It is the duty of every citizen to pay their taxes if they earn taxable income. However, the idea of non-taxable income is something that might intrigue you. You must understand that taxation is not always about paying taxes. It is also about knowing when you need pay them and when you need not.
Firstly, the concept of income tax bracket is applicable on every earning member of society. You do not have to pay taxes, or pay a lower tax, if your annual income falls under a certain amount. Below are the brackets you must know about.
The income tax brackets for individuals below 60 years of age are:
|Income tax slab||Tax rate|
|Up to INR 2,50,000||No tax|
|INR 2,50,001 to INR 5,00,000||5% on the income over INR 2,50,001|
|INR 5,00,001 to INR 10,00,000||INR 12,500 + 20% of the income over INR 5,00,000|
|Over INR 10,00,000||INR 1,12,500 + 30% of the income over INR 10,00,000|
The income tax brackets for senior citizens between 60 and 80 years of age are:
|Income tax slab||Tax rate|
|Up to INR 3,00,000||No Tax|
|INR 3,00,001 to INR 5,00,000||5%|
|INR 5,00,001 to INR 10,00,000||20%|
|Over INR 10,00,000||30%|
Other than this, you might also have a source of income which is not taxable, and knowing about such sources will help you to save on your tax payments.
Returns from life insurance
Under the section 10(10d) of the Income Tax Act, 1961, death and maturity benefits received from life insurance policies are exempt from taxation.
Long-term capital gain
Any capital gain derived from shares held for more than a year listed in a recognized stock exchange that exceeds INR 1 lakh attracts 10% income tax. Any gain lower than this amount is excused from taxes.
Income from dividends
If you receive profits from a domestic company in the form of dividends, then you enjoy a tax benefit of up to INR 10 lakh. Income from equity-based mutual funds has the same benefit.
Income from agricultural products and capital gain from selling agricultural land are exempt from taxation. However, if you have any separate source of income that falls under a taxable bracket, then any earnings exceeding INR 5,000 from agricultural products will be taxable.
Income from gratuity
For government employees, gratuity received on retirement or death has no tax liability. For private sector employees, the available tax benefit is up to INR 10 lakh.
Interest received from savings account
Under Section 80TTA of the Income Tax Act, income up to INR 10,000 received as interest from your savings bank account is tax-free.
Scholarships and grants
Educational scholarships and grants are exempted from any tax.
Now that you know which income is not taxable, it will be easier for you to take them into consideration when calculating your taxes. This will save you from overpaying on income tax.