Did you know there are certain types of income on which you do not have to pay any taxes. So, before you think of doing any start-up business or choosing a profession, in case you want to make hay when the sun shines, you could take the benefits of earning such income without paying any taxes. Is’nt it Awesome?
We are summarizing some of the common types of income which are exempt from tax.
Agricultural Income: in terms of rent from land situated in India or from agricultural produce is fully exempt from tax. However, agricultural income exceeding Rs.5,000 would be included for calculating tax liability in case you have any other sources of income exceeding the basic exemption limit.Further, any capital gain on sale of agricultural land in rural area is also exempt from tax. Therefore, next time you might want to buy a piece of land, you could think of buying a farm land in rural area.
Long term capital Gains: As they say no risks no rewards, but did you ever think taking risks would not be such a bad bet in case the rewards are tax free.Income earned from sale of shares held more than 1 year and are listed on a recognized stock exchange is also exempt from tax, if STT is paid on it.
Dividend income earned from investing in shares & equity oriented mutual funds: Any income received from domestic company in form of dividends (dividends as referred in sec. 115-O) is exempt from tax up to Rs. 10 Lakhs.
Income from Gratuity: Any gratuity received by an employee of the Central Government, State Government or local authority, on death or retirement is fully exempt from tax. In case you are a private co. employee, Gratuity received from your employer (subject to such conditions as specified under the Income tax act) would be exempt up to a maximum of Rs. 10 lakhs.
Life insurance proceeds received on maturity are exempt from tax: Besides the benefit of securing one’s life by taking a life insurance policy, there is income tax exemption on the maturity amount received from the life insurance company on completion of the term, provided the premium paid to actual capital sum assured does not exceed the prescribed thresholds provided under the Income tax act.
Share of profit received from partnership firm: If you are a partner in a firm, your share in the total income of the firm shall be fully exempt, provided the firm is subjected to tax on the profits.
Receipts received by a member from a HUF: Sum paid out of income of family or income of impartible estate or any money received out of income of HUF is fully exempt in the hands of the family member.
Allowance or perquisites received from Govt. of India: If you are an IFS aspirant or rendering any kind of service outside India, good news is the money received in the form of any allowances, remuneration or perquisites from the government is fully exempt from tax.
Scholarships & grants granted to meet the cost of education:The exemption is irrespective of actual expenditure incurred by the recipient to meet the cost of education.‘Cost of education’ includes not only the tuition fees but all other expenses which are incidental to acquiring education. Scholarship may have been given by Govt., University, Board, Trust, etc.
Interest from Savings Bank Account: Income earned by way of interest on savings account up to Rs 10,000 is tax free under Section 80TTA. This means that if the interest earned from a savings bank account is less than/ upto Rs 10,000, then you don’t have to pay taxes on it.