Tax Free Income: Every citizen of India whose annual income is more than 2.5 lakh rupees, then he comes under the purview of income tax. But there are some sources of income from where the income is not covered by income tax. However, some conditions also apply with them. Today we will tell you about tax free income tax.
Income from farming is completely tax free. If you are a partner in a firm, then the amount received as share of profit is tax free, as the company has already paid tax on it. Keep in mind that tax exemption is only on profit and not on salary.
- The gifts you receive are taxable. Gifts received by the taxpayer are taxable under section 56(2)(x) of the Income Tax Act, 1961.
- If you have received gifts from friends and relatives on marriage, then tax will not have to be paid on them. These gifts (movable and immovable property) should not exceed Rs 50000. Along with this, these gifts should be received on the date of marriage or a date around it.
According to the Income Tax Act, if gifts are received from certain people or relatives, then they are not taxed, even if they are more than Rs 50000. Know who those special people are.
- gift from husband or wife
- gift from brother or sister
- Gift received from brother or sister of husband or wife
- Gift received from brother or sister of parents
- gift or property received by inheritance or bequest
- Gift received from any immediate ancestor or descendant of the spouse
- Gift received from any member in case of Hindu Undivided Family (HUF)
- Gift received from local authority like Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board
- Gift from any fund/foundation/university or other educational institution, hospital or other medical institution, trust or institution referred to in section 10 (23C)
- Gift received from a charitable or religious trust registered under section 12A or 12AA
- If an employee leaves the job after working for 5 consecutive years in an organization, then he gets gratuity.
- Gratuity comes under the purview of tax exemption.
- Gratuity up to Rs 20 lakh is tax free for a government employee.
- In case of private employee, gratuity up to Rs 10 lakh is tax free.
- If the employee withdraws his Employee Provident Fund (EPF) after working for 5 consecutive years, then it will be tax free.
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.
- The money invested in Public Provident Fund (PPF), the interest earned and the amount received on completion of the maturity period are all tax free.
Interest on NRE Savings/FD Account
- The interest earned by NRI on NRE (Non Resident External) account is tax free in India. This includes interest earned on both NRE savings account and NRE FD accounts.
Amount received from HUF
- Income received by way of inheritance or income from Hindu Undivided Family (HUF) is also exempt from tax under section 10(2) of the Income Tax Act.
- Scholarship received from government or private organization for study or research is tax free.
- All types of educational scholarships (from school to college level and received while studying abroad) are outside the purview of tax.
Money, jewelry and property received from parents
- Property, jewelery or cash inherited from parents or family is exempt from tax.
- Property or cash received through a will is also not taxed.
- Keep in mind that the Income Tax Department can question the taxpayer regarding this transaction.
- If this happens, then the taxpayer will have to prove that the amount or property has been received by him by parents, will or family inheritance.
- If the taxpayer earns by investing the amount received or receives income or interest from the property, then he will have to pay tax on the income from these.
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