Exempt Income in ITR 1 and ITR 2
Still scratching your head on selecting the correct ITR Form? Before going ahead you must first know the most debated term of ITR i.e. Exempt Income. Both ITR 1 and ITR 2 have this term but there are no official wordings on the incomes which are included in exempt income by the tax department. Since it plays important part for salaried person in deciding the right ITR form to file, it becomes utmost necessary to know the incomes included in the exempt income term.
Why knowing Exempt Income is Important?
Last year a new rule for tax filing was announced that if the total exempt income of the assessee during the year exceeds Rs 5,000 he should file return in ITR 2 not ITR 1.
Which Incomes comes under Exempt Income List?
Followings are the inclusive list of Exempt Income:
- Agriculture Income [Sec. 10(1)]
- Payments received from family income by a member of HUF [Sec. 10(2)]
- Leave travel concession provided by as employer to his Indian citizen employee [Sec. 10(5)]
- Any sum received on life insurance policy (including bonus) is not chargeable to tax Any sum (including bonus) on life insurance policy (not being a keyman insurance policy) [Sec. 10(10D)]
- Any amount from provident fund paid to retiring employee [Sec. 10(11)]
- Amount from an approved superannuation fund to legal heirs of the employee [Sec. 10(13)]
- House rent allowance subject to certain limits [Sec. 10(13A)]
- Interest from certain exempted securities [Sec. 10(15)]
- Scholarship granted to meet the cost of education [Sec. 10(16)]
- Family pension received by family members of armed forces [Sec. 10(19)]
- Income of a minor child up to Rs. 1,500 in respect of each minor child whose income is included under section 64(1A) [Section 10(32)]
- Dividend on or after April, 2003 from domestic companies [Section 10(34)]
- Income on units of Mutual Funds on or after April 1, 2003 [Section 10(35)]
- PPF or PF Interest
- Interest on Tax free Bonds
- Dividend on Shares
- Gratuity, Leave Encashment, Commuted Pension
Therefore, clearly almost all of taxpayers may have to file ITR – 2 positively. There may be rare or limited cases only qualifying for ITR-1. Please be guided as clarified above and take appropriate action of filing Electronic Return in proper Return form.
Where to show Exempt Income in ITR?
Exempt Income in ITR 1
Exempt Income in ITR 2