8 source of Income exempt from Income Tax
Tax is a inevitable part of income, paying income tax is not optional but mandatory. As per income tax Act 1962 any individual having an annual income of more than Rs 2.50 lakh is required to file income tax return with Tax Authority. It is mandatory irrespective of the source of income. The salary and business income are taxed as per the applicable individual tax slabs based on total taxable income, there are certain sources of income that are exempt from income tax irrespective of the amount earned.Here we will know about 8 source of Income exempt from Income Tax.
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Similarly, there are certain other sources of income that are not taxable in India. Tax experts say income from different gift including marriage gift, share of profit obtained in a partnership firm, educational scholarships, retirement gratuity and ancestral wealth is also exempt from income tax.
8 source of Income exempt from Income Tax.
- 1] Share of profit in partnership firm
- 2]Proceeds of Public Provident Fund (PPF)
- 3]Employees Provident Fund (EPF)
- 4]Maturity proceeds of Life Insurance Policy
- 5] Marriage gift:
- 6] Educational scholarship:
- 7] Ancestral property
- 8] Agricultural Income:
Also read:Benefits of filling Income Tax Return.
1] Share of profit in partnership firm:
The share of profit, received by a partner in partnership firm, in the total income of the firm is exempt from payment of income tax in the hands of the partners. As share of partners is arrived after providing for all expenses meet and income tax paid on profit, partnership share of profit is not taxable. However, remuneration received by a partner for his work and interest on capital received by the partner is taxable as per rules.
2] Public Provident Fund (PPF)
PPF is one investment instrument that falls under the Exempt-Exempt-Exempt (EEE) category. This means that all deposits made in the PPF are deductible under Section 80C of the Income Tax Act 1961. However, it should be noted that the maximum permitted contribution in PPF cannot exceed Rs.1.5 lakh in a financial year. The accumulated amount along with interest is also exempt from tax at the time of withdrawal.
3]Employees Provident Fund (EPF)
The return fro. EPF is also amoung 8 source of Income exempt from Income Tax. The maturity from EPF is also tax free but only if the contribution is less than Rs 2.5 lakh.
4]Proceeds of Life Insurance Policy
Under Section 10 (10D) of the Income Tax Act, an individual can avail tax exemption on the sum assured and accrued bonus received through their life insurance policy claim (both maturity and death benefit). This exemption is also applicable for the returns earned from a Unit Linked Insurance Plan and available on all type of life insurance policy claims.
5] Marriage gift:
Gifts received by a newly-wed couple during their wedding ceremony are exempt from tax. If the gifts are given by immediate family members, such as their parents, or the siblings of their parents, siblings or any of their siblings’ spouses, they are exempt regardless of the value of the gift received. Whether it is obtained in cash, stocks, jewellery, automobiles, electronics equipment, artefacts, etc., or even immovable presents such as a house, flat or land, shall not attract any tax. They are exempt from Income Tax under Section 56 of the Income Tax Act, 1961.
6] Educational Scholarship:
The scholarship granted to meet the cost of education is exempt from income tax as per Section 10(16) of Income Tax Act 1961. However, the rules says, to claim the expenses the scholarship income should have been used only to meet the education expenses.
7] Ancestral property:
The tax applicable while inheriting an asset is called Estate Tax or Inheritance Tax. In India inheritance Tax is not levied on tax payers . Inheritance Tax is not levied in India. So any amount received by way of inheritance or amount received under a Will or in contemplation of death of the payer is exempted from income tax under Section 56 (ii) of Income Tax Act 1962.
8] Agricultural Income:
Agricultural income in India is exempted from taxation and its not included under total income of Tax payer. Agricultural income refers to income earned from sources that includes farming land, buildings on or linked with agricultural land and commercial produce obtained from horticultural land. Agriculture income is most common and widely known amoung the 8 source of Income exempt from Income Tax.
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