Under Section 10, individuals are given certain special allowances for the amount they spent for specific purposes. Apart from the net salary, an employee receive various allowances for specific purposes such as Travel allowances, house rent, uniform allowances, etc.
The special allowances that are given to the employees are due to certain specified conditions. Either the allowances are given to the employee for exemplary services or working in unusual conditions or extra hours. Several different allowances will provide a deduction under Section 10.
There are different subsection under Section 10 (14) which determine the exact deduction criterion for different allowances. The exact amount which determines the deductions are:
- Allowance Amount
- The actual amount which is spent on the purpose for which the allowance is given
Section 10 (14) (i)
Allowances are exempted for the allowance amount given or the actual amount which is spent on the purpose for which the allowance is given, whichever is the lowest of the two.
Different Allowance which comes under this section are:
- Daily Allowance
- Travel Allowance
- Research/Academic Allowance
- Conveyance Allowance
- Helper Allowance
- Uniform Allowance
Certain individuals also receive allowances exempt under Section 10:
- High Court Judges.
- UNO employee.
- Supreme Court and High Court Judge.
- Government employees who are Indian citizens, working abroad.
Deductions For Different Allowances Under Section 10
| Sections | Particulars | Exemption limit |
| Sec 10(1) | Agricultural Income (from agricultural land, farm house, or sapling seedling grown in nursery) for self employed | Fully exempt from tax |
| Sec 10(2) | Income received from HUF (Hindu-undivided family) by a tax payer in his capacity as a member of HUF | Fully exempt from tax |
| Sec 10(10C) | Compensation received at the time of voluntary retirement for salaried employees | Exempt from tax up to a certain limit of compensation amount Rs. 5,00,000 |
| Sec 10(10D) | Amount received under life insurance policy including policy bonus | Fully exempt from tax |
| Sec 10(11)(12) | Amount withdrawn from Provident fund by salaried employees | Fully exempt from tax |
| Sec 10(10BC) | Compensation received in case of any disaster from central government | Fully exempt from tax |
| Sec 10(13A) | House rent allowance (HRA) to salaried employees (rent paid by the employees to stay in a rented house) | Fully exempt from tax and 50% of salary amount if residential house is in metro cities otherwise 40% in non-metro |
| Sec 10(14) | Children education allowance (salaried employees can claim a predefined allowance for two children) | Exemption up to Rs. 100 per month per child |
| Sec 10(14) | Special compensatory allowance for hilly areas or climate allowance or high altitude allowance to salaried employees | Exemption up to Rs. 7,000 per month |
| Sec 10(14) rule 2BB | Border area allowance or remote area or any disturbed area allowance to salaried employees | Exemption up to Rs. 1,300 per month |
| Sec 10(14) | Tribal area allowance in: Madhya Pradesh, Tamilnadu, Assam, UP, Karnataka, West Bengal, Bihar, Orissa and Tripura to salaried employees | Exemption up to Rs. 200 per month |
| Sec 10(14) | Compensatory field area allowance available in various areas of AP, Manipur, Sikkim, Nagaland, HP, UP and J&K to salaried employees | Exemption up to Rs. 2,600 per month |
| Sec 10(14) | Transport allowance granted to employee for the purpose of commuting from home to office salaried employees | Exemption up to Rs. 1,600 (Rs. 3,200 for blind, deaf and dumb) per month |
| Sec 10(15) | Income from tax free securities to all assesses (Income received as interest from securities, bonds, deposits notified by government) | Fully exempt from tax |
| Sec 10(23D) | Income from mutual fund (Any income earned from mutual funds registered under SEBI or set-up by any PSU or authorized by RBI) | Fully exempt from tax |
| Sec 10(34) | Income from dividends (Tax paid by the company over the profits is considered as the final payment of tax no further credit to be claimed as dividends) | Fully exempt from tax |
| Sec 10(38) | Long term capital gains on transfer of shares and securities | Fully exempt from tax |
| Sec 10(43) | Reverse Mortgage (Any amount received by the individual as loan in lumpsum or in installments in transaction of reverse mortgage) | Fully exempt from tax |
| Sec 10(44) | New Pension System exemption (Any income received by any person on the behalf of New pension system) | Fully exempt from tax |
| Sec 10(49) | Income of National financial holdings company | Fully exempt from tax |
