Incomes that are exempted from tax
It is generally assumed that the more you earn, the more you are liable to taxation. But this is not completely true as certain types of incomes do not attract any type of income tax. Here we bring you 10 such type of incomes for your knowledge.
1. Agriculture Income
Under the provision of the Indian Income Tax Act 1961, agriculture income is fully exempted from tax liability. But if the net income is more than INR 5000, it will be included in the total income while computing for determining the tax rate.
2. Receipts from Hindu Undivided Family (HUF)
Under the Hindu law, an HUF is a family which consists of persons descended from a common ancestor. If HUF pays one of its members from the income generated by its source belonging to the family, the income is exempted from tax under section 10(2).
3. Share from the partnership firm
If you are a partner in a partnership firm, the share which you receive from the company is exempted from taxation. However, if you obtain any other funds like remuneration or interest, they are not exempted.
4. Income generated from the saplings and seedlings of a nursery
Any income derived from the saplings and seedlings of a nursery is treated as agriculture income and totally non-taxable.
5. Incomes of Non-Resident Indians
Indian residents who render services outside the country need not pay any income tax for the allowances and perquisites. This allows government servants to get tax exemption while working outside India.
6. Amount received for Voluntary retirement
An amount received by an employee of a public sector or of a local authority for a voluntary retirement is exempted from taxation under the section 10 (1 OC).
7. Scholarships and Awards
Any sum of money received by a student as scholarship or award is totally non-taxable under the section 10(16).
8. Life Insurance and Provident Funds
Any amount of money received through Life insurance policies or any payment from a government or recognised Provident Fund is exempted from income tax.
Any sum received as the gratuity by a government employee on retirement is non-taxable. In the case of a private sector, the gratuity is tax-free subject to certain conditions.
10. Income from long-term capital gains
Long-term capital gains like equity shares and mutual funds are exempted from income tax.
These are the major incomes on which tax is not paid. However, it is our moral obligation to pay income tax.