Section 10 of Income Tax Act: What You Need To Know

bySonakshi PatelLast Updated: June 2, 2023

Section 10 of the ITA (Income Tax Act) highlights all the exemption provisions for various paid allowances. A taxpayer can opt for these when paying for income tax. You can also find special exempted allowances and the terms and conditions applicable for availing them.

What are the Exempt Allowances under Section 10? 

The special allowances granted under ITA’s Section 10 are divided into two parts: Section 10 (14)(i) and Section 10 (14)(ii). Below, we have tabulated the categories and the limit of their allowances eligible for exemption. 

Allowances under Section 10 (14)(i)

This subsection lists the exemptions towards allowances and benefits provided to employees to meet expenses. 

The maximum allowance granted under these provisions will depend on the actual amount spent or the sum received. Out of the two, you will be paid for whichever costs less. For example, if your pre-set helper allowance is Rs. 2,500 but you only pay Rs. 2,200 to your helper, you will be paid the latter amount. 

Allowances under Section 10 (14)(ii)

The allowances under this subsection are specified for salaried individuals on official duty. 

Allowance category Details Limit of allowed exemption  
Border area allowance The allowance offered to army personnel who are residents of border areas and disturbed or difficult areasAmounts can range from Rs. 200 to Rs. 1300 per month  
Tribal area allowance Eligible allowance for tribal, schedule and agency areas in Madhya Pradesh, Assam, Uttar Pradesh, Karnataka, West Bengal,Bihar, Orissa, Tamil Nadu, and TripuraRs. 200 per month
Compensatory field area allowanceAvailable for various areas of Arunachal Pradesh, Manipur, Sikkim, Nagaland, Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir Rs. 2,600 per month 
Compensatory modified field area allowanceAvailable in specified areas of Punjab, Rajasthan, Haryana, Uttar Pradesh, Jammu and Kashmir, Himachal Pradesh, West Bengal and North Eastern statesRs. 1,000 per month 
Climate allowanceSpecial compensatory allowance for hilly areas/high altitudes The exemption-free amount may vary from Rs. 300 to Rs. 7,000 per month
Transport allowance (for physically disabled)Available to physically disabled employees for the purpose of commute Rs. 3,200 per month 
Counter insurgency allowanceAvailable to the armed forces members Rs. 3,900 per month
Underground allowance Available for employees working in underground minesRs. 800 per month
Transport system allowance Available to transportation employees to fulfil personal expenditures while on duty 70% of such allowance up to a limit of Rs. 10,000 per month 
Children education allowanceAvailable to armed forces personnel having children  Rs. 100 per month for up to two children 
Hostel expenditure allowanceAvailable to armed forces personnel having children  Rs. 300 per month for up to two children 
High altitude allowance Available to armed forces operating in higher altitudes Rs. 1,060 per month (for altitudes ranging between 9,000-15,000 feet)
Rs. 1,600 per month (for altitudes ranging higher than 15,000 feet) 
Island duty allowance Available for armed forces serving in Andaman & Nicobar and Lakshadweep IslandsRs. 3,250 per month 
Active field area allowanceSpecial allowance available to armed forces operating in highly active fieldsRs. 4,200 per month 

The listed allowances are exempted on the basis of the amount received or the specified limit, whichever is lesser. 

Additional Exempt Allowances under Section 10

Apart from the allowances mentioned above, another set of expenses is eligible for exemption. These are as follows:

  • Allowances offered to Indian government employees rendering outside the country 
  • Allowances offered to high court judges 
  • Sumptuary allowances offered to high court and supreme court judges 
  • Allowance received by the employer’s UNO (United Nations Organisation)

Other than special allowances, the ITA Section 10 also has other subsections concerning the exemption of incomes that aren’t a part of the total salary. It helps in decreasing the tax burden on salaried workers. Any person who pays taxes on their salary much be aware of this section to be able to enjoy its benefits.

Also Read: Section 80C of Income Tax


What is the maximum amount you can claim under Section 10?

People below 60 are eligible for a tax exemption limit of Rs. 2,50,000 under Income Tax Section 10.

Is my total salary calculated with allowance exemptions in consideration?

An individual’s total taxable salary is computed after the reduction of allowance exemption. The balance salary is further subjected to TDS per the income tax slabs.

What are the documents necessary to claim an exemption under Section 10?

To be qualified for exemption, one must be able to present the following documents: Aadhar and PAN card ,Duly filled Form 16 ,Salary slips and relevant bank statements ,Income tax login credentials

Can the amount of my allowances be more than my main income?

In certain rare instances, the sum of allowance exemption under Section 10 can be greater than one’s salary.

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