If you do a job or business somewhere, then you may have to pay Income Tax. Employed people have to pay income tax not only on salary but also on many things like interest coming from savings, earning from home, side business, capital gains. But do you know that there are some sources of income which do not have to pay income tax on the income earned. According to tax experts, section 10 of the Income Tax Act deals with such tax-exempt income. Let us explain about them in detail.
Income from Agriculture
India is an agricultural country. In order to promote the agriculture sector in the country, income from agriculture has been kept out of the purview of income tax in the Income Tax Act, 1961. That is, no income tax is levied on income from agriculture.
EPF
Even in the case of EPF, if the person withdraws the EPF amount after five consecutive years of service, then no income tax is payable on it.
PPF
PPF amount and the amount invested in Public Provident Fund i.e. PPF, interest earned on it and the amount received on completion of maturity period are all income tax free.
Gratuity Amount
If an employee leaves the company after working for 5 years in an organization, then he gets gratuity amount. This amount comes under the purview of tax exemption. Gratuity up to Rs 20 lakh is tax free for a government employee. Whereas gratuity up to Rs 10 lakh is tax free for private employees.
Amount received in VRS
The amount received on taking Voluntary Retirement (VRS) before retirement of a government employee will be tax free up to Rs 5 lakh. However, this facility is available only to government employees.
Gift
If a gift is received from friends or relatives in marriage, then tax does not have to be paid on it. The condition in this is that you got the gift around your wedding. If a gift is given after six months, then income tax exemption will not be available on it. Also, the value of the gift should not exceed Rs 50,000.
Amount received from HUF
Under section 10(2) of the Income Tax Act, the amount received from Hindu Undivided Family (HUF) or inherited income is also not chargeable to tax.
Money/jewelry/property received from parents
Inherited property, jewelry or cash by parents or family members are exempt from tax. Property cash received in the will is also not taxed. If the taxpayer wants to earn by investing the amount received from the parents, then he will have to pay tax on the income from this.
NRE Savings / FD Account Interest
Interest received by an NRI person on a non-resident external account is tax free in India. Interest earned on both NRE FD and savings account is not taxable.
Scholarship
Scholarships received from the government or any private organization for study or research are tax-free. All types of scholarships are outside the purview of tax.