section 194DA
Section 194DA – TDS Deductions on Insurance Policies
May 7, 2018
section 194ia
What is Section 194IA
May 7, 2018

Income tax provides a long list of exempted Incomes under section 10. Includes House Rent allowances, Leave Travel Concession, Uniform allowances, Education Allowances and many more. This guide by H&R Block explains all the exemptions available in detailed.

List of Exemptions under Section 10 of Income Tax Act

Last Update Date : July 23, 2018

Exemptions on income under section 10

As the saying goes “Good Things comes in small packages”, exemptions are those small packages which can make your life less taxing barring the fact that you know about those exemptions. Income Tax under section 10, provides a long list of exemptions especially for the salaried employees to reduce the burden of taxing such as House Rent allowances, Children Education Allowance, Hostel Allowance, Gratuity, Leave Travel Allowances and goes on…

Income exempt u/s 10

There are certain types of incomes which are fully exempt from Income tax as per section 10.

Special Allowance Exemption u/s 10(14)

In the Income tax Act, there are cetain allowances which are characterised as special allowances and they are fully exempt from tax. Such allowances are listed below:

  • Allowances granted to High Court Judges
  • Allowance given to a UNO employee
  • Sumptuary allowance received by Supreme Court and High Court judge
  • Allowances granted to government employees who are Indian citizens, working abroad

Section 10(1) – Agriculture Income Exemption

  • As per section 10(1), agricultural income earned by the taxpayer in India is exempt from tax. Any rent or revenue derived from land used for agricultural purposes or agricultural produce to sell in the market.
  • Any income from farm house subject to certain satisfactory conditions specified in section 2(1A) would be exempt.

Section 10(2) – Amount received by a member of the HUF from the income of the HUF, or in case of impartible estate out of income of family estate

  • As per section 10(2), amount received out of family income, or in case of impartible estate, amount received out of income of family estate by any member of such HUF is exempt from tax.
  • Example-1. HUF earned ` 5, 00,000 during the previous year and paid tax on its income. Mr A, a co-partner is an employee and earns a salary of ` 20,000 p.m. During the previous year Mr A also received ` 1, 00,000 from HUF. Mr A will pay tax on his salary income but any sum of money received from his HUF is not chargeable to tax in Mr A’s hands.
  • Example-2. HUF earned ` 90,000 during the previous year 2016-17 and it is not chargeable to tax. Mr A, a co-partner is earning individual income of Rs 20,000 p.m. Besides his individual income, Mr A receives ` 30,000 from his HUF
  • Mr A will pay tax on his individual income but any sum of money received by him from his HUF is not chargeable to tax in the hands of co-parcener whether the HUF has paid tax or not on that income.

Section 10(2a) – Share of profit from Partnership Firm

  • As per section 10(2A), share of profit received by a partner from a firm is exempt from tax in the hands of the partner.
  • Further, share of profit received by a partner of LLP from the LLP will be exempt from tax in the hands of such partner.
  • This exemption is limited only to share of profit and does not apply to interest on capital and remuneration received by the partner from the firm/LLP.

Section 10(4) of Income Tax Act – Certain Interest to Non-Residents

Any income earned by way of interest on certain notified securities or bonds (income by way of premium on the redemption of such bonds) or NRE account in the hands of individual taxpayer, is exempt from tax.

Section 10(4)(ii) – Interest to Non-Resident on Non-Resident (External) Account

  • Any income by way of interest on money standing to his credit in a Non-Resident (External) Account in any bank in India shall be exempt from tax in case of an individual;
  • Who is a person resident outside India or is a person who has been permitted by the RBI to maintain the aforesaid account.
  • The person residing outside India shall have the same meaning as defined under Foreign Exchange Regulation Act, 1973, FEMA, 1999.
  • This exemption shall not be available on any income by way of interest paid or credited on or after 1-4-2005.

Section 10(5) – Leave Travel Concession

  • An employee can claim exemption under section 10(5) in respect of Leave Travel Concession.
  • Exemption under section 10(5) is available to all employees (i.e. Indian as well as foreign citizens).
  • Exemption is available in respect of value of any travel concession or assistance received or due to the employee from his employer (including former employer) for himself and his family members in connection with his proceeding on leave to any place in India.

Section 10(6) – Remuneration received by an individual who is not a citizen of India

  • Such individuals include ambassadors or other officials of the Embassy, High Commission or Legation of a foreign State in India, Consulate Officer of a foreign State in India and trade commissioner or other official representatives in India of a foreign State
  • The remuneration received an employee of a foreign enterprise for services rendered in India, provided:
    (a) The foreign enterprise is not engaged in any trade or business in India;
    (b) His stay in India does not exceed in the aggregate a period of 90 days in such previous year; and
    (c) Such remuneration is not liable to be deducted from the income of the employer chargeable under this Act

Section 10(7) of the Income Tax Act – Perquisites and Allowances paid by Government to its Employees serving outside India

  • All the perquisites and allowances paid by the Government to its employees for services rendered outside India are exempt from tax.
  • This exemption is allowed only to such employees of the Government who are citizens of India.

Section 10(10CC)- Tax on Perquisites paid by employer

  • Sometimes for non-monetary perquisites employer pay tax on behalf of employee in that case the tax so paid by the employer is treated as exempt in the hands of the employee.

Section 10(10d) – LIC Tax Exemption

Any sum received under a life insurance policy is fully exempt in the following cases:

  • If any sum received from insurance company on insurance of a dependent handicapped member [under subsection (3) of section 80DD].
  • If any sum received from insurance company when a dependent, or a member of family is suffering from a notified disease [under subsection (3) of section 80DDA].
  • Any sum received under a key man insurance policy.
  • Any other policy (not being the case when sum received on the death of a person).
     Policy issued before April 1st, 2003 –Exemption available, nothing is chargeable to tax.
     Policy issued on or after April 1st, 2003 but before April 1st, 2012 – Exemption available only when annual premium payable exceeds 20% of sum assured.
     Policy issued on or after 1st April 2012 – Exemption available only when annual premium payable exceeds 10% of sum assured.
     Policy issued on or after April 1st, 2013 for a disabled person referred to in section 80U or a person with disease or ailment specified in section 80DDB – Exemption available only when annual premium payable exceeds 15% of sum assured.
  • Any other policy (sum received on the death of a person) – exemption available, nothing is chargeable to tax.

Section 10(11) of Income Tax Act – Payment from Statutory Provident Fund

Any payment received on statutory provident fund related to employer’s contribution, interest, amount received on termination will be exempted.

 Section 10(15) – Interest income exempt from tax

Interest incomes which are exempt under section 10(15) could be explained with the help of the following table:

Section Income Exemption to
10(15)(i) Interest, premium on redemption, or other payment on notified securities, bonds, certificates, and deposits, etc. (subject to notified conditions and limits) All assesses
10(15)(iib) Interest on notified Capital Investment Bonds notified prior to 1-6-2002 Individual/HUF
10(15)(iic) Interest on notified Relief Bonds Individual/HUF
10(15)(iid) Interest on notified bonds (notified prior to 1-6-2002) purchased in foreign exchange (subject to certain conditions) Individual – NRI/ nominee or survivor of NRI / individual to whom bonds have been gifted by NRI
10(15)(iii) Interest on securities Issue Department of Central Bank of Ceylon
10(15)(iiia) Interest on deposits made with scheduled bank with approval of RBI Bank incorporated

Abroad

10(15)(iiib) Interest payable to Nordic Investment Bank Nordic Investment Bank
10(15)(iiic) 10(15)(iiic) Interest payable to the European Investment Bank on loan granted by it in pursuance of framework agreement dated 25-11-1993 for financial corporation between Central Government and that bank European Investment bank
10(15)(iv)(a) Interest received from Government or from local authority on moneys lent to it before 1-6-2001 or debts owed by it before 1-6-2001, from sources outside India All assessees who have lent money, etc., from sources outside India
10(15)(iv)(b) Interest received from industrial undertaking in India on moneys lent to it under a loan agreement entered into before 1-6-2001 Approved foreign financial institution
10(15)(iv)(c) Interest at approved rate received from Indian industrial undertaking on moneys lent or debt incurred before 1-6-2001 in a foreign country in respect of purchase outside India of raw materials, components or capital plant and machinery, subject to certain limits and conditions All assessees who have lent such money, or in favour of whom such debt has been incurred
10(15)(iv)(d) Interest received at approved rate from specified financial institutions in India on moneys lent from sources outside India before 1-6-2001 All assessees who have lent such moneys
10(15)(iv)(e) Interest received at approved rate from other Indian financial institutions or banks on moneys lent for specified purposes from sources outside India before 1-6-2001 under approved loan agreement All assessees who have lent such moneys
10(15)(iv)(f) Interest received at approved rate from Indian industrial undertaking on moneys lent in foreign currency from sources outside India under loan agreement approved before 1-6-2001 All assessees who have lent such moneys
10(15)(iv)(fa) Interest payable by scheduled bank, on deposits in foreign currency when acceptance of such deposits by bank is approved by RBI Non-resident or individual/HUF who is not ordinarily resident in India
10(15)( iv)(g) Interest received at approved rate, from Indian public companies eligible for deduction under section 36(1)(viii) and formed with main object of providing long-term housing finance, on moneys lent in foreign currency from sources outside India under loan agreement approved before 1-6-2003 All assessees who have lent such moneys
10(15)( iv)(h) Interest received from any public sector company in respect of notified bonds or debentures and subject to certain conditions All assesses
10(15)( iv)(i) Interest received from Government on deposits in notified scheme out of moneys due on account of retirement Individual –Employee of Central Government/ State Government/Public sector company
10(15)(v) Interest on securities held in Reserve Bank’s SGL A/c No. SL/DH-048 and Deposits made after 31-3-1994 for benefit of victims of Bhopal Gas Leak Disaster held in such account with RBI or with notified public sector bank Welfare Commissioner, Bhopal Gas Victims, Bhopal
10(15)(vi) Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 All assesses
10(15)(vii) 10(15)(vii) Interest on notified bonds issued by a local authority/State Pooled Finance Entity All assesses
10(15)(viii) Interest on deposit made on or after 1-4-2005 in an Offshore Banking Unit referred to in section 2(u) of the Special Economic Zones Act, 2005 Non-resident or person who is not ordinarily resident

Section 10(16) – Stipend Scholarship

  • Scholarship is free education to students. It covers the cost of education like tuition fees and other related expenses.
  • The scholarship may have been given by Govt., University, Board, Trust, etc. is exempt to the fullest amount.

Section 10(18) of Income Tax Act – Pension received by certain winners of gallantry awards

Individual who has received any of the gallantry awards stated below will have to pay no taxes on their pension:

  • service to Central or State Government
  • awarded ‘Param Vir Chakra’ or ‘Mahavir Chakra’ or ‘Vir Chakra’ or such other notified gallantry awards

Also, any amount received as a family pension by any member of the family of such an individual will also qualify for exemption u/s 10(18).

Section 10(19) of Income Tax Act – Family pension received by family members of armed forces including paramilitary forces

Family pension received by the widow or children or nominated heirs of a member of the armed forces (including paramilitary forces) where the death of such member has occurred in the course of operational duty is fully exempt. W.E.F 01/04/2005.

Section 10(19A) – Income from one palace of a former ruler

  • Annual value of any one palace or a portion of a palace in the occupation of a former ruler shall be exempted.
  • But in case such palace or a portion of a palace is let out , its income shall not be exempted.

Section 10(20) – Income of a local authority

The following income of a local authority is exempt from tax:

  • Income which is chargeable under the head “Income from house property”, “Capital gains” or “Income from other sources” or
  • Income from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or
  • Income from business of supply of water or electricity within or outside its own jurisdictional area.

Section 10(23BB) – Income of Khadi and Village Industries Boards

Any income of Khadi and Village Industries Boards is exempt from tax under section 10(23BB).

Section 10(23BBB) – Income of European Economic Community

Any income of European Economic Community derived in India by way of interest, dividends or capital gains, from investments made out of its funds under a notified scheme is exempt from tax.

Section 10(23BBC) – Income of SAARC fund

Any income of SAARC fund for Regional Projects is exempt from tax under section 10(23BBC).

Section 10(23BBD) – Income of Secretariat of Asian Organisation of Supreme Audit Institutions

Any income of Secretariat of Asian Organisation of Supreme Audit Institutions is exempt from tax for the assessment years 2001-02 to 2010-11.

Section 10(23BBE) – Income of Insurance Regulatory and Development Authority

Any income of the Insurance Regulatory and Development Authority established under section 3(1) of the Insurance Regulatory and Development Authority Act, 1999 is exempt from tax.

Section 10(23BBF) – Income of North-Eastern Development Financial Corporation Limited

No exemption is available under section 10(23BBF) from the assessment year 2010-11.

Section 10(23BBG) – Income of Central Electricity Regulatory Commission

Income of Central Electricity Regulatory Commission is exempt from tax from the assessment year 2008-09.

Section 10(23BBH) – Income of the Prasar Bharati

Any income of the Prasar Bharati (Broadcasting Corporation of India) established under section 3(1) of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is exempt from tax.

Section 10(23C)(iiia) – Income of National Foundation for Communal Harmony

[As amended by Finance Act, 2018] Any income received by any person on behalf of the Prime Minister’s National Relief Fund, the Prime Minister’s Fund (Promotion of Folk Art) or the Prime Minister’s Aid to Students Fund is exempt from tax under clause (i), (ii) and (iii) of section 10(23C) respectively.

Any income of National Foundation for Communal Harmony is exempt from tax under section 10(23C)(iiia)

Section 10(23C)(iiiaa) – Income of Swachh Bharat Kosh

Income of the Swachh Bharat Kosh, set up by the Central Government is exempt under section 10(23C)(iiiaa).

Section 10(23C)(iiiaaa) – Income of Clear Ganga Fund

Income of the Clear Ganga Fund, set up by the Central Government is exempt under section 10(23C)(iiiaaa).

Section 10(23C)(iiiaaaa) – Income of Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund

As per section 10(23C)(iiiaaaa) (as inserted by the Finance Act, 2017 with retrospective effect from the assessment year 1998-99),income  of the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any state or union territory is exempt from tax.

Section 10(23C)(iiiab)/(iiiad)/(vi) – Income of Educational Institutions

Section 10(23C)(iiiab)

Income of any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government would be exempt under section 10(23C)(iiiab).

Section 10(23C)(iiiad)

Income of any university or other educational institution existing only for educational purposes and not for purposes of profit would be exempt under section 10(23C)(iiiad) if the aggregate annual receipts of such university or educational institution do not exceed Rs. 1 Core.

Section 10 (34A) – Exemption of income to a shareholder on buyback of shares of unlisted company

Any income arising on buyback of shares by the company as referred to in section 115QA will be exempt from tax.

Section 10(35) – Income from units of UTI and other mutual funds

All the below following are exempt:

  • Dividend income covered by section -115-O
  • Income in respect of units of a mutual fund
  • Income received by unit holder of UTI
  • Income earned units of a specified company

Note:

  1. Under section 115-O and section 115R, the person paying the dividends on share or income on units will have to pay distribution tax on dividend/income distributed.
  2. It should be noted that under this clause, Income on the transfer of units is not exempt.

Section 10(23D) – Tax free mutual funds

Any income of following mutual funds (subject to provisions of sections 115R to 115T) is exempt from tax:

  • A mutual fund registered under the Securities and Exchange Board of India Act or regulation made thereunder.
  • A mutual fund set-up by a public sector bank, or a public financial institution or authorised by RBI (subject to conditions notified by the Central Government).

Section 10(23DA) – Exemption of income from securitization trust

Any person who is an investor of securitization trust receives any income from such a trust, by way of distributed income shall be exempt.

Section 10(36) – Income from sale of shares in certain cases

The transfer of a long-term capital asset for arising any income, when a company purchases eligible equity shares held for a period of 12 months or more shall be exempt.

Section 10(37) – Capital Gain on compulsory acquisition of urban Agricultural Land

Any income chargeable under the head “Capital Gain” arising from the transfer of agriculture land shall be exempt.

Section 10(38) of income tax act – Long Term Capital Gain on transfer of shares and securities covered under Security Transaction Tax (STT)

When the transfer of securities are not chargeable to tax to any individual then long-term capital arises, following conditions should be satisfied:

  • At the time of transfer, transactions must be liable to securities transactions tax.
  • At the time of transfer of assets, it should be equity shares or a unit of a business trust or units of an equity oriented mutual fund.
  • Assets must be a long-term capital asset.
  • Transfer must be taken place on or after October 1, 2004.

Section 10(39) – Income from international sporting event

Any specified income (which is from such international event and which is notified by the Central Govt.) of specified persons from any international event held in India shall be fully exempted if;

  • Such event is approved by the international body regulating the international sport relating to such event.
  • It has participation by more than two countries; and
  • is notified by the Central Govt. in this regard.

Section 10(40) – Income received as grant by a subsidiary company

Income of any subsidiary company by way of grant or otherwise received from its Indian holding company which is engaged in the business of generation/ transmission/distribution of power is exempt, only if;

  • Such receipt is for settlement of dues in connection with reconstruction
  • Or revival of an existing business of power generation.

The exemption is available if the reconstruction or revival is by way of transfer of business to the Indian company notified under section 80 IA(4)(v)(a).

Under section 10(41), any capital gain arising in the above case is not chargeable to tax, if the transfer has taken place before April 1, 2006.

Section 10(41) – Income from transfer of asset of an undertaking engaged in the business of generation, transmission or distribution of power

Income from transfer of capital asset of an undertaking engaged in the business of generation, transmission or distribution of power where such transfer takes place on or before 31.3.2006 and transfer is made to the Indian company as notified u/s 801A.

Section 10(43) – Reverse mortgage

Any amount received by an individual as a loan, either in lump-sum or in instalment in a transaction of reverse mortgage referred in clause (xvi) of Section 47 shall be exempted.

Section 10(44) – New Pension System Trust

Any income received by any person for, or on behalf of the New Pension System Trust established on 27th February, 2008 shall be exempted.

Section 10 (45) – Exemption of Allowance or perquisite to chairman/member of UPSC

Any allowance or perquisite, as may be notified by the Central Government in the Official Gazette, in this behalf, paid to the chairman or a retired chairman or any other member or retired member of the Union Public Service Commission, shall be exempt.

Section 10(47) –  Exemption of Income of notified ‘Infrastructure debt fund’

It shall be exempt from income tax, when the fund is set up as per prescribed guidelines and the notifications are issued by the government in this regard.

Section 10(49) – Exemption of income of National Financial Holdings Company

Any income of the National Financial Holdings Company, being a company set up by the Central Government, shall be exempt.

Partially Exempt Incomes

This category includes allowances which are exempt up to certain limit specified in Income Tax Rules. For certain allowances, exemption depends on amount of allowance spent for the purpose for which it was received and for other allowances, there is a fixed limit of exemption. They are as follows:

section 10(13a) – HRA Exemption

An allowance granted to a person by his employer to meet expenditure incurred on payment of rent in respect of residential accommodation occupied by him is exempt from tax to the extent of least of the following :

  1. House Rent Allowance actually received by the assessee
  2. Excess of rent paid less 10% of salary* due to him
  3. An amount equal to 50% of salary due to assessee

Note: If the rent is more then 100,000/- individual need to compulsory submit PAN of the landlord under Circular No. 08 /2013 dated 10th October 2013.
*Salary – Basic + DA (if part of retirement benefit) + Turnover based Commission

Entertainment Allowance

This allowance is first included in gross salary under allowances and then deduction is allowed .In the case of government employees ,least of the following is exempt:

  1. Rs 5,000;
  2. 20% of salary; or
  3. entertainment allowance actually received.

Leave Travel Concession [Section 10(5)]

For a government employee, leave encashment upon retirement or leaving the job is tax free under Section 10. For a non-government employee, it is exempt up to least of the following:

  1. Earned leave (No. of months) multiplied by Average monthly salary
  2. 10 multiplied by Average monthly salary
  3. Rs. 3, 00,000
  4. Actual leave encashment received

Section 10(13) – Superannuation Fund Taxability

A pension fund created by company for his employee’s benefit paid after retirement or withdrawal with approval of commissioner of income tax.
Exempted up to 1, 50,000 and entire accumulated interest is also exempt.

Section 10(14) of Income Tax Act – Prescribed allowances or benefits

As per section 10(14), read with rule 2BB following allowances granted to an employee are exempt from tax subject to certain limit:

Allowance Name Exemption limit
Children Education Allowance Up to Rs. 100 per month per child up to a maximum of 2 children is exempt
Children Hostel Allowance Up to Rs. 300 per month per child up to a maximum of 2 children is exempt
Transport Allowance granted to an employee or (who is a blind and handicap) meet expenditure on commuting between place of residence and place of duty Rs. 1600/- p.m.
Or
Rs. 3200/- p.m. (for handicapped)
Any Allowance granted to an employee working in any transport system to meet his personal expenditure Rs. 10,000/- p.m.
Or
70% of allowance
(whichever is lower)
Tribal area allowance in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Orissa Rs. 200/- p.m.
Underground Allowance Rs. 800/- p.m.
Compensatory Field Area Allowance Rs. 2,600/- p.m.
Compensatory Modified Field Area Allowance Rs. 1,000/- p.m.
Counter-insurgency allowance to members of armed forces Rs. 4200 /-p.m.
Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office Exempt to the extent of expenditure incurred for official purposes
Travelling Allowance to meet the cost of travel on tour or on transfer Exempt to the extent of expenditure incurred for official purposes
Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty Exempt to the extent of expenditure incurred for official purposes
Helper/Assistant Allowance Exempt to the extent of expenditure incurred for official purposes
Research Allowance granted for encouraging the academic research and other professional pursuits Exempt to the extent of expenditure incurred for official purposes
Uniform allowance Exempt to the extent of expenditure incurred for official purposes
Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 300 to Rs. 7,000 per month.
Border area, Remote Locality or Disturbed Area or Difficult Area Allowance (Subject to certain conditions and locations) Amount exempt from tax varies from Rs. 200 to Rs. 1,300 per month.
High Altitude Allowance granted to armed forces operating in high altitude areas a) Up to Rs. 1,060 per month (for altitude of 9,000 to 15,000 feet)

b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)

Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island Up to Rs. 3,250 per month

Section 10(12) – Recognised provident fund

Any amount received against recognized provident fund by way of:

  • Employer’s contribution = exempted up to 12%
  • Interest = exempted up to 9.5%
  • Amount received on termination = fully exempted

Section 10(10) – Gratuity Exemption

The amount received by Government employee (i.e., Central Government or State Government or local authority) for Death-cum-retirement is fully exempt.
Gratuity income received by employees who are covered under Payment of Gratuity Act, 1972 is exempt from Income tax.
Least of the below is exempt:

  • a) 15 day’s salary x years of services
  • b) Maximum amount i.e. 20lacs
  • c) Amount actually received

Section 10(10a) of Income Tax Act – Commuted Pension Taxability

  • The full amount of commuted value of pension received is exempted if it is received from the Government, a local authority or a statutory corporation.
  • Any payment in commutation of pension received under any scheme from any other employer to the extent it does not exceed
    (a) In a case where the employee receives any gratuity, the commuted value of 1/3rd of pension which he is normally entitled to receive ; and
    (b) In any other case the commuted value of 1/2 of such pension.

Section 10(10AA) – Leave Encashment Exemption

  • Central & State Govt. Employees—any payment received as the cash equivalent of the leave salary in respect of the earned leave at his credit at the time of his retirement shall be fully exempt.
  • Other Employees—any payment received as the cash equivalent of the leave salary at his credit at the time of superannuation shall be exempt up to least of the following:
    (a) Actual amount received
    (b) (average salary means average of salary drawn by employee during 10 months immediately preceding the month of his retirement);
    (c) Cash equivalent of leave salary due at the time of retirement.
    (d) Notified Limit—Rs 3,00,000.

Excess of amount received over the least of the above shall be taxable.

Section10 (10B) – Retrenchment compensation paid to workmen

As per section 10(10B), compensation received at the time of retrenchment is exempt from tax to the extent of lower of the following:

  1. An amount calculated in accordance with the provisions of section 25F(b) of the Industrial Dispute Act, 1947; or
  2. Maximum amount specified by the Central Government (Rs 5,00,000);
  3. Actual amount received.

Fully Taxable Allowances (Individual salaried employees)

Allowances generally mean any sum of money given to a person to meet his/her needs or expenses. These allowances are given to employees to meet some of the particular requirements like house rent, expenses on uniform conveyance, here is a list of some fully taxable allowance:

City Compensatory Allowance

These are given to compensate for the high cost of living in a particularly big city of India or any other capital city. These are also fully taxable.

Fixed Medical Allowance

Medical expenses paid to the employees irrespective of whether they submit the bills to substantiate the expenditure or not are fully taxable

Tiffin, Lunch, Dinner or Refreshment Allowance

Any amount received for lunch or dinner refreshment is fully taxable.

Servant Allowance

servant provided at employee’s resident would be fully taxable

Project Allowance

Any allowance provided by employer to employees to meet project expenses are taxable.

Overtime Allowance

Employee working beyond working hours and receives the amount for the same will be taxable.

Any Other Cash Allowance

Cash given for telephone allowance, holiday allowance, it is fully taxable.

People Also Ask

Yes, it is taxable but the benefit is spread over the years and relief u/s 89 is also available.

Yes, it is fully taxable.

Yes, extra income or overtime duty will be taxable.

No, coupons are received for the same is not taxable up to certain limit.

As rightly said, ‘don’t let the grass grow under your feet’, the faster you understand all the exemptions the earlier you can claim without wasting your time. So learn about all the exemptions available to you today and file your taxes making life less taxing with the help of your personal income tax filing experts at H&R Block India.

e-File your tax returns with ease and convenience with H&R Block
  • Share: 

Still Have Questions?