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What are tax-free income sources apart from agriculture?

There are some sources of income that are not taxable in India. Income generated from agriculture is one of them.

Some of the other sources of income that are not taxable include:

  • Gifts:A gift received from relatives, as defined under income tax laws, including spouse, brother or sister and ascendant, is exempted from income tax. The value of the gift is immaterial in such a case. This exemption can be claimed under section 56(ii) of the Income Tax Act. If the gift is from someone other than the relatives defined above and is valued below ₹ 50,000, it is exempted from income tax. If the value is over ₹50,000, then the gift (either cash or kind) is taxable. Wedding gifts are also tax-free. If the gifted property is valued over ₹ 50,000, stamp duty is taxable if no consideration is paid by the receiver. If the receiver makes a part consideration, the difference between stamp duty and the part payment is taxable if it is above ₹50,000. Stamp duty is based on market value. Property or wealth received by a will or inheritance from ancestors is not taxable.

  • Gratuity:A government servant’s gratuity is exempted from income tax. For non-government employees, gratuity is not taxable under the Gratuity Act of 1972 if it is the least of the following three counts:
      1.15 days salary based on the last drawn salary for every year of employment.
    2. ₹ 10,00,000 
    3. Total gratuity received.
      If the person has received gratuity upon retirement, he or she need not pay tax. If the person’s widow/widower receives the gratuity, it also gets a tax exemption.

  • Partnership shares:If an individual is a partner of a firm, the shares the person owns in the total firm, income is exempted from income tax, under section 10(2). Other sources of income that the partner of a LLP or partnership firm receives, (other than profit share),  including interest or remuneration are taxable.

  • Scholarships or awards: Scholarships given by private and governmental institutions are tax-exempted. The government instituted awards are also tax-free.

  • PPF and EPF: Public Provident fund (PPF) and Employees’ Provident Fund (EPF) withdrawn after maturity are tax-exempted. EPF gets a tax exemption if the person has put in five years of employment without a break in service.

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