Question

Name three income types to be included in Gross Income and three types of income tax can be excluded from Gross Income. Please explain why you believe each item you have included in as excluded income qualifies for that designation.

Answer 1

Three type of income excluded from gross income

1.Agricultural income

india is primarily an agrarian economy. To boost the agricultural sector as a whole, the Indian Income Tax Act of 1961 exempts any income one generates through agriculture from tax liability. However, agriculture income is included while computationf forthe limited purpose of determining the tax rate, in computing the income tax liability if the net agricultural income exceeds Rs 5,000

2. Receipts from Hindu Undivided Family: If you receive ortinherit money as a member of a Hindu Undivided Family (HUF), it is exempted from any income tax obligation.

The reason for exclusion is simple that huf is a separate assessable entity

3. Scholarships and awards:

Any kind of scholarship or award granted to any deserving student to meet the cost of education is exempted from tax under Section 10(16) of the Income Tax Act of 1961.

There is no cap on the maximum limit and the entire sum of money received as a scholarship gets the tax exemption treatment.

3 incomes excluded in gross income are following

1 rental income to be charged in house property all money received from tenant

2 interest income on fixed deposit

This must be chargeable because earning income riskfree treated as part of other income

3 Alimony. Alimony you receive is taxable income