Section 10 of the Income Tax Act has historically been one of the most significant sections for Indian taxpayers since it classified particular kinds of income that can be exempted wholly or partially from their taxable income. The section has included exemptions on income like agriculture, particular allowances, pension, and life insurance payouts.
Nevertheless, there has been a change in relation to 2026, where India’s Income-tax Act, 2025, was passed to replace the Income-tax Act, 1961, coming into force on 1 April 2026. Hence, for those who want to compute or plan their taxes for 2026, the relevant section of the new Act should be consulted, and one should not assume that the number of each old section has remained the same.
What Was Section 10 of the Income Tax Act?
As per the provisions of the Income-tax Act, 1961, Section 10 had included several types of income that are not included in the total taxable income of a taxpayer, provided certain conditions are met.
These exemptions were either complete or partial depending on a particular limit. It all depends on whether you qualify based on particular criteria.
Why Was Section 10 Important?
Section 10 enabled taxpayers to differentiate between income that is taxable and that which is exempt. This was particularly applicable to salaried individuals, retirees, investors, agricultural income earners, and certain organisations.
Section 10 also had exemptions that were intended for particular situations such as employment allowance, retirement benefits, and some types of insurance claims.
Popular Exemptions Typically Covered by Section 10
There were a number of popular exemptions that were part of Section 10 of the old Income Tax Act.
House Rent Allowance
The HRA exemption of Section 10(13A) was granted to salaried employees residing in rented property based on specified calculations.
The HRA exemption was usually calculated based on parameters such as the HRA allowed, the salary of the individual, the rent paid, and whether the individual resided in a metropolitan or non-metropolitan city.
The HRA exemption was usually pertinent under the old tax regime since the new tax regime did not allow many exemptions.
Leave Travel Allowance (LTA)
Section 10(5): This section relates to qualifying travel expenses incurred in connection with travel undertaken by an eligible employee within India, subject to conditions.
The tax exemption normally included travel-related expenditure other than expenditure on accommodation, food, or sightseeing.
Agricultural Income
Section 10(1): Under this section, qualifying agricultural income earned in India was tax exempt.
In some cases, however, agricultural income could affect the computation of the tax rate when it was earned along with other taxable non-agricultural income.
Gratuity
Section 10(10): This section provided for exemption of qualifying gratuity earned by employees.
This exemption would depend on whether the person is a government or non-government employee, among other factors.
Commuted Pension
Section 10(10A): Commuted pension received by government employees was normally fully exempt.
In the case of non-government employees who may be entitled to such an exemption, it would normally be partial and dependent on other factors such as gratuity.
Leave Encashment
Section 10(10AA): Qualifying leave encashment earned by an eligible individual at retirement was exempt under this section.
Government employees and non-government employees would have been treated differently with respect to this tax exemption.
Voluntary Retirement Compensation
Any qualifying retirement compensation payable under any voluntary retirement scheme may get exemption under section 10(10C).
The traditional cap on such exemptions was ₹5 lakhs.
Proceeds from Life Insurance Policies
Section 10(10D) was crucial in the case of policyholders of life insurance policies. Any qualifying amount paid under such life insurance policies may get exemption from tax subject to the terms of issue, premium, and sum assured.
Not all maturity payments would qualify for the purpose. Special provisions have been made in subsequent years for high-premium ULIPs and certain non-ULIP life insurance policies.
Payments under death benefits usually got separate consideration for satisfying the relevant conditions.
Provident Fund Exemptions and Other Savings Accounts
Provisions for the receipt of amounts from certain specified accounts, including the provident fund, have been covered in section 10.
Exemption would depend upon the nature of the account and other terms.
It is essential to avoid taking for granted the fact that all withdrawals and gains made through PFs are exempt from taxation.
Old Tax Regime vs. New Tax Regime
One of the main factors to consider while filing taxes is what regime the taxpayer has chosen.
While some exemptions and deductions provided in the new concessional regime could not be used in full or at all, there were other exemptions and deductions that could provide significant relief to the taxpayer and that were possible only within the old regime. There is no best regime, as it depends on an individual’s income, investments, allowances, and deductions.
Change in 2026
The most crucial thing to remember for 2026 is that the Income-tax Act, 2025, was introduced in place of the Income-tax Act, 1961, from 1 April 2026.
In particular, the 2025 Act revised the structure of income-tax law in India. Therefore, one needs to refer to sections like “10(13A)” or “10(10D)” under the Act of 1961.
Documents Commonly Needed
Generally, tax exemptions need appropriate documentation. It can be rent receipts, lease agreements, travel tickets, salary papers, retirement papers, proof of an insurance policy, or qualifying investments.
Keeping proper records makes sure there are no errors while filing your income tax returns and also provides evidence if any of the claims are doubted.
My Personal Favourite
The best thing I like about Section 10 is that it explains how exemptions differ from deductions. Exempted income can exclude the total taxable income provided all conditions are fulfilled, while deductions work separately to reduce the income.
For 2026, the most important thing for me will be to refer to the new laws rather than using outdated sections from the earlier years’ tax guide books.
Conclusion
The Income Tax Act, 1961, provided various exemptions, including HRA, LTA, agricultural income, retirement benefits, and qualifying insurance income under Section 10.
But 2026 has seen a major change, as the Income Tax Act, 2025, came into effect on 1 April 2026. Taxpayers thus need to check the current provisions and eligibility conditions.
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