Tax free income is no doubt tax free, but, it must be declared when filing your tax returns. Many individuals consider this as tax free and hence decide not to mention the same in the income tax returns or ITR.
1) Interest on savings bank account
The interest earned on savings bank account is tax free up to an amount of Rs 10,000. So, if you have as an example earned Rs 8000 on interest income on savings bank account, it is exempted from tax. This does not mean that you do not show the interest on savings bank account. It must be shown when filing tax returns.
2) Interest on tax free bonds
A host of tax free bonds were launched a couple of years back. These included from the likes of Indian Railways Finance Corporation, HUDCO, National Highways Authority of India etc. Interest income earned from these bonds were tax free. So, if you are a holder of these bonds and have received interest income from them, you can show them in your income tax returns and then claim an exemption.
Read How and where to buy tax free bonds here
3) Interest earned on PPF
Interest earned on the PPF is tax free in the hands of the investor. However, you need to show them in your tax returns, even though it is tax free.
4) Profit on sale of shares
This is more a case of capital gains. If you buy shares and sell them after holding them for more than a year, you need not pay capital gains, as there is no capital gains applied for holding shares for more than a year. But, you must declare the profit so made on sale of these shares.
5) Dividend Income
Dividend income is also tax free in the hands of the investor. This is on the shares that you hold. However, you can mention the same in your income tax returns.
Read on all the non taxable income here
Remember, when declaring your tax returns to mention all kinds of income. This would also include interest on fixed deposits, recurring deposit, post office deposits.
Many individuals fail to even mention savings bank interest income when filing tax returns. This is totally incorrect and must be rectified.
Remember, the last day to file tax returns is the August 31, which has been extended from the usual July 31 deadline.