There is another head that is equally important because the individual can get the benefit of having income and at the same time not having to pay tax on it. This is called tax free income and it consists of flows that are considered as income but there is a special tax effect for such inflows as they will not be considered for the purpose of calculation of the total tax to be paid by the individual. There are several heads of income like dividend or agricultural income or even long term capital gains from equities and equity oriented funds that are tax free in nature.
The real benefit of the tax free income is that the amount earned here does not have to be added to the other figures that would be taxable so this goes outside of all the workings for the different heads of income. There is a separate space in the income tax return where the tax free income has to be mentioned and hence this is something that will have to be disclosed by the individual. Another point is that since there is no inclusion of such a figure in the taxable workings there is also no way in which any of the deductions can be set off against such income because for the purpose of taxation this is not entered into the workings at all.
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
- ICICI Prudential Tax PlanInvest Online
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- Birla Sun Life Tax Relief '96 Invest Online
- IDFC Tax Advantage (ELSS) Fund Invest Online
- SBI Magnum Tax Gain Scheme 1993 Invest Online
- Sundaram Tax Saver Invest Online
- Edelweiss ELSS Invest Online
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