Section 10 Exemptions in New Tax Act 2025: Full List
- Section 10 renumbered as Section 11 (with Schedule II) under the new Act. Substance unchanged.
- Gratuity, leave encashment, LTA, HRA continue with same caps.
- Agricultural income stays fully exempt under Section 11.
- PPF maturity, EPF maturity (after 5 years), and life insurance maturity all remain tax-free under the new Act.
Section 10 of the old Income Tax Act 1961 was the master list of exempt incomes - everything from agricultural income to gratuity to PPF maturity. If any part of your income was tax-free, it was probably because of Section 10. Under the new act, Section 10 is now Section 11 of the Income Tax Act 2025.
Section 10 → Section 11: What Changed
The sub-clause numbers within the section remain largely the same. Only the main section number changed from 10 to 11.
Gratuity Exemption
Gratuity received at the time of retirement, resignation, or death continues to be exempt under new Section 11:
- Government employees - entire gratuity is exempt, no limit
- Private sector employees covered under the Payment of Gratuity Act - exempt up to Rs 20 lakh
- Other employees - exempt up to Rs 20 lakh, calculated using the formula (15 days salary x years of service) / 26
This limit was last revised in 2019 and carries forward unchanged into the new act.
Leave Encashment
When you leave your job and get paid for unused leave days:
- Government employees - entire leave encashment is exempt
- Private sector employees - exempt up to Rs 25 lakh (at the time of retirement or resignation, not while employed)
- Leave encashment during employment - fully taxable, no exemption
Leave Travel Allowance (LTA)
LTA for travel within India continues to be exempt:
- Domestic travel only - international travel does not qualify
- Actual travel expenses - only the cost of travel (air, rail, bus fare) is exempt, not hotel or food
- Two journeys in a block of 4 years - you can claim LTA exemption for 2 trips in every 4-year block
- Family coverage - exemption covers travel for spouse, children (up to 2), and dependent parents
Agricultural Income
Agricultural income remains fully exempt under new Section 11(1):
- Income from farming operations - growing and selling crops is fully exempt
- Rent from agricultural land - exempt if the land is used for farming
- Agricultural income above Rs 5,000 - must still be reported for rate purposes (it increases the tax rate on your non-agricultural income)
- Processed agricultural products - income from processing may be partially taxable depending on the level of processing
PPF Maturity and Interest
PPF continues to enjoy its EEE (Exempt-Exempt-Exempt) status:
- Interest earned on PPF - fully exempt every year
- Maturity amount - fully exempt at the end of 15 years
- Partial withdrawals - also exempt from tax
This makes PPF one of the most tax-efficient savings instruments available, and the new act does not change this.
Other Key Exemptions Under New Section 11
- Scholarship for education (old 10(16)) - fully exempt
- Allowances to MPs and MLAs (old 10(17)) - exempt as notified
- Pension commutation (old 10(10A)) - exempt up to specified limits
- VRS compensation (old 10(10C)) - exempt up to Rs 5 lakh
- Long service award - exempt if received as part of approved scheme
- HRA exemption (old 10(13A)) - continues under the old tax regime for salaried employees receiving HRA
- Sukanya Samriddhi Yojana - interest and maturity both exempt
Gratuity, leave encashment, LTA, agricultural income, PPF, scholarships, all continue at the same limits. Only the section number on your tax return changes from 10 to 11, and tax software handles this automatically from FY 2026-27.
Frequently Asked Questions
What is the new section for income exemptions?
Section 10 of the old act is now Section 11 under the Income Tax Act 2025. All sub-clauses retain their original numbering. For example, Section 10(10) for gratuity is now Section 11(10).
Is gratuity still tax-free under the new act?
Yes. Gratuity is exempt up to Rs 20 lakh for private sector employees covered under the Payment of Gratuity Act. For government employees, the entire gratuity is exempt with no limit.
What is the leave encashment exemption limit?
For private sector employees, leave encashment at retirement or resignation is exempt up to Rs 25 lakh under new Section 11. For government employees, the entire amount is exempt. Leave encashment during employment is fully taxable.
Is agricultural income tax-free in India?
Yes. Agricultural income remains fully exempt under new Section 11(1). However, if your agricultural income exceeds Rs 5,000, it must be reported for rate purposes as it increases the tax rate on your non-agricultural income.
For HRA exemption (the most commonly used Section 11 sub-clause), see HRA exemption now Section 11. For senior citizen exemptions and 80TTB, see senior citizen tax benefits.
Disclaimer: This article provides general information about the Income Tax Act 2025 and is not tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.
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