3 Types of Tax-Free Incomes

No one is a stranger to the fact that when you earn an income you have to pay a tax on it. However, not all incomes are taxed.

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The following are the three kinds of incomes on which you don’t have to pay tax:

1. Interest Earned from a Savings Account

As per section 80TTA of the Income Tax act you are allowed to earn a tax-free income in the form of interest from a savings account. However, the tax-free interest income is capped at Rs. 10,000. Thus, if the total annual amount earned in the form of interest from all of your savings account is higher than Rs. 10,000 you will have to pay tax on the extra amount.  

2. Capital Gains on Equity Investments

Not only equity investments offer high returns in the long-term, they also have tax benefits as well. If you sell long-term equities or equity mutual funds (when you have retained your investment for at least a year) then the capital gains obtained from them will be tax-free. You will, however, still need to pay the taxes on securities’ transaction.

3. Provident Funds Returns

Both types of Provident Funds, i.e. EPF (Employee Provident Fund) for the salaried individuals, and PPF (Public Provident Fund) for everyone offer tax benefits. However, you can enjoy tax returns with the former only if you redeem it after at least 5 years, and in the case of the latter after 15 years.

Depending on the amount you have put in mutual funds, or in your savings account, you can save a lot of money through tax-deduction. Unfortunately, many people are unaware of this.