Tax Free Incomes – The Essential List Two


(Last Updated On: August 29, 2019)

We hope that you have already gone through the part one of the two blog series on tax-free income but there’s much more left then you thought, so here we have tax free incomes in store.

We all love saving taxes and getting income tax refund!!!

At the time of income tax filing, double check to see you have not paid any online income tax s on any of these incomes.

  • Provident Fund (PF): Exemption / Tax treatment in respect of amount received from public provident fund/ statutory provident fund/ recognized provident fund/ unrecognized provident fund are as follows:
 Statutory Provident FundRecognized Provident FundUnrecognized Provident FundPublic Provident Fund
Employer’s ContributionExempt.Exempt upto 12% of Salary.Exempt.Not Applicable for employers as its only for Individuals and HUF.
Employee’s ContributionDeduction under section 80C subject to Rs 1,50,000 limit.Deduction under section 80C subject to Rs 1,50,000 limit.Deduction under section 80C is not available.Eligible for deduction under section 80C subject to Rs 1,50,000 limit.
InterestExempt.Interest credited to such fund upto 9.5% p.a. is exempt.Exempt.Exempt.
Lump sum Amount received at the time ofterminationExempt.Exempt subject to certain conditions.Employee’s contribution is exempt & interest on employee contribution is taxed under the head “Income from other sources”.Employer’s contribution and interest thereon are taxed as salary income; however, an employee can claim relief u/s 89 in such case.Exempt.
  • Superannuation fund:

The employer’s contribution upto Rs. 1,50,000 p.a. is exempt and in excess of Rs 1,50,000 is taxable as perquisite. The employee’s contribution qualifies for deduction u/s 80C and interest on the accumulated balance is exempt.

  • Sukanya Samriddhi Scheme

In case if you have opened an account in accordance with the Sukanya Samriddhi Account Rules, 2014, then interest and withdrawals are exempt from tax. Also, you can claim deduction in section 80C for investment in this scheme subject to the limit of Rs 1,50,000.

  • Exemption in regard to allowances granted to an employee

As per section 10(14), read with rule 2BB, there are certain allowances granted to an employee which are exempt from tax subject to a certain limit, the major ones are mentioned below:

AllowanceExemption Limit
Children Education AllowanceUp to Rs. 100 per month per child up to a maximum of 2 children is exempt.
Hostel Expenditure AllowanceUp to Rs. 300 per month per child up to a maximum of 2 children is exempt.
Transport Allowance granted to an employee to meet expenditure on commuting between place of residence and place of duty.Up to Rs. 1,600 per month is exempt.
Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office.Exempt to the extent of expenditure incurred for official purposes.
Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
Helper/Assistant Allowance
Uniform Allowance
Travelling Allowance to meet the cost of travel on tour or on transfer.
  • Travel concession

This concession is can get dual benefits for you – holiday + income tax refund.Any travel concession or assistance received from your employer (including former employer) to you and your family for proceeding on leave to any place in India is exempt and shall not be included in your taxable income. The amount of exemption depends on the mode of transportation. However, amount exempt shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.

  • Interest on Investment

We know that you invest a lot, and in return, a lot of interest income are received. Well, for the next time you can keep in mind the following interest incomes which are exempt from tax:

  • Interest, premium on redemption, or other payment on notified securities, bonds, certificates, and deposits, etc. subject to notified conditions and limits. For example, interest on post office savings bank account is exempt up to Rs 3,500 in case of individual account and Rs 7,000 in case of joint account
  • Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetization Scheme, 2015.
  • Also, you can claim deduction of up to Rs 10,000 for interest on bank savings deposit and post office saving account u/s 80TTA.
  • Long-term capital gains arising on transfer of securities u/s 10(38) are exempt in your hands, if the following conditions are satisfied:
  • The asset transferred should be equity shares of a company or units of an equity oriented mutual fund or a unit of a business trust.
  • The transaction should be liable to securities transaction tax, at the time of transfer.
  • Such asset should be a long-term capital asset, and
  • Transfer should have taken place on or after October 1, 2004.
  • Dividends and interest on units

The following income are exempt in your hands:

  • Any income by way of dividends covered by section 115-O [i.e., any dividends from a domestic company other than dividends covered under section 2(22) (e)];
  • Any income in respect of units of a mutual fund;
  • Income received by a unit holder of UTI;
  • Income in respect of units of a specified company.

However, as per section 115BBDA (as inserted by Finance Act, 2016), in the case you are a resident individual, dividend shall be taxed if aggregate amount of dividend received during the year exceeds Rs. 10,00,000/-

Thus, we hope now you are better aware of all tax free incomes and will make the most of this information at the time of income tax filing! So, just relax and save tax with our help! In case you still have doubts, contact us at [email protected] or call +91-9660996655!

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.