income tax
Many individuals believe that all forms of income are taxable; however, certain types of income are exempt from taxation. To take advantage of these exemptions, it's essential to be informed about the relevant rules. Below, we outline various sources of income that are not subject to tax.
Income received through inheritance, including property, jewelry, or cash from parents, is completely tax-free. If you inherit assets through a will, those funds are also exempt from taxation. It’s important to note, however, that any income generated from these inherited assets may be taxable.
Gifts provided by friends or relatives around the time of your wedding are not subject to tax, regardless of the gift's value. However, gifts received significantly after the wedding date, such as six months later, may be liable for tax. Additionally, any gifts exceeding a value of ₹50,000 will incur taxes.
If you are a partner in a firm and receive profit shares, these amounts are not taxed, as the partnership firm has already paid taxes on these earnings. This tax exemption pertains solely to profits. Conversely, any salary drawn from the firm is taxable.
Money received from life insurance claims or maturity is fully tax-exempt, provided that the annual premium does not exceed 10% of the sum assured. If the premium exceeds this threshold, the excess may be taxable, with some scenarios allowing for a tax exemption of up to 15%.
Investments in shares or equity mutual funds may yield returns up to ₹1 lakh exempt from taxation under Long Term Capital Gains (LTCG). Earnings above this threshold are subject to LTCG tax.
Understanding these tax-free income sources is essential for developing a robust financial strategy. By utilizing exemptions related to inherited wealth, wedding gifts, and life insurance claims, individuals can effectively minimize their tax liabilities. Stay vigilant and ensure you maximize your earnings during the filing of your Income Tax Returns (ITR).