Income Tax Exemptions · FY 2025-26
Section 10 Income-Tax
Exemptions — Full List
Every incomes-exempt clause under Section 10 — agricultural income, HRA, gratuity, leave encashment, PPF/EPF, NPS and LIC maturity — with the current limits and which ones survive the new tax regime.
Updated for AY 2026-27 CA reviewed Old vs New regime
40+Exempt categories
₹20LGratuity cap
₹25LLeave encashment cap
NilAgri income tax
Quick Answer
Section 10 lists incomes that are fully or partly exempt — they never enter your total income. Key exemptions: agricultural income (10(1)), HRA (10(13A)), gratuity up to ₹20 lakh (10(10)), leave encashment up to ₹25 lakh (10(10AA)), PPF/EPF maturity (10(11)/10(12)), NPS 60% lump sum (10(12A)) and scholarships (10(16)). HRA, LTA and most allowances apply only in the old regime; retirement and agri exemptions apply in both.
Agri income 10(1) Exempt
Gratuity 10(10) ₹20L
Leave 10(10AA) ₹25L
HRA 10(13A) Old only
New law — same familiar numbers
From tax year 2026-27, the Income-tax Act, 2025 relocates old Section 10 into Section 11 read with Schedules II–VII. The exemptions and limits below are unchanged — we keep the well-known "Section 10" clause numbers because that is how everyone (and every search) still refers to them.
Complete reference
Section 10 Exemptions — Full List with Limits
Every commonly-claimed Section 10 clause, the income it exempts, and the current limit or condition for FY 2025-26 (AY 2026-27).
| Clause | Exempt income | Limit / condition |
|---|---|---|
| 10(1) | Agricultural income | Fully exempt · partial integration for rate purposes if non-agri income exceeds the basic exemption |
| 10(2) | Share of profit from an HUF | Fully exempt in the member's hands |
| 10(2A) | Partner's share of firm/LLP profit | Fully exempt (firm already taxed) |
| 10(5) | Leave Travel Allowance / Concession | Actual travel cost within India; Old regime only |
| 10(10) | Gratuity on retirement/death | Govt: full. Private (Gratuity Act): least of actual / ₹20L / 15 days' salary per year |
| 10(10A) | Commuted pension | Govt: full. Private with gratuity: 1/3 of full value; without gratuity: 1/2 |
| 10(10AA) | Leave encashment on retirement | Govt: full. Private: least of actual / ₹25L / 10 months' avg salary / cash equivalent |
| 10(10B) | Retrenchment compensation | Least of actual or ₹5L |
| 10(10C) | VRS compensation | Up to ₹5L (once in a lifetime) |
| 10(10D) | Life-insurance maturity proceeds | Exempt if premium ≤ 10% of sum assured; policies after 1 Apr 2023 with premium >₹5L/yr (ULIP >₹2.5L) are taxable |
| 10(11) | PPF maturity & interest | Fully exempt — no ceiling |
| 10(12) | EPF / recognised PF maturity | Exempt after 5 years continuous service |
| 10(12A) | NPS lump sum at retirement | 60% of corpus exempt; 40% must buy an annuity |
| 10(12B) | NPS partial withdrawal | Up to 25% of own contribution |
| 10(13A) | House Rent Allowance (HRA) | Least of actual HRA / rent−10% salary / 50% (metro) or 40% (non-metro); Old regime only |
| 10(14) | Special allowances (transport, children education, etc.) | Prescribed per-head limits; mostly Old regime only |
| 10(15) | Interest on specified bonds/securities | Tax-free bonds, certain RBI/PSU securities (per notification) |
| 10(16) | Scholarship for education | Fully exempt — any amount |
| 10(17) | Constituency allowance of MPs/MLAs | Fully exempt; Old regime only |
| 10(18) | Pension of gallantry awardees | PVC, MVC, Vir Chakra and notified awardees — fully exempt |
| 10(23C) | Income of educational / medical institutions | Receipts ≤ ₹5cr exempt; larger institutions need approval |
| 10(34) | Dividend income | Exempt only up to FY 2019-20; dividends now taxable in the shareholder's hands |
| 10(37) | Compensation on compulsory acquisition of agri land | Fully exempt for individual/HUF (urban agri land) |
| 10(38) | LTCG on listed equity (old) | Only for gains before 1 Apr 2018; now taxed at 12.5% u/s 112A |
| 10(43) | Reverse-mortgage annuity | Amount received by a senior citizen — fully exempt |
| 10(46) | Specified income of statutory bodies | Notified authorities — exempt as per notification |
Limits are for FY 2025-26 / AY 2026-27. Under the Income-tax Act 2025 these map to Section 11 and Schedules II–VII from tax year 2026-27.
The key decision
Which Section 10 Exemptions Survive the New Regime?
The new tax regime under Section 115BAC is the default from FY 2023-24. It has lower slabs but drops most salary-linked exemptions. Retirement, savings and agri exemptions continue in both regimes.
Both
Available in old AND new regime
- Agricultural income — 10(1)
- Gratuity ₹20L — 10(10)
- Leave encashment ₹25L — 10(10AA)
- PPF / EPF maturity — 10(11) / 10(12)
- NPS 60% lump sum — 10(12A)
- LIC maturity (qualifying) — 10(10D)
- Scholarship — 10(16)
vs
Old
Old regime ONLY (lost in new)
- House Rent Allowance — 10(13A)
- Leave Travel Allowance — 10(5)
- Transport / children-education allowances — 10(14)
- Constituency allowance — 10(17)
- Most special allowances
- (New regime instead gives ₹75k standard deduction & rebate up to ₹12L taxable)
Don't claim HRA/LTA in the new regime
If you are on the default new regime, HRA (10(13A)), LTA (10(5)) and transport/children-education allowances (10(14)) cannot be claimed — the exemption is auto-disallowed. Compare both regimes with our income-tax calculator before deciding, because the new regime's ₹75,000 standard deduction and Section 87A rebate up to ₹12 lakh taxable income often outweigh the lost exemptions.
Not sure which regime saves you more with your allowances?
Talk to a Tax Expert →Most-claimed exemption
HRA Exemption under Section 10(13A)
HRA exemption is the least of three amounts — you must actually pay rent, and it is available only under the old regime:
- Actual HRA received from your employer
- Rent paid minus 10% of salary (basic + DA)
- 50% of salary in a metro (Delhi, Mumbai, Kolkata, Chennai) or 40% in a non-metro
Metro example — Mumbai
Actual HRA received₹25,000
Rent ₹20,000 − 10% of ₹60,000₹14,000
50% of ₹60,000 basic₹30,000
Exempt HRA (least)₹14,000
What stays taxable
HRA received₹25,000
Less: exempt HRA₹14,000
Taxable HRA₹11,000
Rent above ₹1 lakh/year needs the landlord's PAN. Living in your own house or paying no rent makes the entire HRA taxable. Use the HRA calculator for your exact figure.
Want your HRA and full salary exemptions optimised in your ITR?
File with a CA →Retirement & savings
Gratuity, Leave Encashment, PF & NPS
The big retirement exemptions apply under both tax regimes, each with its own cap:
| Benefit | Clause | Exemption |
|---|---|---|
| Gratuity (private, Gratuity Act) | 10(10) | Least of actual / ₹20L / 15 days' salary per completed year |
| Leave encashment (private, on retirement) | 10(10AA) | Least of actual / ₹25L / 10 months' avg salary / cash equivalent of unavailed leave |
| PPF maturity & interest | 10(11) | Fully exempt — no ceiling |
| EPF maturity | 10(12) | Exempt after 5 years service; taxable if withdrawn earlier |
| NPS lump sum at retirement | 10(12A) | 60% of corpus exempt |
The ₹20L gratuity and ₹25L leave-encashment caps are lifetime limits across employers.
EPF: the 5-year and ₹2.5L traps
Withdraw EPF before 5 years of continuous service and the accumulation is taxable, with TDS at 10% u/s 192A on withdrawals over ₹50,000. Separately, interest on your own EPF contribution above ₹2.5 lakh in a year is taxable. See tax on EPF withdrawal for the full picture.
Retiring or switching jobs this year? Get your exempt benefits computed correctly.
Get Expert Help →Government sourcesAct & e-filing: incometax.gov.in · Leave-encashment ₹25L: CBDT Notification 31/2023 (eff. 1 Apr 2023) · Gratuity ₹20L: S.O. 1420(E), Payment of Gratuity Act · New law: Income-tax Act 2025 — Section 11 & Schedules II–VII (tax year 2026-27)
People also ask
Frequently Asked Questions
Basics
What is Section 10 of the Income-tax Act?
Section 10 lists incomes that are exempt from income tax — they are not included in your total income at all. It covers over 40 categories, including agricultural income, HRA, gratuity, leave encashment, PPF/EPF maturity, NPS lump sum, life-insurance proceeds, scholarships and dividends declared before FY 2019-20. Some exemptions are unconditional (like agricultural income and PPF) while others carry limits or conditions (like HRA and gratuity).
Does Section 10 still exist under the new Income-tax Act 2025?
The exemptions continue, but from tax year 2026-27 (1 April 2026) they are relocated from Section 10 of the 1961 Act into Section 11 read with Schedules II to VII of the Income-tax Act, 2025. The categories, limits and conditions are unchanged. Because taxpayers and searches still refer to the familiar clause numbers (10(10), 10(13A), etc.), we keep using them here.
What is the difference between Section 10 exemptions and Chapter VI-A deductions?
Section 10 incomes are exempt — they never enter total income. Chapter VI-A deductions (80C, 80D, etc.) are subtracted from gross total income after it is computed. Another difference: most Section 10 exemptions and most Chapter VI-A deductions are unavailable in the default new regime, but retirement-related Section 10 exemptions (gratuity, leave encashment, PF, NPS) survive in both regimes.
Agricultural income
Is agricultural income really 100% exempt under Section 10(1)?
Yes. Income derived from land situated in India and used for agriculture — rent or revenue from the land, income from farming, and income from a farmhouse attached to agricultural land — is fully exempt under Section 10(1). However, the partial-integration rule applies: if you have both agricultural income above ₹5,000 and non-agricultural income above the basic exemption limit, the agricultural income is added only to fix the applicable tax rate slab, then tax on it is backed out. So agricultural income can push the rate on your other income higher, even though it stays tax-free.
HRA & allowances
How is the HRA exemption under Section 10(13A) calculated?
HRA exemption is the least of three amounts: (1) actual HRA received; (2) rent paid minus 10% of salary (basic + DA); and (3) 50% of salary in a metro (Delhi, Mumbai, Kolkata, Chennai) or 40% in a non-metro. You must actually pay rent to claim it, and landlord PAN is needed if annual rent exceeds ₹1 lakh. HRA exemption is available only under the old regime — it cannot be claimed in the default new regime.
Can I claim HRA under the new tax regime?
No. HRA exemption under Section 10(13A) is disallowed in the default new regime (Section 115BAC) from FY 2023-24. The same applies to LTA (10(5)) and most special allowances (10(14)). If HRA is a large part of your package, compare both regimes — the old regime with HRA may beat the new regime's lower slabs, ₹75,000 standard deduction and Section 87A rebate.
What special allowances are exempt under Section 10(14)?
Section 10(14) exempts specified allowances granted to meet duties or personal expenses, subject to prescribed limits — for example children education allowance (₹100/month/child, up to two children), hostel allowance (₹300/month/child), and certain travel/transfer/uniform allowances. Most of these are available only in the old regime; the transport allowance for a specially-abled employee is one that continues in the new regime.
Retirement benefits
What is the gratuity exemption limit under Section 10(10)?
For government employees, gratuity is fully exempt. For private-sector employees covered by the Payment of Gratuity Act, the exemption is the least of: actual gratuity received, ₹20 lakh, or 15 days' salary (last drawn) for each completed year of service. For those not covered by the Act, it is the least of actual gratuity, ₹20 lakh, or half-month average salary per completed year. The ₹20 lakh is a lifetime limit across employers, and gratuity applies in both tax regimes.
What is the leave encashment exemption limit under Section 10(10AA)?
Government employees get full exemption. For non-government employees, leave encashment received on retirement is exempt up to the least of: actual amount, ₹25 lakh (raised from ₹3 lakh with effect from 1 April 2023), 10 months' average salary, or the cash equivalent of unavailed leave (capped at 30 days per completed year of service). The ₹25 lakh is a lifetime limit, and it applies under both the old and new regimes. Leave encashment while still in service is fully taxable.
When is EPF or PPF maturity exempt under Section 10(11) and 10(12)?
PPF maturity, including interest, is fully exempt under Section 10(11) with no ceiling. EPF maturity is exempt under Section 10(12) only after 5 years of continuous service; if you withdraw earlier, the accumulation is taxable and TDS at 10% applies under Section 192A on amounts over ₹50,000. Separately, since FY 2021-22, interest on your own EPF contribution exceeding ₹2.5 lakh in a year is taxable. Both exemptions apply in either tax regime.
How much of the NPS lump sum is exempt under Section 10(12A)?
On retirement or reaching 60, up to 60% of the NPS corpus withdrawn as a lump sum is exempt under Section 10(12A); the remaining 40% must be used to buy an annuity, whose pension is taxable as it is received. A partial withdrawal of up to 25% of your own contribution during the accumulation phase is exempt under Section 10(12B). Both exemptions apply in the old and new regimes.
Other exemptions
Is life-insurance maturity exempt under Section 10(10D)?
Maturity proceeds are exempt if the annual premium never exceeded 10% of the sum assured (for policies issued after 1 April 2012). Two caps override this: for non-ULIP policies issued on or after 1 April 2023, if aggregate annual premium exceeds ₹5 lakh the maturity is taxable; for ULIPs issued on or after 1 February 2021, if premium exceeds ₹2.5 lakh the gains are taxed as capital gains under Section 112A. The death benefit is always fully exempt, regardless of premium.
Is scholarship income taxable?
No. Any scholarship granted to meet the cost of education is fully exempt under Section 10(16) — there is no monetary ceiling, and it applies whether the scholarship comes from the government, a private trust, an employer or a foreign institution, as long as it is genuinely used for education. This exemption continues in both the old and new regimes.
Is dividend income still exempt under Section 10(34)?
No, not anymore. Dividends were exempt in the shareholder's hands only up to FY 2019-20, when the company paid Dividend Distribution Tax. From FY 2020-21, dividends are taxable in the shareholder's hands at slab rates, and the company deducts TDS at 10% under Section 194 on dividends above ₹5,000 a year.
Old vs new regime
Which Section 10 exemptions are lost in the new tax regime?
The default new regime disallows HRA (10(13A)), LTA (10(5)), constituency allowance (10(17)) and most special allowances (10(14)). Exemptions that continue in both regimes include agricultural income (10(1)), gratuity (10(10)), leave encashment (10(10AA)), commuted pension (10(10A)), PPF/EPF maturity (10(11)/10(12)), NPS lump sum (10(12A)), qualifying LIC maturity (10(10D)) and scholarships (10(16)). Instead of the lost exemptions, the new regime offers a ₹75,000 standard deduction and a Section 87A rebate making income up to ₹12 lakh tax-free.
Should I choose the old or new regime for Section 10 exemptions?
It depends on how much you claim. If HRA, LTA and Chapter VI-A deductions (80C, 80D, home-loan interest) together are large, the old regime often wins. If you claim few exemptions, the new regime's lower slabs, ₹75,000 standard deduction and rebate up to ₹12 lakh taxable income usually give a lower tax. Run both through an income-tax calculator or ask a CA — the choice can be revisited each year for salaried taxpayers.
Done-for-you
Related TaxClue Services
Income Tax Return FilingCA-assisted ITR that captures every Section 10 exemption you're entitled to.Explore →Old vs New Regime AdvisoryFind the regime that keeps more exemptions working for you.Explore →HRA & Salary StructuringCompute your exact HRA exemption and optimise your salary.Explore →Gratuity ComputationWork out your exempt gratuity under Section 10(10) instantly.Explore →
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