Here are nine incomes you need not pay tax in India
It is generally believed that one cannot have the best of both worlds, especially when it comes to income and taxation.
The more a person earns, the greater the tax liability. But few people realize that this is not entirely true and there are certain types of income where your tax liability is zero. “Such income is not added to your total taxable income for that assessment year and hence remains tax-free.
Section 10 of the Indian Income Tax Act, 1961 lists the various incomes that fall under this category,” says Adhil Shetty, Founder and CEO director. from BankBazaar.com. We give you nine such types of income that are exempt from any income tax: Powered by PlayUnmute Loaded: 1.01%
Ads by Agricultural Income:
India is primarily an agrarian economy. To support the agricultural sector as a whole, the Indian Income Tax Act 1961 exempts any income a person generates through agriculture from tax liability.
However, agricultural income is included while computing, for the limited purpose of determining tax rate, while calculating tax liability if the net agricultural income exceeds Rs 5,000 for say FY15 and the total income, excluding net agricultural income, exceeds the applicable basic income exemption of 2,50,000 Rs. Currently, the basic income exemption for individuals between the ages of 60 and 80 years is Rs 3 lakh for FY15 and the basic income exemption for individuals above 80 years is Rs 5 lakh.
Receipt from Hindu Undivided Family:
If you receive or inherit money as a member of a Hindu Undivided Family (HUF), it is exempt from any income tax liability. This exemption falls under Section 10(2) of the Income Tax Act which provides that an amount received from family income or in the case of indivisible property, an amount received from family income by any member of such HUF is exempt from tax. HUF is a separate assessable entity under the Income Tax Act, 1961.
Savings Bank Interest Income:
At present, a deduction is allowed under Section 80TTA for interest earned on a savings account up to a maximum of Rs 10,000 per annum. However, this does not mean that it is exempt income. One has to declare this amount as his ‘income from other sources’ in ITR and then claim deduction under Section 80TTA, which was first introduced in 2013-14. “The ceiling of Rs 10,000 is for the interest you receive from all your accounts across banks, not with one bank. For example, if you are earning Rs 5,000 as interest from your SB account in bank X and Rs 10,000 from bank Y, the taxable interest income savings bank is Rs 5,000,” says Shetty.
Shares in a partnership firm:
If you are a partner in any partnership firm, any share you may have in the total income of the firm is exempt from income tax. Under Section 10(2), no partner or partners are liable to pay tax on income that is exempt from any partnership firm.Any other funds received by a partner of a partnership firm or LLP, other than profit sharing, such as remuneration or interest, remain taxable.However, interest on capital or remuneration received by a partner is not exempt .
Long-Term Capital Gains: Currently, Long-Term Capital Gains (LTCG) on sale of shares and equity mutual funds on which Securities Transaction Tax (STT) has been charged on sale, fully tax-exempt, meaning that any gains on the sale of shares held for more than a year are not subject to any tax. “In other words, any income you may earn from the sale of these instruments is exempt from income tax liability under Section 10(38) of the Income Tax Act. However, for this purpose, the equity instrument should be held for more than a year. This is not true for debt mutual funds,” informs Shetty.
Foreign Service Allowance:
Any Indian resident rendering services outside the country and receiving any allowances or benefits outside the country remains exempt from tax under Section 10(7) of the Income Tax Act. This section allows government employees to collect tax-free benefits and allowances they may get while working outside India.
Gratuity: Gratuity is paid by the employer as part of a thank you for recognizing the long-term meritorious services of the employee. Gratuity received by any government employee is fully exempt from income tax. For non-government employees covered by the Payment of Gratuity Act, 1972, at least one of the three is exempt from income tax. · 15 days’ salary according to the last drawn salary for each year worked. · Rs. 10,00,000 (Rs. 3,50,000 till 23 May 2010) · Total Gratuity Received. Gratuities received by an employee are not taxable if they are received on his retirement, on disability before such retirement, on termination of employment or if received by his widow, children or dependents after his death. “In case an employee receives such emoluments from more than one employer in the same financial year, the total amount so exempted should not exceed the total exemption limit.
Similarly, if the emoluments were received in one or more financial years, the tax exemption amount earlier claimed must be taken into account while calculating the exemption at the same time,” say tax experts. Amount received under Voluntary Retirement: Any amount received by an employee of a company or a local authority where a voluntary retirement scheme is framed under Rule 2BA of the Income Tax Rules will get exemption from tax up to Rs 5 lakh on the amount received as voluntary retirement
Scholarships and Prizes: Any scholarship or award given to any deserving student to meet the cost of education is exempt from tax under Section 10(16) of the Act income tax from 1961. There is no ceiling on the maximum limit and the entire amount of money received as sti pendium is exempt from tax. Paying income tax is a moral and legal duty of every proud citizen of the country.
