Tax Exempt Income In India, Checklist Of Exempted Income Under Section 10

Key Takeaways: 
 

• In simple words, the exempt income refers to a part of your earnings that is completely tax-free. 
   
• This exempt income is not included in your taxable income, but in some cases, they need to be reported. 
   
• Some of the famous examples of exempted income are agricultural income, specific allowances, and certain exemptions on interest income. 
   
• The list of exempted income is covered under section 10 of the Income Tax Act. 

 We all know how taxes are the worst thing to happen to humankind. So many numbers, calculations, and the worst part, why do we have to pay money for what we are earning with our own blood and sweat? But what if I tell you that not all income is meant to be taxed? It may sound a bit surprising, but it is actually true.  

Where most of your earnings are calculated and included in the total taxable amount as usual, a small amount is given a free pass. The amount that is free from tax is known as exempt income in economic terms. These exemptions are introduced to encourage savings, support certain activities, and also to reduce the tax burden for payers. 

The fun part is that most people are totally unaware of such exemptions, whereas some think this is some kind of discount they got magically. This unawareness is what leads to either paying more taxes than you should or losing the benefits one might get through them. Let’s save you some money and help you understand what a tax exemption is. 

Learning About Exempt Income 

Exempt income refers to a percentage of your income that is not included in the income tax. Some incomes are exempt from federal income tax or state income tax, while some of them are exempt from both. The Internal Revenue Service (IRS) is responsible for making rules for those exempt from federal tax and stating the circumstances. Meanwhile, different states have their own rules and regulations that count as exempt income. 

Even some financial benefits that you receive from your company or where you work are also a common example of exempted income. Below, we have provided the following benefits that are tax-exempt: 

The above-mentioned exemptions help in reducing the overall tax burden for most people. This approach also provides a sense of financial relief in certain situations. 

Bonus Tip: Do you know? Agricultural Income in India is 100% tax-free, no matter how big or small it is. This happens because the Constitution gave states the power to tax it and not the central government. The state government chooses to keep it tax-free for everyone. 

List Of Exempted Income Under Section 10 

Under Section 10 of the Income Tax Act, we can see a wide variety of exempt income in ITR. These incomes can be fully or partially tax-free. Below, we have provided the complete list of exempt incomes and divided them into categories so you can understand them easily: 

1. Common Personal Exempt Income 

2. Salary & Retirement Benefits 

3. Investment & Savings Income 

4. Special Cases (Non-Residents & Foreign Income)

Foreign Salary 

Fully 

IFSC Income 

Partially/Fully 

5. Government & Welfare-Based Exemption