Income Tax News: Tax-Free Earnings You Must Know! 8 Income Sources Exempt from Tax in 2024-25, Check

Income Tax News: With 2024-25 being another financial year, the necessity to keep taxpayers very well conversant with the various sources of income which are exempt from income tax seems to become one of the most important things. Such knowledge will go a long way in tax planning and filing of returns that help people in making maximum saving while reducing their tax burdens to a minimum. Eight types of incomes that would remain free of tax in India during the year 2024-25:—

Agricultural Income

Under the Income Tax Act, 1961, income from agriculture is fully exempt from tax. These include receipts from the sale of agricultural produce and rent received from agricultural land; all other income derived from land used for agricultural purposes falls under this category.

Income from the Provident Fund

The interest that accrues on the balance in the EPF is tax-free. An amount received at the time of retirement or withdrawal from the Provident Fund is exempt from tax subject to certain conditions.

Gifts from Relatives

Gifts received from specified relatives are not chargeable to tax in the hands of the donee. Relatives include parents, siblings, spouse, and others defined under the Income Tax Act. However, as far as gifts from other persons than relatives are concerned, these are chargeable to tax if the amount is more than ₹ 50,000 in any financial year.

Income from Scholarship

Any scholarship that is received to defray the cost of education is exempt from tax. The exemption includes scholarships—both domestic and foreign—which facilitates the path of students to pursue higher education without bothering about the tax ramification for such scholarships.

Amount Received from Life Insurance

Any amount received on maturity or as death benefit under a life insurance policy is exempt from tax. However, for claiming this exemption, the premium payable on the policy should not be more than 10% of the sum assured if the policy was issued after April 1, 2012.

Gratuity Income

Gratuity received by an employee on retirement, termination, or death is exempt to the extent of a certain limit. The whole amount is exempt in the case of government employees; in the case of non-government employees, the exemption limit is specified under the Income Tax Act.

Dividend Income

Any dividends received from domestic companies are exempt to the extent of ₹10 lakh. The exemption encourages investment in the stock market and helps people get tax-free income from the investments made.

Amount Received as Inheritance

Anything received as inheritance is not treated as income, and as such, it is not taxable. That ensures tax is not charged on wealth passed from one generation to another, thereby offering security to one's heiress or heirs.

Tax Planning and Filing Returns

These exemptions are very important to understand for efficient tax planning. These exempted incomes reduce chargeable income and hence reduce the tax payable on it. While filing returns, a taxpayer should take care to correctly declare sources of income and claim exemptions under those heads for avoiding mismatch.

It is due to these exemptions that the government relieves the taxpayer of part of his financial burden, encouraging savings and investment. With the new financial year approaching, keeping oneself updated with regard to such tax-free incomes will help in making financial decisions and optimizing their tax returns.