Income tax rules in India are created to make sure that people and businesses pay taxes on the money they earn.
But, there are certain types of income that don’t get taxed.
Learning about these sources of income that don’t have taxes can help people and businesses make smart financial choices.
Below listed Income Sources are not taxed in India
Agricultural Income
One well-known kind of tax-free income is the money earned from farming.
According to Section 10(1) of the Income Tax Act, 1961, income from farming is not taxed.
The reason behind this rule is to help and support the farming sector, which is important for the country’s economy.
Tax-free farming income encourages farmers to invest in their farms and improve their farming methods.
Gifts and Inheritances
Gifts received by people in India are usually not taxed, as long as they meet certain conditions mentioned in Section 56(2) of the Income Tax Act. Similarly, property inherited from family members is also not taxed.
This rule exists because taxing gifts and inheritances wouldn’t help families financially, and it would make it difficult to pass money between generations.
Interest on PPF and EPF
The interest earned on investments in Public Provident Fund (PPF) and Employees’ Provident Fund (EPF) is tax-free.
These investments are encouraged because they help people save for the long term and secure their financial future. The government encourages citizens to contribute to these plans by not taxing the interest earned.
Profit on Long-Term Investments
Profits from selling certain assets like stocks and mutual funds are tax-free if you hold onto them for a long time.
This is called Long-Term Capital Gains (LTCG), and it’s tax-free if it meets certain conditions.
The government does this to encourage people to invest for the long term in the stock market.
However, short-term gains are still taxed.
House Rent Allowance (HRA)
Part of a person’s salary called House Rent Allowance (HRA) can be tax-free if certain conditions mentioned in section 10(13A) are met.
This rule is in place to ease the financial burden on people who live in rented homes.
It’s important for taxpayers to understand these categories of income that don’t get taxed so they can plan their finances accordingly.
These exemptions are meant to support specific sectors, promote long-term savings, and provide relief in specific situations.
