Taxpayers need to understand these rules to comply with the Income Tax Act. Additionally, staying informed about exemptions and deductions can help individuals with their tax liabilities. Let us know about it in detail.
People have many sources of income. Some earn money by doing a job and some earn money by doing business. Taxation on these incomes is done under the provisions of the Income Tax Act. Although not all types of income are tax-free, certain types of income do not come under its purview but their conditions are different. Under which some types of income are tax-free. Come, let us know here how many types of income are not taxed and what are the rules for it?
How many types of tax-free income are there in India?
agricultural income
Income received from agricultural activities is considered tax-free under the Income Tax Act. However, it is important to note here that income from commercial industries related to agricultural activities, such as sale of agricultural produce, is taxable.
Gifts and Inheritance
Gifts received on occasions such as weddings or through wills and inheritances are generally not subject to income tax. Although there is an exception to the amount of tax-free gifts, a limit has also been set for it.
Interest received on PPF and EPF
Interest earned on investments in Public Provident Fund (PPF) and Employees Provident Fund (EPF) is tax-free. Both PPF and EPF are popular sources of long-term savings.
Dividend
Dividends received from investments in stocks and mutual funds are tax-free in the hands of the recipient. However, the distributing company is liable to pay dividend distribution tax.
Long-term capital gains on equity
Profits from sale of equity shares held for more than one year are exempt from tax. However, short-term capital gains are subject to taxation.
