Every earning person, whether employed or self-employed, has to file Income Tax Return (ITR) and pay tax every financial year. But according to the Income Tax Act, 1961, some types of income are not taxed. Let us know 10 such sources of tax-free income.
agricultural income
Income from farming is completely tax-free, there is no upper limit. However, if the agricultural income is more than Rs 5,000 and the total income goes above the basic exemption limit, then it can be included in determining the tax rate.
Public Provident Fund (PPF)
Exemption under Section 80C is available on investment up to Rs 1.5 lakh annually in Public Provident Fund. The interest and maturity amount received in this is completely tax-free.
epf withdrawal
Withdrawals from Employees’ Provident Fund after 5 years or more of continuous employment are tax-free. This includes the contribution and interest of the employee and the employer.
Maturity amount of life insurance
There is no tax on the maturity or death benefit of a life insurance policy, provided the premium does not exceed the prescribed limit (usually 10% of the sum assured).
scholarship
The scholarship received for studies is 100% tax-free.
gift
No tax on gifts received from close relatives like parents, spouse, siblings. Tax-free up to Rs 50,000 from non-relatives, if more than this the entire amount is taxable.
inherited property
There is no tax on bequest or inherited property. But the income beyond that (like interest or dividend) will be taxable.
Sukanya Samriddhi Yojana
In Sukanya Samriddhi Yojana, investment, interest and maturity amount – all three are tax-free.
tax-free bonds
The interest received from tax-free bonds issued by government institutions is tax-free.
gratuity
Gratuity received by government employees is completely tax-free. Exemption up to Rs 20 lakh is available for private employees, as per the prescribed rules.