What Is Section 10 Under Income Tax Act?
Section 10 of the Income Tax Act contains compensation and allowances provided to salaried employees engaged in the organised sector. Apart from the basic pay, there are other allowances that are a part of the salary structure of employees. These allowances along with the basic pay constitute the total income of the employee. These allowances are provided to the employees for services rendered that are specified under this act.
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What Is Section 10 Under Income Tax Act?
Special Allowance under the Section 10(14):
Under the Income Tax Act, there are some allowances known as special allowances. The main advantage of these allowances is that they are fully exempt from tax. Listed below are the allowances listed under Section 10(14) of the Income Tax Act:
- Allowances granted to the High Court Judge.
- Allowances given to UNO employees.
- The judges of the Supreme Court and High Court are entitled to receive the sumptuary allowance. (This is an allowance for daily expenditure).
- The Indian citizens who are working as government employees abroad are considered to receive special allowance under this act.
See Also: How To File Income Tax Returns?
Exemptions of Agricultural Income under Section 10(1):
Listed below are the exemptions given to the beneficiary under Section 10(1):
- The income received by an individual taxpayer from agricultural activities is exempt from tax. Any rent or revenue derived from land used for agricultural purposes or agricultural produce to sell in the market is exempt from tax.
- Any income from farm house subject to certain satisfactory conditions specified in section 2(1A) would be exempted.
Profit Sharing from partner firm under Section 10(2a):
Under Section 10(2a) of the Income Tax Act, certain benefits are offered to the partner of a firm. Given below are the benefits offered to the beneficiary under this section:
- Section 10(2a) states any share of profit received by a partner of a firm is liable for tax exemption.
- The share of profit that the partner of LLP receives from the LLP enjoys tax exemption.
- The exemptions are restricted only to the share of profit and do not apply to interest on capital and remuneration received by the of firm/LLP.
Section 10(4) of the income tax act:
According to Section 10(4) of the Income Tax Act, the Non Resident Indians (NRIs) will receive tax benefits. They are entitled to enjoy tax exemption on certain conditions like earning on bonds or NRE accounts in the individual taxpayer’s hands.
Section 10(4)(ii) Interest to Non-Resident:
- Under this section the Non Resident Indians who earn money from bonds or have accounts in any bank located in India, enjoy tax exemption under this act.
- The tax exemption is not available for any interest earned on or after 1-4-2005.
- An individual who resides outside India shall have the same meaning as defined by Foreign Exchange Regulations Act 1973.
Travel Concession under Section 10(5):
Section 10(5) offers certain benefits to employees known as travel leave concession. Listed below are the benefits offered to the employees under this section of the Income Tax Act, 1971:
- An employee receives tax exemption under Section 10(5) on his leave travel.
- Under this section of the income tax act, all employees (including Indian and foreign citizens) are eligible to enjoy the leave travel concession.
- Exemption is available for any travel concession or assistance received or dues to the employee from his employer (including former employer) for himself and family members in connection with his proceeding on leave to any place in India.
Working outside India under Section 10(6):
- Under this section there are some special benefits offered to employees working outside India who represent the country abroad. These 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. They are eligible to receive certain benefits under this act.
- The employees working under foreign companies too are entitled to enjoy tax benefits under this act. However they are subject to the following limitations:
- The foreign company carries out no trade or business in India.
- The employee should not exceed an aggregate period of 90 days for his stay in India.
- Under this act, the remuneration of the employer is not liable for tax deduction
See Also: How To Calculate Your Taxable Income?
Section 10(7) Income Tax Act:
- Under this Section, all the perquisites and allowances given by the Government to the employees for providing services outside India are exempt from taxes.
- The Indian citizens who are employed under government services are eligible to receive benefits under this section.
Taxes on Perquisites under Section 10(10CC):
Sometimes the employers pay taxes for perquisites on behalf of their employees. In this case the tax paid by the employer enjoys tax exemptions under Section 10(10CC) of the Income Tax Act.
Any sum received from the statutory provident fund relating to the contribution, amount or interest on his termination is liable to be exempted from tax.
The salaried employee is entitled to enjoy exemption on tax for receiving compensation on a natural disaster from the Central Government.
The salaried employees are eligible to receive an allowance on house rent which is exempt from tax. These allowances are given to the employee by the employer to cover the expenditure incurred on payment of rent.
Under the special allowances Act defined in Section 10(14), exemptions are provided for money utilized for certain purposes. The exemptions are categorised as follows:
- Exemption of allowance under Section 10(14)(i)
- Exemption of allowance under Section 10(14)(ii).
Section 10(14) (i):
Allowances given under this category are as follows:
- Daily allowance: Daily allowances are provided to employees to meet their daily expenses, when they are on tour or when they are transferred while on duty. This allowance is given when the employee is away from the actual place of duty.
- Travel allowance: Travel allowances are given to employees to cover the costs related to travelling, when they are on tour or when they are transferred while on duty. The allowances include travel costs incurred due to transfer/work tours, transportation of goods due to this transfer and so on.
- Academic allowance: These allowances are granted for the purpose of encouraging academic and research related training, education or professional duties and are termed as academic or research allowances.
- Helper allowance: Sometimes your employer allows you to appoint a helper for performing official duties of the office. In such cases, helper allowance is granted.
- Uniform allowance: The employees who have to wear uniform while on duty are granted the uniform allowance.
Section 10(14) (ii):
The Allowances given under this category are as follows:
- Climate allowance: Compensation/ allowance given to employees working in high altitude regions or hilly areas:
Hilly areas: HP, UP, J&K and North East – Rs 800
Siachen: Rs 7000/ month.
Places 100 Meters above the sea level: Rs 300
- Schedule/ tribal area allowance: Allowances are given for working in tribal areas at Rs 200 in areas like Karnataka, West Bengal, MP, Assam, Orissa, Tamil Nadu, Bihar, UP and Tripura.
- Allowance for education of children: There’s Rs 100/ month given to government employees with a maximum of 2 children for education of each child.
- Allowance for duty at border areas: Allowances are provided to the members of the armed forces for serving in remote areas ranging from Rs 200 to Rs 1,300 which are exempt from tax under rule 2BB.
- Allowance for working in underground mines: Its Rs 800/month.
- Special compensation for working in highly active field area: This is Rs 4,200/ month.
- Island duty allowance given to armed forces: To serve the nation at Andaman and Nicobar islands and Lakshadweep, an additional allowance of Rs 3,250/ month is offered.
- Field area allowance: Its Rs 2,600/ month given for working in areas of Nagaland, J&K, HP, UP, AP, Sikkim and Manipur.
- Allowance for employee’s children hostel expenses: It’s Rs 300 given for each child to employees with a maximum of 2 children.
- Transport allowance to physically disabled person: Its Rs 1,600/ month for travelling to work.
- Allowance given to armed forces for counter insurgency: Its Rs 3,900/ month
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