There are innumerable incomes under the Income Tax Law which are exempted from the purview of tax. These incomes are known as exempted incomes.
For example, interest income from tax-free bonds as also any income from agriculture are some items of exempted incomes.
There are other exempted incomes also which are discussed in Chapter IV of this book. Proper planning of your investments in a way so as to generate tax exempt incomes is another golden rule of tax planning.
Oh, yes! You can achieve zero-tax status if all your income taken together in one financial year does not exceed ` 2,00,000. Thus, income tax is payable only when the net taxable income of financial year 201 2-2013 for an individual tax payer, exceeds ` 2,00,000. Besides, there are innumerable options when you may have annual income much higher than ` 2,00,000 — it may even run into a few Lakh and Crore — but still you may not be required to pay income tax. This is possible only when your income in excess of ` 2,00,000 in a financial year arises from tax-free sources. One such example is the interest income arising to an individual from Tax free Bonds issued by various public sector companies. The interest on these bonds, irrespective of the amount would be completely exempt from income tax notwithstanding the fact that the income may far exceed ` 2,00,000 in the FY 2012-2013 relevant to the AY 2013-2014. Similarly, the dividends received from companies are also tax exempted.
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