Tax-Free Income You Need to Know! 8 Income Sources That Are Tax-Exempt in 2024-25, Check

Income tax news: With 2024-25 being another tax year, the need to keep taxpayers well informed about the various sources of income that 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 returns that help people save maximum while minimizing their tax burden. Eight types of income that would continue to be exempt from tax in India in the year 2024-25:—

Agricultural income

Under the Income Tax Act, 1961, income from agriculture is completely exempt from tax. This includes income from sale of agricultural produce and rent received from agricultural land; all other income derived from land used for agricultural purposes comes under this category.

Income from the Provident Fund

Interest accruing 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 certain relatives are not taxable in the hands of the donee. Relatives include parents, siblings, spouse and others defined under the Income Tax Act. However, insofar as gifts from persons other than relatives are concerned, the same are taxable if the amount exceeds ₹50,000 in any assessment year.

Income from scholarships

Any grant received to cover the cost of education is exempt from tax. The exemption includes grants, both domestic and foreign, which ease the path of students to pursue higher education without worrying about the tax implications of such grants.

Amount received from life insurance

Any amount received at maturity or as a death benefit under a life insurance policy is exempt from tax. However, to claim this exemption, the premium payable on the policy must not exceed 10% of the sum insured if the policy was issued after 1 April 2012.

Tip income

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

Dividend income

Dividends received from domestic companies are exempted up to ₹10 lakh. The exemption encourages investments in the stock market and helps people get tax-free income from the investments made.

Amount received as inheritance

Anything received as an inheritance is not considered income and as such is not taxable. This ensures that no tax is levied on assets passed from one generation to the next, providing security for the heir or heirs.

Tax planning and filing returns

These exemptions are very important to understand for efficient tax planning. These exempted incomes reduce the taxable income and hence the tax payable on it. While filing returns, a taxpayer must ensure that he correctly declares the sources of income and claims exemptions under those heads to avoid mismatch.

It is through these exemptions that the government relieves taxpayers of some of their financial burdens, by encouraging savings and investment. As the new tax year approaches, keeping abreast of such tax-free income will help them make financial decisions and optimize their tax returns.