Saturday, 16 November 2013

Tax Free Incomes


Some of the incomes are completely exempted from income tax and that too without any upper limit.   The following incomes which are tax free :-
(a) Interest on EPF / GPF / PPF
(b) Interest on GOI Tax Free Bonds / Tax Free Bonds issued with specific stipulation to this effect
(c) Dividends on Shares and Mutual Funds.  Dividend income from companies / Equity Oriented Mutual funds is completely exempt in the hands of investors.  Dividend is also tax free in the hands of investors in case of debt-oriented Mutual Fund schemes.  (However, the Asset Management Company is liable to deduct 22.44% distribution tax in case of non individuals / non HUF investors and 14.025% in case of individuals or HUF investors.)
(d) Capital receipts from Life Insurance policies i.e. sums received either on death of the insured or on maturity of Life insurance plans.  However, in case of life insurance policies issued after March 31, 2004, exemption on maturity payment u/s 10(10D) is available only if premium paid in any year does not exceed 20% of the sum asssured;
e) Interest on Saving Bank accounts in banks upto Rs10,000/- per year (from FY 2012-13)
(f) Interest earned was Tax Free up to INR 3500/- per year in single and INR 7000/- in Joint account up to 2011-12.  From 2012-13 FY, interest up to INR 10,000/- per year either in single or joint account

(f) Long term capial gains on sale of  shares and equity mutual funds after 01/10/2004, if security transaction is paid / imposed on such transactions.

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