Discover 12 Tax-Free Income Sources for ITR Filing

Discover 12 Tax-Free Income Sources for ITR Filing

July is here and it is time to submit your ITR! As is expected, income tax returns must be filed by July 31st. However, not every earner must pay taxes to the government since some income sources are fully or partially exempt from taxation under income tax regulations.

In the previous tax system, anyone under 60 who had taxable incomes over Rs 2.5 lakh was required to pay taxes. For elderly adults (60 to 80 years old), the tax-free income ceiling is maintained at Rs 3 lakh; for super senior citizens (80 years and above), it is Rs 5 lakh every financial year.

All people now have a baseline exemption amount of Rs 3 lakh, up from Rs 50,000 under the new tax regime. Many types of income are exempt from income tax under the income tax legislation.

Which Kind Of Income In India Are Exempt From Taxes?

Revenue From Agriculture: In India, revenue from agriculture is completely exempt. This exemption extends beyond the sale of crops and includes income from the purchase or sale of agricultural land as well as leases from buildings or agricultural land.

Interest Income From NRE Accounts: People who live outside of India yet are Non-Resident Indians (NRIs) can deposit money into an account known as an NRE (Non-Resident External) account. Benefits from NRE accounts include tax-free interest on NRE deposits. Through NRE accounts, NRIs can also send money back to their home domicile.

Gratuity: In the private sector, workers are not required to pay taxes on gratuities up to Rs 20 lakh that they get upon retirement. Government personnel are excused from paying any taxes on gratuities; however, the tax exemption on gratuities varies depending on the type of job. Following the most recent DA increase, the gratuity cap for government employees was raised by Rs 5 lakh to Rs 25 lakh.

Capital Gains: A portion of capital gains are exempt from taxes. Taxes are not due to those who get compensation against urban agricultural land.

Scholarship: Students are not required to pay taxes on funds they receive for additional education from public and private universities.

Provident Fund: Grows with age and becomes tax-free upon retirement from employment, provident funds are mandated savings plans for enterprises registered under The Enterprises Act, 1956 in India. If an employee has actively contributed to the Employee Provident Fund for more than five years regardless of job changes during this time they are eligible for tax-free returns.

Profit From Partnership Firm: The income of a partnership firm is subject to entity-level taxation under the Income Tax Act. Because they receive their share of profit after taxes are paid, partners who work for the business are exempt from paying income tax. On their portion of the company profits, partners are exempt from paying income tax once again.

Leave Encashment: Amounts received against leave encashment are largely tax-free upon retirement. Whether you work for a government agency or a private company determines this. Taxes are not due on leave encashment for up to ten months for government employees. The current cap for employees in the private sector is Rs 25 lakh.

Tax-Free Pension: Certain organizations, like the UNO, do not impose taxes on their pensions. Dependents of employees are also eligible for tax-free family pensions up to a maximum of one-third of the pension, or less than Rs. 15,000. In addition, pensions given to military members and their families, as well as winners of bravery awards and their families, are completely tax-exempt.

Voluntary Retirement: Up to Rs 5 lakh of the money obtained upon voluntary retirement before superannuation is tax-free. Gifts from family members or given in celebration of a marriage are also tax-free. Presents from strangers are, nonetheless, tax-free up to Rs 50,000. The Income Tax Act of 1961 defines “relative” as the individual’s wife, spouse, sister, brother, or any lineal descendant.

Allowances Or Any Compensation: In India, some types of remuneration are free from taxes for individuals. For instance, the foreign allowance that the Indian government pays to its workers who work overseas is free from taxes. Furthermore, Public Sector Undertaking (PSU) enterprises are free from tax on compensation paid upon voluntary or superannuation retirement.

Payment Of Maturity Received From Insurance Companies: Under Section 10(10D) of the Income Tax Act, 1961, any payment received from insurance companies, including bonuses, is completely free from tax (except from Keyman Insurance plans).

Find Your Daily Dose of NEWS and Insights – Follow ViralBake on WhatsApp and Telegram

About the author

Leave a Reply

Your email address will not be published. Required fields are marked *