Everyone tries to minimize their income tax, and there are few incomes in India which are 100% tax free. Today I have listed few incomes – if you earn any of these incomes then you no need to pay any tax at all.
5 tax free incomes in India
1. Profits from mutual fund and shares
Mutual fund’s which invests at-least 65% of its fund amount into equity and equity related instruments are known as equity mutual funds. If you have held any of these equity mutual funds for over 1 year and gain profit on these investments – it will be considered as Long-term capital gain, this profit will be 100% tax free as per Income tax rules in India.
Fund’s which invest less than 65% of its total fund amount into equity and equity related instruments are known as debt mutual funds. If you have held any of these debt mutual funds for over 3 years and gain profit on these investments – it will be considered as Long-term capital gain, this profit will be 100% tax free in India.
For example, if you invest Rs 50,000 in any of Equity mutual fund like Large-cap fund, Mid-cap fund, Equity oriented balanced funds etc. and after 1 yr its worth is 75,000 – in this scenario, you will not be paying any tax on this 25,000 gain/profit as this will be under Long term capital gain.
2. Interest earned on any saving bank account
Under Income tax section 80TTA, any interest earned upto 10,000 a year on deposits from saving account held with Banks, Post Office and with Cooperative banks are tax-free in India. This applicable only to saving account and not applicable to interest earned from FD/any term deposit. This deduction is addition to 1.5 lakhs of section 80C.
For example, if your saving account earned Rs. 30,000 from all your bank accounts – out of that Rs 10,000 will be tax free and rest 20,000 will be added to your taxable income.
3. Gift received on marriage
Any amount received as gift on your marriage is totally tax free under income tax act in India. So any gift or valuable things received from your family or friends on your marriage will be considered as non-taxable for you. This deduction only allowed to your own marriage and not for your sister / brother / Son / daughter’s marriage.
4. EPF amount
Under, Rule 8 of Part A of the Fourth Schedule of Income Tax Act – Any amount withdrawn after 5 years from your Employee Provident Fund account is fully tax free. Also, when employee service is terminated before 5 years due to employee’s ill health or any other reasons beyond the employee’s control, the EPF amount will be fully tax-exempted.
5. Interest earned from your NRE account is exempt from income tax
Any NRI can open an NRE account through a bank in India or abroad, this saving account is fully & freely repatriable, where NRIs can easily move their principle and interest money back to their respective country. Interest earned from NRE account in India is fully tax free. NRE account can be a Fixed Account or any Saving Account.
Apart from these there are also, few other tax free incomes in India like Amount received from WILL, Dividends received from mutual funds and shares, Claim amount or maturity received from Life Insurance Companies etc.