Tax Free Income in India

Tax Free Income in India

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Tax Free Income in India

Certain types of incomes earned in India are exempt from income tax as per the Income Tax Act. In this article, we review a list of tax free incomes in India.

Agricultural Income

Agricultural income earned in India is exempt from tax. Agricultural income is defined as:

  1. Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.
  2. Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.
  3. Any income attributable to a farm house subject to satisfaction of certain conditions specified in this regard in section
  4. Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.

Amount Received by a Member of HUF from the income of the HUF

Amount Received by a member of HUF from the income of the HUF, or in case of impartible estate out of income of family estate is exempt from income tax.

Leave Travel Concession

An employee can claim income tax exemption for Leave Travel Concession. Exemption for leave travel concession is available to all employees (i.e. Indian as well as foreign citizens). Exemption is available in respect of value of any travel concession or assistance received or due to the employee from his employer (including former employer) for himself and his family members in connection with his proceeding on leave to any place in India.

Share of Profit in Partnership and LLP

Share of profit received by a partner from a partnership firm is exempt from tax in the hands of the partner. Further, share of profit received by a partner of LLP from the LLP is also exempt from income tax in the hands of such partner. This exemption is limited only to share of profit and does not apply to interest on capital and remuneration received by the partner from the firm/LLP.

NRI Interest Income on Notified Securities

Certain interest to Non-Residents Indians by way of interest on certain notified securities or bonds (including income by way of premium on the redemption of such bonds) is exempt from tax. Further, in the case of an individual, any income by way of interest on money standing to his credit in a Non-Resident (External) Account in any bank in India is exempt from income tax.

Finally, interest on notified savings certificates, in the case of an individual, being a citizen of India or a person of Indian origin, who is a non-resident, any income by way of interest on notified savings certificates (subscribed in convertible foreign exchange) issued before the 1st day of June, 2002 by the Central Government is exempt from income tax.

Income of a Fund Established for Welfare of Employees

Any income received by any person on behalf of a fund established, as notified by the Board in Official Gazette, for the welfare of employees or their dependents and of which fund such employees are members, is exempt from income tax, if such fund applies or accumulates its income for exclusive application towards its objects, invests its funds in the modes specified in section 11(5) and such fund is approved by the Principal Commissioner or Commissioner.

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