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Enjoy Tax Exempt Income

IndianMoney.com Research Team | Updated On Wednesday, February 12,2020, 05:18 PM

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Enjoy Tax Exempt Income

 

 

The popular talk around is earn, save and invest. What about taxes? Is not saving every rupee in taxes the legal way important? Yes, check the tax efficiency which is nothing but after tax return on an investment.

Want to know more on Tax Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

Enjoy Tax Exempt Income

1. Gratuity from Your Employer

You are eligible for gratuity on continuous service in an organization of 5 or more years. The gratuity you get from employer is tax-exempt up to certain limits. Gratuity is fully tax-exempt for Government Employees. It’s tax-exempt up to Rs 20 Lakhs for private employees. This is for all gratuities across work life.

See Also: What are The Steps Involved in Tax Planning?

2. Interest from EPF

You enjoy the EEE tax benefit on the EPF investment. There’s a Section 80C tax benefit up to Rs 1.5 Lakhs a year. The interest and maturity withdrawals are tax free. EPF offers an interest rate of 8.65% and is the highest among fixed income instruments.

3. Employer Contribution to EPF and NPS Account                                    

From the next Financial Year 2020-21 the contribution employer makes to your employee provident fund and NPS and superannuation fund is tax-exempt. This happens only if contributions to all your accounts are up to Rs 7.5 Lakhs in a fiscal year.

An employer contributes 12% of employee’s basic salary to the EPF account. The employer contributes up to Rs 1.5 Lakhs a year towards superannuation account. The employer may contribute up to 10% of employee’s basic salary towards NPS tier-1 account.

See Also: Last Minute Tax Planning: What You Should Do?

4. Interest From PPF

The PPF investment enjoys Section 80C tax benefit up to Rs 1.5 Lakhs a year. The interest payouts and the PPF withdrawals are tax-free.

5. Interest and Payment Received from SSY Scheme

SSY or the Sukanya Samriddhi Scheme launched as part of the 'Beti Bachao Beti Padhao' is a great scheme for the girl child. This scheme enjoys the EEE tax benefit. There’s a Section 80C tax benefit up to Rs 1.5 Lakhs a year. Interest and withdrawal at maturity are tax free.

6. Payment You Get from NPS Account

Under the tax rules, NPS maturity amount enjoys tax benefits. There’s a Section 80C tax benefits up to Rs 1.5 Lakhs a year on NPS contribution. You have 60% of NPS corpus at maturity as tax-free. The remaining 40% is compulsorily locked into an annuity plan. Annuity payouts are taxed.

See Also: All You Must Know About Tax Planning

7. Leave Encashment at Retirement

When you/employee exit an organization, the Company offers payment against leaves not availed. For private employees the leave encashment which you get up to Rs 3 Lakhs is tax-exempt. VRS is tax-exempt up to Rs 5 Lakhs.

8. Agricultural Income

Agricultural income is exempt from tax. However, agricultural income would be considered for tax purposes to assess income tax liability if these 2 conditions are met:

  • In the previous year, net agricultural income was found to be greater than Rs 5,000
  • Total income which does not include net agricultural income is greater than basic tax exemption limit.

Tax liability is computed only if these conditions are met.  

See Also: How Does an Income Tax Calculator Work?

9. Gifts From Relatives

Gifts from some relatives are not taxed. Relatives are defined as:

  • Spouse/brother/sister
  • Spouse’s brother and sister. Brother and sister of the parents.
  • Lineal ascendant or descendant of individual or spouse.

These are relatives from whom the gifts got are not taxed.

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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