Section 10 Exemptions —
Tax-Free Income List
Every major exemption under Section 10 of the Income-tax Act — agricultural income, gratuity, leave encashment, PPF interest, HRA, LTA and more — with the current limit and whether it survives in the new tax regime.
Section 10 lists income that is fully or partially exempt from income tax — it is deducted before your total income is taxed. Key items for FY 2025-26: agricultural income (10(1)) is fully exempt, gratuity up to Rs 20 lakh for private employees (10(10)), leave encashment up to Rs 25 lakh on retirement (10(10AA)), and PPF interest is fully exempt (10(11)). Most Section 10 exemptions continue under both regimes, but HRA (10(13A)) and LTA (10(5)) are NOT available in the new default regime.
Section 10 Exemptions — Master Table
The most-used clauses of Section 10, the current exemption limit for FY 2025-26 (AY 2026-27), and whether the exemption is available under the new (default) tax regime. The clause numbers are the familiar Income-tax Act 1961 references (the same reliefs are carried into the Income-tax Act 2025 from AY 2026-27).
| Clause | Income type | Exemption limit | New regime |
|---|---|---|---|
| 10(1) | Agricultural income (Indian land) | Fully exempt | Yes |
| 10(4) | NRE / FCNR account interest (NRI) | Fully exempt | Yes |
| 10(5) | Leave Travel Allowance (LTA) | 2 trips per 4-year block | No |
| 10(10) | Gratuity on retirement / death | Govt: unlimited · Private: Rs 20L | Yes |
| 10(10AA) | Leave encashment on retirement | Govt: unlimited · Private: Rs 25L | Yes |
| 10(10C) | VRS compensation | Rs 5L (once in lifetime) | Yes |
| 10(10D) | Life-insurance maturity proceeds | Exempt if premium ≤ 10% of SA | Yes |
| 10(11)/(12) | PPF, GPF & recognised PF | Fully exempt* | Yes |
| 10(13A) | House Rent Allowance (HRA) | Least of 3 (formula) | No |
| 10(14) | Uniform / conveyance / special allowances | Actual / notified limits | Mostly no |
| 10(15) | Tax-free bonds & PO savings interest | Rs 3,500 single / Rs 7,000 joint | Yes |
| 10(16) | Scholarship for education | Fully exempt | Yes |
| 10(17A) | Government award / reward | Fully exempt | Yes |
| 10(26) | ST member income in tribal areas | Fully exempt | Yes |
* PF interest is taxable to the extent employee contribution exceeds Rs 2.5L/year (Rs 5L where no employer contribution) — Section 10(11)/(12) read with the 2021 rules. Under the Income-tax Act 2025 these reliefs move to Schedule II/III but the amounts are unchanged.
Salary Exemptions Under Section 10
These are the Section 10 reliefs a salaried person claims most often. The catch for FY 2025-26: the new regime is now the default, and it withdraws HRA and LTA — but retirement reliefs like gratuity, leave encashment and VRS stay exempt in both regimes.
| Exemption | Clause | Limit / rule | Available in |
|---|---|---|---|
| Gratuity (private employee) | 10(10) | Least of Rs 20L, actual, or 15 days’ pay per year of service | Both regimes |
| Leave encashment (retirement) | 10(10AA) | Least of Rs 25L, actual, 10 months’ salary, or formula | Both regimes |
| VRS compensation | 10(10C) | Rs 5L, once in a lifetime | Both regimes |
| HRA | 10(13A) | Least of actual HRA / 50%—40% of salary / rent minus 10% salary | Old regime only |
| LTA | 10(5) | Domestic travel, 2 journeys in a 4-year block | Old regime only |
Govt employees: gratuity and leave encashment are fully exempt without the Rs 20L / Rs 25L caps.
If you are on the new (default) regime, you cannot claim HRA under 10(13A) or LTA under 10(5). Instead the new regime gives a flat standard deduction of Rs 75,000 and a rebate under Section 87A that makes income up to Rs 12 lakh tax-free. If your rent and travel exemptions are large, run both regimes before deciding.
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Get an ITR Expert →Section 10 Exemptions: New vs Old Regime
Not every Section 10 exemption behaves the same across regimes. Allowance-based reliefs (HRA, LTA, most 10(14) allowances) vanish in the new regime; income-source exemptions (agricultural income, gratuity, PPF, insurance maturity, scholarships) survive in both.
Old regime — all exemptions live
- HRA (10(13A)) claimable with rent proof
- LTA (10(5)) for 2 trips per 4-yr block
- Special allowances under 10(14)
- Standard deduction Rs 50,000
- Chapter VI-A deductions (80C, 80D…) allowed
New default regime — trimmed
- HRA & LTA withdrawn
- Most 10(14) allowances withdrawn
- Standard deduction Rs 75,000
- Rebate 87A up to Rs 12L taxable income
- Gratuity, leave encashment, PPF, agri still exempt
Agricultural Income & Partial Integration
Agricultural income from land in India is fully exempt under Section 10(1). But if you also have taxable income and your agricultural income exceeds Rs 5,000, it is used for rate purposes only (partial integration) — it pushes your other income into a higher slab even though it is not itself taxed.
Step 1 — tax on aggregate
Step 2 — tax on agri + exemption limit
Net tax on the other income = Step 1 minus Step 2 (before cess) = Rs 1,72,500 − Rs 22,500 = Rs 1,50,000. Figures are illustrative on old-regime slabs; integration does not apply if agricultural income is Rs 5,000 or less.
A Section 10 exemption reduces income, whereas a Chapter VI-A deduction (80C, 80D) reduces it too but is largely blocked in the new regime. Since gratuity, leave encashment and PPF exemptions survive both regimes, they rarely drive the regime choice — HRA, LTA and 80C usually do.
Life Insurance & PF Exemptions
- 10(10D): life-insurance maturity is exempt if the premium is ≤ 10% of the sum assured (policies from 1 Apr 2012). Death benefit is always exempt.
- ULIPs after 1 Feb 2021: if aggregate annual premium exceeds Rs 2.5 lakh, the maturity is not exempt and is taxed as capital gains under Section 112A (12.5% LTCG).
- Non-ULIP policies after 1 Apr 2023: exemption is lost if aggregate annual premium exceeds Rs 5 lakh (10(10D) proviso).
- 10(11)/(12): PPF interest is fully exempt; recognised PF interest is taxable to the extent employee contribution exceeds Rs 2.5 lakh/year (Rs 5 lakh where the employer does not contribute).
HRA Exemption Calculation (10(13A))
HRA exemption is the least of three: (1) actual HRA received; (2) 50% of basic salary in metros / 40% non-metro; (3) rent paid minus 10% of basic salary. Example — Delhi, basic Rs 50,000/month, HRA Rs 20,000, rent Rs 22,000:
The three HRA limits (per month)
Taxable HRA (per month)
This 10(13A) exemption is available only if you opt out of the new default regime. On the new regime the entire HRA is taxable, offset instead by the higher Rs 75,000 standard deduction and the Section 87A rebate.
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