In the complex landscape of taxation, understanding which income sources are exempt from taxes can significantly impact your financial planning. While taxes are an unavoidable part of life for most people, certain avenues offer the opportunity to earn income without the burden of taxation. In this article, we’ll delve into various sources of tax-free income, shedding light on how individuals can leverage these opportunities to enhance their financial well-being.
Wedding Gifts: Gifts received from friends or relatives during weddings are another source of tax-free income. Whether in the form of cash, jewelry, or other valuables, wedding gifts are exempt from taxation up to a certain limit.
Inherited Wealth: Inheriting assets such as property, jewelry, or cash from parents is a common occurrence. The good news is that inherited wealth is typically exempt from taxation. Whether received through a will or direct transfer, these assets carry no tax liability for the recipient. However, any income generated from inherited assets in subsequent years may be subject to taxation.
Profit from Partnership Firms: Partnership firms often distribute profits among partners, and this income is generally tax-free. The rationale behind this exemption is that the partnership firm has already paid taxes on its profits. However, it’s essential to differentiate between profits and salary income from the firm, as the latter is subject to taxation.
Life Insurance Claims or Maturity Amounts: Proceeds from life insurance policies, whether received as a claim or maturity amount, enjoy tax-free status. However, certain conditions may apply, such as the annual premium not exceeding a certain percentage of the sum assured. Any excess premium may be subject to taxation.
Returns from Shares or Equity Mutual Funds: Returns generated from the sale of shares or equity mutual funds may qualify for tax exemption under Long Term Capital Gains (LTCG). Currently, gains of up to Rs 1 lakh are tax-free, with amounts exceeding this threshold subject to LTCG tax.
Click Here to Read Exempt income under Income Tax
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