Income tax free investment Options: Every year, before filing tax, the preparation for submitting investment proof begins. This time is especially important for the employed. It is very important to invest and submit proof before the end of the financial year. In such a situation, you must know where your money is safe and you do not have to pay any tax on it (Tax free investment). In the old tax regime, those with an annual income of more than Rs 2.5 lakh come under the purview of income tax. But, whether the income is less or more, if you know where tax will not be levied, then you can also sit relaxed.
On which income tax is not to be paid
There are some sources of income where there is no need to pay tax. Income from farming is completely tax free. If you are a partner in a firm, then the amount received as profit sharing is tax free. Because, the company has already paid tax on it. Tax exemption is only on profit. At the same time, there is no tax on the income from some of your investments.
Voluntary Retirement Service (VRS)
If a government employee takes voluntary retirement before his actual retirement, then up to Rs 5 lakh on this amount is tax free. This facility is only for government employees.
Amount received from HUF
Under Section 10(2) of the Income Tax Act, any money received from an Undivided Hindu Family (HUF) or by way of inheritance is completely tax free.
Money/jewellery/property received from parents
Property, jewellery or cash inherited from parents or family members are not taxable. Property and cash received through a will are also not taxable. If a taxpayer wants to earn money by investing the money received from parents, then he will have to pay tax on the income earned from it.
Gifts are also tax free
Although gifts are taxable. Under Section 56(2)(x) of Income Tax 1961, taxpayers have to pay tax on gifts received. However, there is no tax on gifts received on marriage and from friends and relatives. These gifts should not exceed Rs 50,000. The gifts should be given on or around the wedding day. However, according to income tax rules, gifts received on marriage from certain people do not come under the scope of income tax even if the value is more than Rs 50,000. 1. Gift received from spouse 2. Gift received from sibling 3. Gift received from parent’s sibling 4. Property received through inheritance or will 5. Gift received from any fund/foundation/university or other educational institution, hospital or other medical institution, trust or institution under section 10 (23C) 6. Gift received from any charitable or religious trust registered under section 12A or 12AA.
Interest on NRE saving/FD account
The interest earned by an NRI person on a Non Resident External Account is tax free in India. The interest earned on both NRE FD and savings accounts is not taxable.
Gratuity
It is very important for a working person to understand the rules of gratuity. If you work for 5 years in any institution, then gratuity is payable on it. This is according to the current rules. The entire amount of gratuity is tax exempt. For a government employee, gratuity up to Rs 20 lakh is tax free. Whereas, for a private employee, gratuity up to Rs 10 lakh is tax free.
PPF Investment
Although the tax rules on EPF are different, but if seen in simple terms, there is no tax on withdrawal after investing for 5 consecutive years.
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