With March 31 approaching, taxpayers are looking for ways to earn or receive money without increasing their tax liability. Good news — the Income Tax Act provides several legal tax-free income sources.
Here are 7 types of income that are completely tax-exempt in India (if you follow the rules).
1. Agricultural Income (Section 10(1))
- Fully exempt if earned from farmland within India
- Includes rent, sale of produce, and related income
- Note: Can impact tax slab for high-income earners under aggregation rule
2. PPF & EPF Interest (within limits)
- PPF interest is 100% tax-free
- EPF interest is tax-free up to ₹2.5 lakh annual contribution
- Above this, interest on excess is taxable
3. Long-Term Capital Gains on Equity (Up to ₹1 Lakh)
- LTCG on stocks/equity mutual funds taxed at 10% only if gains > ₹1 lakh/year
- Plan withdrawals accordingly to stay under this cap annually
4. Gifts from Relatives (Section 56)
- Gifts in cash, property, gold, or shares from defined relatives are fully exempt
- Also exempt if received on marriage or via inheritance
5. Life Insurance Maturity (Section 10(10D))
- Fully tax-free if premium <10% of sum assured (and not ULIP over ₹2.5L/year)
- Applies to endowment, term, and traditional LIC policies
6. Scholarship Income (Section 10(16))
- Any scholarship granted for education is fully exempt, regardless of amount
- Applies to school, college, and competitive exam grants
7. HUF Partition & Family Settlements
- Amount received on HUF partition or family arrangement is not considered income
- No tax, no capital gain — provided it’s properly documented
Pro Tip:
Plan your gifts, equity withdrawals, and LIC maturities smartly to fall under these tax-free categories — especially before March 31.
Social Caption:
Looking to earn without paying tax? These 7 income sources are 100% legal and 100% tax-free under Indian tax laws. Use them smartly before March 31!
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