully nil for resident individuals with taxable income up to Rs12,00,000. With the Rs75,000 standard deduction a salaried person pays no tax up to about Rs12.75 lakh — so many taxpayers no longer need HRA/LTA to reach zero tax.
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How HRA Exemption Is Calculated
HRA under Section 10(13A) is exempt to the least of three amounts — available only in the old regime and only if you actually pay rent. See the full method on our HRA exemption guide.
- Actual HRA received from the employer;
- Rent paid minus 10% of basic salary (plus DA, if it forms part of retirement pay);
- 50% of basic salary for metro cities (Delhi, Mumbai, Chennai, Kolkata) or 40% for non-metros.
HRA exempt (old regime)
Basic salary (year)Rs6,00,000
HRA receivedRs2,40,000
Rent paidRs2,88,000
Least of threeRs2,28,000
Exempt HRARs2,28,000
New regime treatment
HRA receivedRs2,40,000
HRA exemptionRs0
Standard deductionRs75,000
HRA taxableFull
HRA and LTA are gone in the new regime
If you opt for the new regime you cannot claim HRA (S.10(13A)) or LTA (S.10(5)) even if you pay rent or travel. Salaried taxpayers who rely heavily on HRA should run both regimes before choosing — file Form 10-IEA to opt out of the new regime if the old one is cheaper.
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Other Common Exempt Incomes
- PPF maturity (S.10(11)) — principal, interest and maturity are all tax-free (EEE). See tax on PPF.
- Gratuity (S.10(10)) — exempt up to Rs20 lakh for private employees; fully exempt for government staff. See tax on gratuity.
- Leave encashment (S.10(10AA)) — exempt up to Rs25 lakh on retirement for non-government employees. See leave encashment tax.
- Life-insurance maturity (S.10(10D)) — exempt where the premium is within the prescribed limit; death claims are always tax-free.
- Agricultural income (S.10(1)) — exempt, but aggregated for rate purposes if you have other income.
- Scholarships (S.10(16)) and minor child income (S.10(32), up to Rs1,500/child) — fully exempt.
- Agricultural income (S.10(1))
- Gratuity up to Rs20L (S.10(10))
- Leave encashment up to Rs25L (S.10(10AA))
- PPF / EPF maturity (S.10(11)/(12))
- LIC maturity within limits (S.10(10D))
- Scholarship / stipend (S.10(16))
- VRS up to Rs5L (S.10(10C))
- Employer NPS (S.80CCD(2))
TaxClue Insight
An exemption removes income from your total income entirely; a deduction (like 80C) only reduces taxable income. Since the new regime is the default and makes tax nil up to Rs12 lakh, the value of HRA/LTA exemptions has fallen for many salaried taxpayers — but they can still tip the balance in favour of the old regime for high-rent, high-80C profiles.
Government sourcesAct, rules & e-filing: incometax.gov.in · Section 10 exemptions and limits — Income-tax Act · Budget 2025: new-regime slabs & Section 87A rebate (nil tax up to Rs12L) · Leave encashment cap Rs25L — Notification u/s 10(10AA)
People also ask
Frequently Asked Questions
Section 10 Basics
What is Section 10 of the Income-tax Act?
Section 10 lists incomes that are completely exempt from income tax — they are not included in your total income at all, not merely deducted. It has more than 50 sub-clauses covering agricultural income (S.10(1)), HRA (S.10(13A)), LTA (S.10(5)), gratuity (S.10(10)), leave encashment (S.10(10AA)), PPF maturity (S.10(11)) and life-insurance maturity (S.10(10D)), among others.
What is the difference between an exemption and a deduction?
An exemption (Section 10) removes a specific income from your total income entirely, so it is never taxed. A deduction (Chapter VI-A, such as 80C or 80D) is subtracted from your taxable income after it is included. Exemptions relate to the type of income; deductions relate to how you spend or invest. Most Section 10 exemptions continue under the new regime, but Chapter VI-A deductions largely do not.
What incomes are fully tax-free in India?
Agricultural income, PPF maturity, gratuity up to Rs20 lakh, leave encashment up to Rs25 lakh (non-government), life-insurance maturity within premium limits and on death, scholarships, and minor child income up to Rs1,500 per child are among the fully exempt incomes. The exact treatment depends on the section and its conditions.
New vs Old Regime
Which exemptions are available in the new tax regime?
The new regime (default for AY 2026-27) keeps the Rs75,000 standard deduction, employer NPS contribution (S.80CCD(2)), gratuity (S.10(10)), leave encashment (S.10(10AA)), PPF/EPF maturity, life-insurance maturity (S.10(10D)), VRS up to Rs5 lakh, scholarships and agricultural income. It removes HRA, LTA and all Chapter VI-A deductions such as 80C and 80D.
Is HRA exemption available in the new tax regime?
No. HRA exemption under Section 10(13A) is not available in the new regime. It can be claimed only under the old regime, and only if you actually pay rent and do not own a house in the city where you work. If HRA is a large part of your package, compare both regimes before choosing.
Is LTA exemption available in the new tax regime?
No. Leave Travel Allowance exemption under Section 10(5) is not available under the new regime. It survives only in the old regime, where you can claim the actual travel fare for two journeys in a block of four calendar years. Significant LTA benefits are one reason some taxpayers still opt for the old regime.
How much income is tax-free under the new regime for AY 2026-27?
For resident individuals, the Section 87A rebate makes tax nil on taxable income up to Rs12,00,000 under the new regime. With the Rs75,000 standard deduction, a salaried person effectively pays no tax up to about Rs12.75 lakh. Above that, slab rates from 5% to 30% apply.
HRA
How much HRA is tax-free?
HRA exemption (Section 10(13A)) is the least of: (a) actual HRA received; (b) rent paid minus 10% of basic salary; and (c) 50% of basic salary for metro cities (Delhi, Mumbai, Chennai, Kolkata) or 40% for non-metros. This is available only under the old regime and only if you actually pay rent.
Can I claim HRA if I live in my own house?
No. HRA exemption requires that you actually pay rent for accommodation you occupy. If you live in a house you own, you cannot claim HRA exemption on the salary component even if the employer pays HRA — the HRA received becomes fully taxable in that case (old regime).
Gratuity, Leave & Retirement
Is gratuity tax-free?
Gratuity is exempt under Section 10(10). For government employees it is fully exempt. For other employees covered by the Payment of Gratuity Act, it is exempt up to Rs20 lakh (lifetime), with any excess taxable as salary. This exemption continues under both the old and new regimes.
How much leave encashment is tax-free?
Leave encashment received on retirement is fully exempt for government employees. For non-government employees the exemption under Section 10(10AA) is capped at Rs25 lakh (raised from Rs3 lakh in Budget 2023), computed on the least of the prescribed formulas. Leave encashment while in service is fully taxable.
Is PPF maturity amount tax-free?
Yes. PPF maturity proceeds are fully exempt under Section 10(11) — principal, accrued interest and the final maturity amount are all tax-free. PPF enjoys EEE status: the contribution qualifies for 80C (old regime), the interest is exempt each year, and the maturity is exempt. This holds under both regimes.
When is life-insurance maturity taxable?
Life-insurance maturity is exempt under Section 10(10D) only if the annual premium stays within the prescribed limit — 10% of the sum assured for policies issued on or after 1 April 2012 (20% for older policies). For ULIPs and traditional plans with high annual premiums issued after the Budget 2021 changes, the maturity is taxable as capital gains. Death claims are always tax-free regardless of premium.
Special Cases
Is agricultural income taxable in India?
Agricultural income from land in India is exempt under Section 10(1). However, if you also have non-agricultural income above the basic exemption limit, agricultural income above Rs5,000 is aggregated for the limited purpose of determining the tax rate on your other income — this is called partial integration. The agricultural income itself is still not taxed.
Is scholarship income taxable?
No. A scholarship granted to meet the cost of education is fully exempt under Section 10(16), with no upper limit and regardless of the source. This exemption applies under both the old and new regimes.
Are dividends still exempt under Section 10(34)?
No. The Section 10(34) exemption on dividends from domestic companies was withdrawn from FY 2020-21. Dividends are now taxable in the hands of the shareholder at their applicable slab rate, and TDS applies where the dividend exceeds the threshold. Similarly, the Section 10(38) exemption on listed-equity LTCG was withdrawn — such gains above Rs1.25 lakh are taxed at 12.5%.
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