Exempt Income

Exempt income is income that is specifically excluded from your total income under the Income Tax Act 2025 and is therefore not subject to income tax. Section 10 of the Act lists the main exempt incomes: life insurance proceeds, dividends from Indian companies up to ₹1 lakh, receipt of HRA for employers providing accommodation, scholarships for education, leave travel concession within India, retrenchment compensation up to ₹5 lakh, and agricultural income from land situated in India. Note that exempt income is not the same as non-taxable income — it is excluded only after being included in total income, whereas non-taxable income never forms part of total income. Even exempt income must be reported in your ITR. Some exempt incomes affect the calculation of rebate under Section 87A and the deduction limits under various sections.