How many types of income are tax-free? What are the income tax rules for them? people earn income in many ways. Some work and earn money. Others earn money through different professions. Taxation on these incomes is done as per the provisions of the Income Tax Act. Although not all types of income are taxable, certain types of income do not come under its ambit. But their conditions are different. Certain types of income are not taxed under this. How many types of income are not taxed? What are the income tax rules for them? You can see about these in this post.
How many categories of tax-free income are there in India?
Income derived from agricultural activities is considered tax-free under the Income Tax Act. However, it is important to note here that income from business activities related to agricultural activities such as the sale of agricultural produce is taxable.
Gifts and Inheritance
Gifts received on special occasions such as marriage or through wills and inheritances are generally not subject to income tax. Although there are exceptions to the tax-free prize amount, a limit is also fixed.
Interest received on PPF and EPF:
Interest invested in Public Provident Fund (PPF) and Employees' Provident Fund (EPF) is tax-deductible. Both PPF and EPF, which are popular sources of long-term savings, do not attract tax.
Dividend:
Dividends received from investments in stocks and mutual funds are tax-deductible to the recipient. However, the distributing company has to pay dividend distribution tax.
Long-term capital gains on equity:
Gains on the sale of equity shares held for more than one year are tax-free. However, short-term capital gains are taxable.
This action will be taken if false information about income is given. If a person makes any wrong attempt to hide or save tax, it can create big problems for him. The Income Tax Department has already issued a warning in this regard. If someone does such work then the Income Tax department will collect a penalty from him. In case of tax evasion, the penalty may be levied on the total amount evaded from tax.
Many times taxpayers try to reduce tax liability by understating or misrepresenting income. Such persons shall be penalized under Section 270A. Be aware that as per the Income Tax Act, there is a penalty for every mistake made by the taxpayer. Apart from penalties for non-payment of self-assessment tax, failure to file return, failure to pay tax, and others, the Income Tax Department imposes penalties for understatement and misrepresentation of income.
This action will be taken by the Income Tax Department
According to the Income Tax Department, there is a penalty of 50 to 200 percent of the total amount evaded. According to Section 270A, a penalty of up to 200 percent of the tax liability or the hidden amount can be levied if false information is given in the income tax return.
However, if the separate income is understated due to some other reason, a penalty of 50 percent of the liability or hidden amount will be levied. Apart from this, the employers of such taxpayers will also be informed that the person working for them is filing false income tax returns, the Income Tax Department said.
All these things are included in the case of Misrepresentation of Income.
- Providing or concealing false information
- Failure to provide proper investment records
- Exaggerated deduction but not providing proof
- Any incorrect entry in the books of accounts
- Failure to provide records of international or specific transactions