- Income tax is not always about paying taxes on income and earnings
- There are several provisions under which you can rest assured that you need not pay tax on
- Some may be applicable to all, while some of the avenues are unique to few professions and people in some professions
Proceeds from life insurance: Life insurance death claims and maturity benefits are exempt from income tax as mentioned under Section 10(10D) of the Income Tax Act.
Long term capital Gains: Investments in equities shares, listed on a recognised stock exchange and units in equity mutual funds held for more than a year, when sold or redeemed are exempt from capital gains tax, as the tax rate is nil for investments in equities that are held for more than a year. In case of shares, the exemption is available if the STT (securities transaction tax) is paid.
Dividend income: Any income received by way of dividends from a domestic company is exempt from tax up to Rs 10 lakh and so is the case in case of equity-oriented mutual funds:
Agricultural Income: Earnings from agricultural produce is fully exempt from tax. However, agricultural income exceeding Rs 5,000 would be included for calculating tax liability in case you have any other sources of income exceeding the basic exemption limit. Further, any capital gain on sale of agricultural land in rural area is also exempt from tax.
Gratuity income: Any gratuity received by an employee of the Central Government, State Government or local authority, on death or retirement is fully exempt from tax. In case you are employed in the private sector gratuity received from your employer, would be exempt up to a maximum of Rs 10 lakh.
Interest from Savings Bank Account: Interest income earned through money in the savings account up to Rs 10,000 in a financial year is tax free under Section 80TTA.
HUF receipts: Any sum paid out of income of family or income of estate that cannot be parted or any money received out of income of HUF is fully exempt in the hands of the family member.
Profit from partnership firm: If you are a partner in a firm, your share in the total income of the firm shall be fully exempt, provided the firm is subjected to tax on the profits.
Scholarships and grants: Any grant or scholarship to meet the cost of education is exempt irrespective of actual expenditure incurred by the recipient to meet the cost of education. Cost of education; includes not only the tuition fees but all other expenses which are incidental to acquiring education. Scholarship may have been given by Govt., University, Board, Trust, etc.