Keen to know ‘Which is your tax-free money’? Spare a few minutes, and have a quick look on the following points in order to find your tax-free income.
Which is your tax-free money
When it’s about paying taxes, the less the better. Filing income tax returns is a moral and ethical responsibility of every citizen, and one should not resist paying a small part of their income as tax. Moreover, individuals are of the view ‘Whatever income we receive, it is going to be taxable’. However, that is not the case. There are many categories of income which are exempt from tax. So, here we have come up with a short guide throwing some light on ‘Which is your tax-free money’.
Income from Agricultural Activities
If you receive income in the form of rent from any agricultural land located in India, then it’s tax-free. Receiving income from agricultural produce doesn’t make you liable for taxes. If you have sold any farm land in rural area, you can exclude the capital gain earned thereon while paying your taxes. In case, there are a few other sources generating income beyond the exemption limit, your agricultural income will be considered for assessing tax liability.
Individuals, who have invested in the shares of a company, tend to receive dividend (out of the profits earned) after a fixed period of time. Shareholders, receiving dividends of at most Rs. 10 lakh in a financial year, are not liable to bear any sort of tax.
Long-term Capital Gains
If you’ve been owning shares (listed on a recognized stock exchange) for more than a year, the income received on their sale will cost you ‘zero tax’. However, you must ensure that you’ve borne Securities Transaction Tax (tax charged on capital gains from securities) on such shares.
Gratuity is a monetary incentive paid by an organization to its prestigious employees. Any gratuity paid by the Central Government, State Government or local authorities to the employees, on account of retirement or death, is not at all taxable. However, the employees who are rendering services in a private organization may have to pay tax, if their gratuity goes beyond Rs. 10 lakh.
Proceeds from Life Insurance
Taking up a life insurance plan not only saves your life, but also saves you from bearing hefty tax. Once the tenure of your insurance policy gets completed, there will be no need of calculating income tax on the maturity amount that your reputed insurance company will provide. A win-win situation for the insured: His/her life is secured, and their proceeds are safe from tax too.
Allowances offered by GOI
Government of India sends allowances or remuneration to those persons who are providing their valuable services, while living outside the country. Any such allowance received by the individuals won’t be counted in while calculating tax.
Grants and Scholarships acquired for covering the cost of education
Cost of education, takes your tuition fees and every other expense that is incidental to procuring education from schools and universities, into consideration. So, if you have received scholarship and grant from an educational institute, or government, it will be assumed as a tax-free income.
Profits gained from a partnership company
If you are working as a partner in an organization, your portion of profits received won’t carry any sort of tax along. Phew!! A relief for all partners.
‘Which is your tax-free money’ should not be a riddle anymore for anybody now. The aforementioned income sources won’t make you liable for tax, provided your receipts or income is within the exemption limit. If you know some more sources which are exempt from tax, tell us about them in the ‘comments’ section below.