Some of the common types of income which are exempt from tax:
1. Agricultural Income: Agricultural income in terms of rent from land situated in India or from agricultural produce is fully exempt from tax. However, agricultural income exceeding Rs.5,000 would be included for calculating tax liability in case you have any other sources of income exceeding the basic exemption limit. Further, any capital gain on sale of agricultural land in rural area is also exempt from tax.
2. Long-Term Capital Gains: Income earned from sale of shares held for more than 1 year and listed on a recognized stock exchange is also exempt from tax, if STT is paid on it.
3. Dividend income earned from investing in shares & equity-oriented mutual funds: Any income received from a domestic company in the form of dividends (dividends as referred in Sec. 115-O) is exempt from tax up to Rs.10 lakh.
4. Income from Gratuity: Any gratuity received by an employee of the Central government, State government or local authority, on death or retirement, is fully exempt from tax. However, in case you are a private company employee, gratuity received from your employer (subject to such conditions as specified under the Income Tax Act) would be exempt up to a maximum of Rs.10 lakh.
5. Life insurance proceeds: Life insurance proceeds received on maturity are exempt from tax provided the premium paid to actual capital sum assured does not exceed the prescribed thresholds provided under the Income Tax Act.
6. Share of profit received from partnership firm: If you are a partner in a firm, your share in the total income of the firm shall be fully exempt, provided the firm is subjected to tax on the profits.
7. Receipts received by a member from a HUF: Sum paid out of income of family or income of impartible estate or any money received out of income of HUF is fully exempt in the hands of the family member.
8. Scholarships & grants granted to meet the cost of education: The exemption is irrespective of actual expenditure incurred by the recipient to meet the cost of education. ‘Cost of education’ includes not only the tuition fees, but all other expenses which are incidental to acquiring education. Scholarship may have been given by Govt., University, Board, Trust, etc.
9. Allowance or perquisites received from Government of India: If you are an IFS aspirant or rendering any kind of service outside India, good news is the money received in the form of any allowances, remuneration or perquisites from the government is fully exempt from tax.