About:
According to Section 10 of the Income Tax Act, the salaried employees are allowed to enjoy the tax exemption.
The objective of section 10 of the Income Tax Act is to minimize the burden of the different structure of the tax such as
- rent allowance,
- allowance for children education,
- travel allowance,
- gratuity and so on
Various types of incomes are entitled to exemptions under section 10 of the Income Tax Act are as below.
Exemption of Agricultural Income under sec 10(1)
There are several advantages to this section.
According to section 10(1), those taxpayers who earn the income from agriculture are allowed to get the exemption from tax. The citizens who enjoy the income relating to the farmhouse can get the exemption from tax based on certain conditions.
Exemption on the income of the HUF Sec 10(2)
According to the section of 10(2), those who earn the income of HUF are allowed to get tax exemption.
the given illustration for better understanding:
Example: Suppose Rs.100, 000 is earned by a HUF member during the previous session of 2019-20 and he is not entitled to give the tax. Now, Mr. A is the co-partner of the HUF member who has earned Rs.30, 000 which will be considered as his individual income. In addition to that, Mr. A has also received Rs.50, 000 from HUF.
Here, in this case, Mr. A will pay tax on his individual earnings but is not allowed to pay tax on the income which is earned by him on the amount given to him by the HUF member.
Profit-sharing from partnership firm Sec 10(2a)
There are various advantages that are enjoyed by the partner of a firm.
According to section 10(2), the profit earned by a co-owner is exempted from tax in the other co-owners, in addition, the profit which is earned by the partner of LLP will be exempted from the tax.
Travel Concession Sec 10(5)
According to this section, an employee can receive the exemption on his LTC (leave travel concessions).
Under this section, all the employees (including Indian and foreign citizens) are entitled to enjoy the particular benefit.
The employees are entitled to get travel concessions with respect to any amount from his employer on a leave across India.
Remuneration to Indian citizens who are working outside India Sec 10(6)
According to this Section, those individuals who are working outside India and representing India in that country. There are such individuals i.e.,
- High Commissioners,
- top-rated officials of the Embassy,
- Trade commissioners, and
- the other officers
that all are allowed to enjoy the benefits of this section.
Same in the case of the employees of the foreign companies are too, entitled to enjoy the tax benefit under this act, subject to the following limitations: The foreign company should not be involved in any business or business in India.
Living tenure/period of the employees should not be more than 90 days in India.
The remuneration of the employer is not entitled to be deducted.
Government pay the allowances and perquisites to the employees who are serving outside India Sec 10(7)
All the allowances and the perquisites that are provided by the government of India to its employees for providing its services outside India are exempted from tax.
The Indian citizens who are government employees have allowed availing of this benefit.
Employers pay the taxes on Perquisites Sec10(10CC)
Sometimes, the employers have to pay taxes for the perquisites of non-monetary on behalf of their employees.
In this case, the paying of the tax by the employer will be treated as the exemption from tax in the hands of employees.
Exemption on a tax of LIC Sec10(10d)
every citizen of India who earns at the sum of the LIC policy will be allowed to enjoy the tax advantages under this section of the Income Tax Act.
There are some rules to receive the benefit of the sum of the insurance.
If any sum is received under the policy of key man insurance.
If any money is received by the policyholder when a member of the family or the policyholder is suffering from any dangerous disease under section 80DDA.
If any money is received from the insurance company of a handicapped member under section 80DD.
Section 10(11) of the income tax act payment of statutory provident fund
Any sum received from the statutory provident fund relating to the contribution, amount, and interest on his termination from the company or firm will be exempted.
Section 10(10BC) of the income tax act
The employee is entitled to enjoy the tax exemption on receiving the compensation for natural disasters, calamities, etc. from the CG (central government).
Section 10(13A) of the income tax act
The salaried employees are entitled to receive the allowance on rent of the house which is exempted from tax.
As per rules, the tax-exempt part of the HRA (House Rent Allowance) is the minimum of the following amounts:
- Actual HRA component of salary
- rent paid – 10% of basic salary*
- 50% of basic salary if he resides in Metro city; 40% if his residence is in any other city
The special allowance is given under section 10(14) of the Income Tax Act
The exemption of the special allowance under the 10(14) can be classified into 2 parts.
- 1. Exemption of allowance under 10(14)(i)
- Exemption of allowance under 10(14)(ii)
The exemption should be given on the expenditure of government employees for a special purpose.
Section 10(14) (i)
Travel allowance
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.
Daily allowance
The employees can receive a daily allowance to meet the changes which take place on a daily basis. Such type of allowance is given when the employee is not in his actual place of duty.
Uniform allowance
Employees need to maintain their uniforms while on duty can receive a uniform allowance.
Academic/Research allowance
The allowance given for aiming for encouragement for research, vocational training, etc. 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.
Climate allowance
Those who are working in hilly regions of the country:
- working in the hilly regions of – HP, J&K, and North East would get the allowance of Rs. 800
- working in the regions of Siachen would get Rs.7000 per month.
The tribal or scheduled areas allowances
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.
The remote areas allowances
Who is working in remote areas or the disturbed areas of the country would be entitled to receive the allowance between Rs.200 to Rs.1300.
This allowance is exempted under the rule of 2BB.
Allowance for the education of children
The allowance of Rs.100 per month per child is given to the employee for the education of children. This allowance is given to those who have a maximum of 2 children.
The allowance is given to the Armed forces
Army members who are serving the nation at the
- height of ranging between 9000-15000ft should get the allowance of Rs.1060 p.m. and
- the height of above 15000ft should get Rs.1600 p.m.
Allowance for serving in underground mines
Those who are working for the central government project in underground mines are entitled to receive Rs. 800 p.m.
Transport allowance for those who are physically disabled
Under this section, those who are working for the government are entitled to enjoy the allowance of Rs. 1600 p.m. while on duty and need to travel for the government assignment.
Exemption of Special Allowance under the section of 10(14)
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:
The special allowances have been granted under this section of the income tax act to high court judges. UNO employees are entitled to receive this allowance.
The judges of the Supreme Court and the High Court are entitled to receive the sumptuary allowance.
Those who are Indian citizens working as government employees outside India are considered the beneficiary of this allowance
