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Time of India

ITR filing FY 2024-25: Don't make the mistake of not reporting tax exempt incomes such as PPF, gratuity; here's why

But many taxpayers make the mistake of not mentioning exempt incomes in their income tax return. (AI image) ITR filing FY 2024-25: PPF interest is tax free. So is the interest coming from tax free bonds. The maturity proceeds of life insurance plans are also exempt from tax. But while the taxman lets you pocket these tax free incomes, he demands full disclosure. 'While exempt income is not taxable, it is mandatory to disclose it in ITR under the 'Exempt Income' schedule,' advises Nishant Khemani, Managing Partner of the Saturn Consulting Group. There are several sources of tax free income (see table). But many taxpayers make the mistake of not mentioning these incomes in their return. Reporting your exempt income in your tax return isn't just about ticking a box — it's about ensuring that you don't face scrutiny later in life. When it comes to filing your tax return, transparency is critical. The return must account for all financial transactions during the year. This includes incomes that are tax free. This disclosure is mandatory if your gross total income exceeds the basic exemption limit or you are otherwise required to file an ITR. Though there is no penalty for not reporting this income, taxpayers who include this income in the tax return will find it easier to explain the source of funds in future, especially for high-value exempt receipts like maturity of PPF account or life insurance policy. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Muradnagar Knee Pain Treatments Might Surprise You Knee Pain Treatment | Search Ads Undo 'If a large amount (more than Rs 50 lakh) is deposited in a savings bank account in a year, the bank is obliged to report it to the tax authorities,' warns Umesh Jethani, Founder of Apki Return. Keep in mind that the Annual Information Statement may already have records of exempt income (tax-free bond interest, life insurance receipts, provident fund payments). If these are missing from your ITR, it can trigger a notice for 'information mismatch'. Though it will ultimately get resolved, there is the possibility of a delay in processing refunds if the return is flagged for verification. Exempt income Income tax section Exemption condition Receipts from Provident Fund 10(11) Fully exempt. PPF interest 10(11) Fully exempt. Withdrawal from Provident Fund after 5 years 10(12) Fully exempt. Sukanya scheme interest & maturity 10(11A) Fully exempt. Life insurance maturity proceeds 10(10D) Exempt if annual premium is up to 10% of sum assured Leave encashment on retirement 10(10AA) Fully exempt for Govt employees; partly exempt for others. Retrenchment compensation 10(10B) Exempt up to specified limits. VRS receipts 10(10C) Exempt up to ₹5 lakh once in a lifetime. Tax-free bond interest 10(15) Applies to notified bonds (e.g., NHAI, REC). Gifts from specified relatives 56(2)(x) Exempt if from defined relatives, on marriage or mundan ceremony Scholarships 10(16) Fully exempt. Awards and rewards (approved by govt) 10(17A) Exempt if notified. Gratuity 10(10) Exempt up to ₹20 lakh for non-Govt. HUF income 10(2) Exempt if received as a member of HUF. Share of profit from a partnership firm 10(2A) Exempt in partner's hands; firm pays tax. Agricultural income 10(1) Fully exempt; must still be disclosed. If more than ₹5,000, separate computation in Schedule EI. Stay informed with the latest business news, updates on bank holidays , public holidays , current gold rate and silver price .