Tax-Free Incomes

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Generally the more you earn, the more would be tax liabilities. After all we live in India and as per Indian Laws we are liable to pay taxes on our Income.
But Fortunately there are few incomes which are not taxable. There still exist certain Income on which your tax liability is ZERO. These incomes are not added to your "Total Income'' and hence it remains tax free. In this article, we will discuss few such income sources which are tax-free. Take a note that this article is written with a view to provide information with respect to  exemptions/benefits from Income tax only to the Resident Individual . Let's save some taxes:- 
    

1. Dividend Income:-

  • Dividend received from domestic company(read Indian Co.) is tax free. 
  • There is an upper limit of Rs.10,00,000 in this exemption. So dividend beyond Rs.10,00,000 is taxable at 10%.

2. Income from Mutual Funds:-

         
  • There are two types of Incomes one can generate from Mutual Fund one is Capital Gain from sale of Units and Other One is Dividend Income.
  • Dividend received on Mutual Funds Units are tax free.
  • However Capital Gain from Sale of Units of Mutual Fund is taxable.

 3.Wedding Gifts:-

 
  • If you want to save tax then get married .(lol) On the occasion of Marriage one can receive any amount as Gift which is totally tax free.
  • So if you are going to receive gift of any valuation then enjoy this is exempt from tax.

4. Cash Gifts from Relatives:- 

  • Gift received from relatives are exempt from tax. However you need to understand the meaning of relative which is given under Income Tax Act, Relative means:-
    • Husband or Wife
    • Brother or Sister of Individual
    • Brother Or Sister of Spouse
    • Linear ascendant or descendant of Individual
    • Linear ascendant or descendant of Spouse 
    • Spouse of the person mentioned above.

 5. Gifts from Non- Relatives:- 

  • Any gift received from non-relatives upto Rs. 50,000 (in a year) is totally tax free.
  • The Gift may be in the form of money, jewellery, property, vehicle or any means.

6. Claims on Life Insurance:-  

 
  • The maturity money received by the policy holder from life insurance companies on maturity, claims from money back endowment policy is NOT taxable.
  • The maturity money received by the nominee of the policy holder from the life insurance companies on the death is policy holder is totally tax free.

7. Interest from Banks:- 

 
  • If Your age is Less than 60 years:-
    • Interest income upto Rs.10,000 received from Savings Account with Banking Company, Co-operative Banks or Post office is tax free. However beyond 10,000 this is taxable.
  •    If Your age is 60 years or more:-
    • Interest income upto Rs.50,000 received on any deposit with bank, co-operative bank or post office is NOT taxable. However beyond Rs.50,000 income is taxable.
  • Bank Interest of a girl child from Sukanya Sambridhi Scheme is tax free

8. Agricultural Income:-

  • Central Government has not constitutional right to impose tax on income from agriculture..
  • Income from any kind of farming activity is tax free.
  • There is no tax on any level of agriculture income such as
    • Production of Crops
    • Processing of Crops
    • Sale of Crops
    • Rental Income from agriculture land or building
    • Profit from Sale of Agriculture land.

9. Scholarships & Awards:-

  • Any kind of scholarship granted to meet the cost of education is exempt from tax.
  • Any rewards or awards given by government for literary, scientific or artistic work or for service for alleviating the distress of the poor, the weak and the ailing, for proficiency in sports & games and Gallantry awards are completely tax free.

10.Receipt from Providend Fund:-
  • Amount received from recognised providend fund or approved superannuation fund, or PPF is not taxable.
  • Receipt from Employee providend fund is exempt only if there was active contribution for at least 5 years to such fund.

 11.Componets of Salary:- 

  • A standard deduction of Rs.50,000 which means you will always get deduction of Rs.50,000 on your salary income.
  • Traveling or tour allowance is fully exempt.
  • Conveyance allowance is not taxable.
  • Uniform allowance is exempt
  • Daily allowance and Helper Allowance( for office allowane) is tax free.
  • Medical Insurance premium paid by employer is not taxable.
  • Internet Bills
  • Loan amount upto Rs20,000 then interest benefit is not taxable.
  • Gift in kind whose FMV is less than 5000 is fully exempt.
  • House Rent Allowance subject to some conditions & limitations
  • These perquisites are fully tax free:-
    • Telephone/ mobile bill paid or reimbursed by Employer.
    • Scholarship to employee's children.
    • Goods sold by employer to employee at reasonable price.
    • Tax on Non- monetary perquisites paid by employer.
12.Retirement Benefits:-
  • These benefits are exempted either wholly or partially depends upon if he is a government employes or non government employees. This benefit is available subject to some condition and limitation. To know in details about such conditions feel free to mail us.
  • Those retirement benefits are:-
    • Leave Encashment
    • Gratuity
13.Pensions:-
  • Pension & Family pension of gallantary award winners is fully tax free.
  • Family pension by self or family members of the armed forces personnel is fully exempt.
  • Pension received from some organisation like UNO, WHO, World Bank is tax free.
  • Family pension received by dependents of an employee is exempt upto 1/3rd of pension or Rs.15000 which ever is lower.
14.Long Term Capital Gain:-
  • Long term Capital Gain on Sale of Listed Equity Shares which are subjeted to STT is exempt upto Rs.1,00,000.
  • Compensation received on compulsory acquisition of urban agriculture land is not taxable.

 15. Inherited Properties:-

 
  • Any property received in heritance from parents or as under will is exempted from tax.
  • Any property received on the partial or total partiton of HUF is not taxable.
  • So if your ancestor have written a WILLputting your name as their nominee after their life, then the property will be yours and completely tax free.
16. Interest Income:-
  • Interest on Gold Deposit Bonds are tax free.
  • Interest on certain deposits for Bhopal Gas Victims are exempted.
  • Interest on certain new tax free bonds and tax free infrastructure bonds to be notified from time to time. 
  • Interest from tax free infrastructural bonds are exempt.
 17. Basic Exemption :-
  • You will always get benefit of basic exemption limit irrespective of your total income and source of income. It means up to a certain level you don't need to pay any tax.
  • If your age is below 60 years then you don't need to pay any tax upto Rs.2,50,000.
  • If your age is 60 or above but below 80 years then you don't need to pay any tax upto Rs.3,00,000.
  • If your age is 80 years or above then upto Rs.5,00,000 there is no tax.
These are only few portions of tax free incomes which i have covered in this article. If you have any doubt on tax free incomes feel free to comment or contact us. Our intension is to create awareness to the people who don't know these kinds of income opportunities which are tax free.
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