Tax-free income in India: Explore 10 such sources to earn

Published on: 22 August 2023

Earning tax-free income means you can save big on your taxes. Did you know that there were multiple means that help you do just that? From gratuity to income from agriculture, you can use wisely safeguard such hard-earned money and use it for all of life’s upgrades and emergencies. 

Keep reading to know more about these lucrative tax-free sources of income in India.

10 Sources of Earning Tax-Free Income in 2023

If you are wondering what are the tax-free sources of income in India, here is a list you can consult. 

1. Income from Agriculture

Any earnings you get through agricultural land or activities are exempt from taxation under Section 10(1) of the Income Tax Act. To a certain extent, income from farmhouses is also tax-free.  

2. Profit from Partnership Firm

If you are a partner of a partnership firm or LLP, your share of revenue is non-taxable income in India as per Section 10(2A). However, you need to know that this is only applicable to profit share and not interest on capital or remuneration.

Also Read How to get personal loan without income proof

3. Earnings from Public Provident Fund

The interest income you get from PPF provident fund is exempt from income tax as per section 10. Additionally, any amount you get from the maturity of PPF is tax-free. 

4. Maturity Amount from Insurance

If you are a policyholder or a nominee of a life insurance policy, you need to know that the amount you get from the insurance company, including bonuses, is tax-free in India. This only applies to life insurance and its provisions are defined under Section 10(10D). 

5. Payments from a Hindu Undivided Family (HUF)

As an individual receiving a receipt of income from the HUF as a HUF member, the amount is free of any tax liability. However, there is a condition. The HUF should have undergone a separate tax assessment. You do not need to pay tax on this income if this criterion is met.

6. Amount Received as Gratuity

Any gratuity upon retirement or death is fully exempt from tax if you are a government employee as per Section 10(10)(i). If you work in the private sector, the gratuity amount you get upon retirement or termination is exempt to up to ₹20 lacs as per Section 10(10)(ii). 

Also Read How much personal loan can i get on 30000 salary

7. Tax-Free Pension Income 

As a government employee, any pension that is owed to you in lieu of a monthly pension is exempt from tax. As a private employee, you can get a lump-sum pension with either a standard deduction of ₹15,000 or a third of the pension amount, which is lower. However, remember that is only applicable if you receive gratuity along with the pension amount. 

8. Compensation from the Employer

Any allowance or compensation you get over and above your salary from the company you are working in is also exempt from tax as per certain provisions. This includes leaving travel allowance, conveyance allowance, uniform allowance and more. Even children’s allowances related to education are exempt up to certain limits. 

9. Gifts from Friends and Family

You do not need to pay tax on gifts, including property, vehicles, jewellery, etc. However, if you get these gifts from someone other than your relative, the exemption limit is ₹50,000. There is an exception to this rule when you get a gift on your marriage; it becomes fully tax-free, regardless of whether it’s from a friend or a relative. 

10. Income from Awards or Scholarships

When the government, be it state or central, awards a monetary payment to you, you do not need to pay tax on it as per Section 10 (17A). This includes awards like the Bharat Ratna. Similarly, if you are awarded a scholarship for education from the government or even through non-government institutes, it is tax-free. 

Now that you know what is tax-free income, and its various sources in India, make the best use of this information. If you fall short of funds, whether, during tax season or any other time, you can apply for Personal Loan from Fibe. Get up to ₹5 lakhs with a simple online application in just 2 minutes. To get started, download our Personal Loan App or by login to our website.

FAQs on Tax-Free Sources of Income

Which income is not taxable in India?

Tax-free income in India includes income from agriculture, provident fund, certain capital gains, pension, gratuity, maturity amount from insurance and more. 

What income is tax-free?

Income on which you do not need to pay tax is called tax-free income. These include the earnings you get by investing in PPF, the amount you get as gratuity and pension, etc.

How much is tax-free income in India?

In India, you do not need to pay any tax on income up to ₹2.5 lakhs. If your income exceeds this tax bracket, you need to pay income tax. However, you can use rebates, deductions as well as exemptions to pay no tax even if your income is up to ₹10 lakhs or over. 

What is taxable income in India?

Taxable income refers to the income after exemptions and deductions on which you need to pay the income tax. 

How is ₹7 lakhs income tax-free?

In India, you do not need to pay tax in India if your annual income is ₹7 lakhs or a little over thanks to the deductions in the old regime and the tax rebates in the new regime. 

Which income does not attract any tax?

Income from agriculture, share from HUF, compensation from employees, provident fund, capital gains, pension, gratuity, etc., does not attract any tax in India.

Sources: https://incometaxindia.gov.in/Tutorials/11.Tax%20free%20incomes%20final.pdf