According to Section 10 of the Income Tax Act 1961, the salaried employees are entitled to enjoy the tax exemption. The objective of section 10 of the Income Tax Act is to reduce the burden of the different structure of the tax such as rent allowance, allowance for children education, travel allowance, gratuity and so on. This article will help you understand all the tax exemptions that will ultimately broaden the ways of appreciation on tax.
There are various types of incomes that are entitled to exemptions under section 10 of the Income Tax Act.
There are certain kinds of allowances that are considered special allowances under this section of the Income Tax Act, 1961. These special allowances are mentioned below for further understanding:
There are several advantages under this section. Let check out the allowances that are given to the beneficiary.
According to the section of 10(2), those who earn the income of HUF are entitled to get tax exemption. Please go through the given illustration for better understanding:
Example: Suppose Rs.100, 000 is earned by a HUF member during the previous session of 2017-18 and he is not entitled to give the tax. Now, Mr X is the co-partner of the HUF member who has earned Rs.20, 000 which will be considered as his individual income. In addition to that, Mr X has also received Rs.40, 000 from HUF.
Here, in this case, Mr.X will pay tax on his individual earning but is not entitled to pay tax on the income which is earned by him on the amount given to him by the HUF member.
There are several benefits that are enjoyed by the partner of a firm. Let’s go through the benefits offered under this section.
Those who are non-resident Indian are entitled to enjoy the exemption on tax on the certain condition such as earnings on bonds or account of NRE in the individual taxpayer’s hands.
Sometimes, the employers pay taxes for the perquisites of non-monetary on behalf of their employees. In that case, the paying of the tax by the employer will be treated as the exemption from tax in employees’ hands.
Whatever, the citizen of India earns on the sum of the LIC policy will be entitled to enjoy the tax benefits under this section of the Income Tax Act. There are some criteria to receive the benefit of the sum of the insurance.
Any sum is received of the statutory provident fund relating to the contribution, amount and interest on his termination from the company or firm will be exempted.
The employee is entitled to enjoy the exemption on tax over receiving the compensation for natural disaster from central government.
The salaried employees are entitled to receive the allowance on rent of the house which is exempted from tax.
The exemption of the special allowance under the 10(14) can be classified into 2 parts.
Under the section of 10(14), the exemption should be granted on the expenditure of government employee for a special purpose.
The allowance of travel is given to the government employee for transferring him or her to the new location within the country on duty. While the employee on tour, the allowance is exempted from tax under this section of the income tax act.
The employees can receive the daily allowance to meet the charges which take place on daily basis. Such type of allowance is given when the employee is not in his actual place of duty.
Those employees who need to maintain its uniform while on duty can receive the uniform allowance.
The allowance granted for aiming the encouragement for research, vocational training is considered the research or academic allowance.
For most of the cases, the employees are not liable to submit the necessary documentation relating to the exemption of the tax on the allowance.
The allowance is granted under this section of this income tax act, to the employees who are serving under the several sets of conditions on duty. Let’s check out the kinds of allowances that are exempted from tax.
(those who are working in hilly regions of the country):
Those who are working in the tribal parts of West Bengal, Karnataka, MP, Odisha, Tamil Nadu, UP, Bihar and Tripura, would receive Rs.200 as allowance.
Those who are working in the remote areas or the disturbed areas of the country would be entitled to receive the allowance ranging between Rs.200 to Rs.1300. This allowance is exempted under the rule of 2BB.
The allowance of Rs.100 per month is given to the government employee for the education of each child. This allowance is given to those who have a maximum of 2 children.
Army members who are serving the nation at the height of ranging between 9000-15000ft should get the allowance of Rs.1060 per month and those who posted on the height of above 15000ft should get Rs.1600 per month.
Those who are working for the central government project in underground mines is entitled to receive Rs. 800 per month.
Under this section of the Income tax act, those who are working for the government is entitled to enjoy the allowance of Rs. 1600 per month while on duty and need to travel for the government assignment.
Those who are working as an armed force in Lakshadweep and Andaman & Nicobar island are entitled to receive the allowance of 3250 per month.
Those who earn the income from interest are exempted as per the rules of section 10(15). The below-mentioned table will show the exact details which come under the sheds of this section of the Income tax act.
Section |
Income |
Exemption to |
10(15)(i) |
The exemption would be availed on the interest, redemption or the premium on bonds, securities, deposits and certificates which are subject to some conditions and limitations. |
All assesses |
10(15)(iib) |
Interest on the bonds of Capital Investment which should be notified before the date of 1-6-2002 |
HUF/Individual |
10(15)(iic) |
Interest on Relief bonds |
HUF/Individual |
10(15)(iid) |
Interest on declared bonds (which should be declared before 1-6-2002) and should be bought in foreign exchange which must be subject to some limitations and conditions. |
NRI-Individual/NRI gift the bonds to the individual. |
10(15)(iii) |
Securities’ interest |
Issue department under the central bank of Ceylon |
10(15)(iiia) |
The interest on deposits with the scheduled bank with the approval from RBI |
Incorporation of bank Abroad |
10(15)(iiib) |
Paying of interest to Nordic Investment Bank |
Nordic Investment Bank |
10(15)(iiic) |
In the execution of an agreement which takes place on 25-11-1993, the interest is payable to the European Investment Bank for granting of the loan by it between that bank and the central government. |
European Investment Bank |
10(15)(iv)(a) |
Receiving the interest from the local authority or the government on money lent to it prior to 1-6-2001 |
All the assess which have committed to lent on money from sources outside the nation. |
10(15)(iv)(b) |
Under the agreement of loan, received the interest from the industrial undertaking in India prior to 1-6-2001. |
Approved the financial institution of foreign nations. |
10(15)(iv)(c) |
Receiving the interest on a certain rate from the industrial undertaking of India on debt or lent prior to the date of 1-6-2001 in a foreign nation for the purpose of purchasing the capital plant, raw materials and machinery within certain limitations and conditions. |
All the assesses who have committed to lent such cash. |
10(15)(iv)(d) |
Receiving the interest prior to 1-6-2001 at an approved rate from certain financial institutions on lending of money in India |
All the assess which have committed to lent on such money |
10(15)(iv)(e) |
Receiving the interest at an approved rate from country’s financial institutions on lending of money from outside India prior to 1-6-2001 under the certain loan agreement |
All the assess which have committed to lent on such money. |
10(15)(iv)(h) |
Receiving of the interest from any company concerning for approved debentures or bonds. |
All assesses |
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