Section 10 Income Tax Exemptions: Complete List (2025–26)

Yes, agricultural income is fully exempt from income tax under Section 10(1) of the Income-tax Act. Agricultural income means income derived from land situated in India and used for agricultural purposes — including rent/revenue from such land, income from farming activities carried out on the land, and income from farmhouses attached to agricultural land (subject to conditions). However, the partial integration rule (sometimes called the clubbing of agricultural income) applies if a taxpayer has both agricultural income and non-agricultural income exceeding the basic exemption limit. In such cases, agricultural income is added to total non-agricultural income merely to determine the applicable tax rate slab (rate purpose only), and then tax on the agricultural income is backed out. This means that high-income taxpayers could end up paying a higher rate on their non-agricultural income because of large agricultural income, even though the agricultural income itself remains tax-free. Additionally, income from plantation activities like tea, rubber, or coffee involves a split between agricultural income (exempt) and business income (taxable) in prescribed proportions.

House Rent Allowance (HRA) exemption under Section 10(13A) is the least of three amounts: (1) Actual HRA received from employer; (2) Rent paid minus 10% of basic salary (plus DA forming part of salary); (3) 50% of basic salary if the employee lives in a metro city (Delhi, Mumbai, Kolkata, Chennai), or 40% of basic salary for non-metro cities. All three calculations must be done, and the lowest of the three figures is the exempt HRA. The remaining HRA, if any, is added to taxable salary. For example, if an employee in Mumbai earns ₹60,000/month basic, receives ₹25,000 HRA, and pays ₹20,000 monthly rent: (1) ₹25,000; (2) ₹20,000 − ₹6,000 = ₹14,000; (3) ₹30,000 (50% of ₹60,000). The exempt amount is ₹14,000/month. HRA exemption is not available under the New Tax Regime (Section 115BAC) from FY 2023-24 onwards. The employee must actually pay rent — residing in own house or not paying rent makes the entire HRA taxable.

Gratuity received by an employee is exempt under Section 10(10) subject to conditions. For government employees (central/state government, local authority, defence services): entire gratuity received is exempt — no cap. For private sector employees covered under the Payment of Gratuity Act, 1972: exempt amount is the least of (a) actual gratuity received, (b) ₹20 lakh (enhanced limit per 7th Pay Commission notification), or (c) 15 days salary based on last drawn salary for each completed year of service or part thereof exceeding 6 months. For private sector employees NOT covered under the Payment of Gratuity Act: exempt amount is the least of (a) actual gratuity, (b) ₹20 lakh, or (c) half-month average salary for each completed year of service. The ₹20 lakh exemption is a lifetime limit — if an employee has already claimed exemption on gratuity from a previous employer, only the remaining balance is available. Gratuity received during service (not on retirement/death/resignation) is fully taxable.

Public Provident Fund (PPF) maturity amount including interest is fully exempt under Section 10(11) — there is no ceiling on the exemption amount for PPF. Employees Provident Fund (EPF) maturity amount under Section 10(12) is exempt subject to important conditions: the employee must have completed at least 5 years of continuous service. If the employee withdraws before 5 years, the employer contribution, interest on employer contribution, and interest on employee contribution all become taxable as salary income. TDS at 10% is deducted under Section 192A on EPF withdrawals exceeding ₹50,000 before 5 years (Form 15G/15H can be submitted to avoid TDS if total income is below taxable limit). Budget 2021 introduced a new restriction: if an employee contributes more than ₹2.5 lakh to EPF in a financial year, the interest earned on the excess contribution is taxable from FY 2021-22. The ₹2.5 lakh threshold is per EPF account (not per employer). For NPS, Section 10(12A) exempts 60% of the lump sum withdrawn at retirement.

The New Tax Regime under Section 115BAC (default from FY 2024-25) comes with significantly lower tax rates but disallows most exemptions and deductions. The following Section 10 exemptions are NOT available under the New Tax Regime: Section 10(13A) — HRA exemption; Section 10(14) — Special allowances including transport allowance, children education allowance, hostel allowance; Section 10(17) — Constituency allowance for MPs/MLAs. However, several Section 10 exemptions remain available even under the New Tax Regime: Section 10(1) — agricultural income; Section 10(10) — gratuity (subject to limits); Section 10(10A) — commuted pension; Section 10(10AA) — leave encashment on retirement (₹25 lakh limit); Section 10(10D) — life insurance maturity (if policy qualifies); Section 10(11) — PPF maturity; Section 10(12) — EPF maturity (5 years service); Section 10(12A) — NPS 60% lump sum; Section 10(16) — scholarship; Section 10(23C) — income of educational institutions. Taxpayers should carefully compare the effective tax under both regimes before choosing.