Under income tax laws, many types of income are not taxed. Agriculture income is mainly included in this. Let us know about it in detail. Let us know about it in detail.
Income tax is an important aspect of a country’s financial system, contributing to its revenue and acting as a tool for economic regulation. In India, the Income Tax Act regulates the taxation of income earned by individuals and entities. While many types of income are subject to taxation, there are some categories that enjoy tax-free status. Come, let us understand here which five types of income are outside the scope of income tax?
Agricultural income
Agricultural income is an important category of tax-free income in India. According to the Income Tax Act, income received from agricultural activities is free from taxation. This includes revenue derived from crop cultivation, livestock farming and other agriculture. However, income earned from agricultural land located in urban areas cannot avail the benefit of this exemption.
Gifts and heirlooms
Gifts and inheritance received by an individual are generally tax-free in India. Any money or property received as gifts from relatives or on special occasions like marriage is exempt from income tax. Similarly, any inheritance received by an individual is not subject to taxation. However, gifts received from non-relatives above a certain limit may be taxable under the provisions of the Income Tax Act.
Income from life insurance policies
Income received from life insurance policies, including maturity benefit and death benefit, is tax-free under Section 10(10D) of the Income Tax Act. This exemption applies to policies issued on or after April 1, 2003, where the premium paid does not exceed a certain percentage of the sum assured. However, to avail the benefit of this tax benefit, it is important to follow the conditions specified in the Act.
Scholarships and Awards
Income received as scholarship for education or as award for exceptional achievements is exempt from income tax under section 10(16) of the Income Tax Act. Students and individuals receiving such scholarships or awards are not required to include these amounts in their taxable income. This provision encourages educational and commercial excellence by providing tax benefits to those meritorious individuals.
Provident Fund and Gratuity
Contributions to recognized provident funds, both made by the employer and the employee, enjoy tax benefits under section 10 of the Income Tax Act. Additionally, gratuity received by employees on retirement or in the event of death or disability is exempt from income tax, subject to certain conditions. The objective of these provisions is to provide financial security to individuals during their retirement years.
Income tax rules in India
Apart from understanding the tax-free income categories, it is important to be aware of the general rules governing income tax in India:
Income slabs and tax rates
Individuals are taxed based on their income slab, with different tax rates applicable to different income categories.
The government revises these slabs and rates from time to time through budget announcements.
Filing income tax return
Individuals and entities meeting the specified criteria are required to file income tax returns.
The due date for filing returns is usually 31st July of the assessment year.
Deductions and Exemptions
Various deductions and exemptions are available under the Income Tax Act, such as home loan interest, medical insurance premiums and more.
Taxpayers can reduce their taxable income by taking advantage of these deductions.
Penalty for non-compliance
Failure to comply with income tax rules may result in penalties.
To avoid penalty, it is necessary to file returns on time and provide correct information about income.
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