Tax · Guide

Exempt income: what you do not pay tax on

Short answer

Exempt income is income the law keeps out of tax. The common ones are agricultural income, gifts from relatives, and gifts from others up to Rs 50,000 a year. Capital gains reinvested under 54EC or 54F can be exempt too. Exempt income is still reported in your return, in the exempt income schedule.

Not all money you receive is taxed the same way. Some is fully exempt, some is exempt up to a limit, some reduces taxable income as a deduction, and some perks are taxed at a fixed value rather than their real cost. This hub sorts the common cases and links to a full guide on each.

By FinancePaisa Editorial Team · Research & editorialUpdated 22 October 2026 · 2 min read

On this page (5 sections)

Which income is tax-free in India?

Income or payment	Treatment	Guide
Agricultural income	Exempt; counted for the rate on other income if over Rs 5,000	Agricultural income exemption
Gift from a relative	Exempt, no limit	Gifts exemption
Gifts from non-relatives	Exempt if the year's total is Rs 50,000 or less; otherwise all taxable	Gifts exemption
Gifts on marriage, or by inheritance or will	Exempt	Gifts exemption
Long-term gain reinvested in 54EC bonds or a house (54F)	Exempt to the extent reinvested	Capital gains on sale of land
Children's tuition fees	Not exempt income: a deduction within the 80C limit (old regime)	Tuition fees deduction
Employer car and driver	Taxable perquisite at a fixed monthly value	Driver salary perquisite
HRA	Partly exempt under the old regime	HRA exemption

Agricultural income
Treatment
Exempt; counted for the rate on other income if over Rs 5,000
Guide
Agricultural income exemption
Gift from a relative
Treatment
Exempt, no limit
Guide
Gifts exemption
Gifts from non-relatives
Treatment
Exempt if the year's total is Rs 50,000 or less; otherwise all taxable
Guide
Gifts exemption
Gifts on marriage, or by inheritance or will
Treatment
Exempt
Guide
Gifts exemption
Long-term gain reinvested in 54EC bonds or a house (54F)
Treatment
Exempt to the extent reinvested
Guide
Capital gains on sale of land
Children's tuition fees
Treatment
Not exempt income: a deduction within the 80C limit (old regime)
Guide
Tuition fees deduction
Employer car and driver
Treatment
Taxable perquisite at a fixed monthly value
Guide
Driver salary perquisite
HRA
Treatment
Partly exempt under the old regime
Guide
HRA exemption

What is the difference between exempt income and a deduction?

Exempt income never enters your taxable income: agricultural income or a gift from your father is not taxed at all. A deduction is subtracted after income is added up: tuition fees reduce taxable income under 80C, and only under the old regime. Exemptions mostly apply in both regimes; most deductions do not apply in the new regime.

Do I need to show exempt income in my ITR?

Yes. Exempt income goes in the exempt income section of your return. ITR-1 allows agricultural income up to Rs 5,000; above that you need ITR-2 or another form. Reporting it matters because AIS often shows the underlying transaction, such as a large deposit or a property registration, and an unexplained gap can lead to a notice.

Frequently asked questions

Is exempt income the same in the old and new regime?

Mostly yes: agricultural income and gifts from relatives are exempt in both. Some allowances, such as HRA, are exempt only under the old regime.

Is PPF interest exempt?

Yes, PPF interest and maturity are exempt. This hub focuses on the cases salaried readers ask about most; see the 80C guide for PPF.

Sources & references

What is the tax treatment of agriculture income? — Income Tax Department (checked 22 Oct 2026)
Gifts received from relatives are exempt from tax: who is a relative? — Income Tax Department (checked 22 Oct 2026)
Various exemptions available from capital gains — Income Tax Department (checked 22 Oct 2026)
Section 80C — Income Tax Department (checked 22 Oct 2026)
Provisions of the Income-tax Act, 1961 vis-a-vis Income-tax Act, 2025 — CBDT

Rates, fees, eligibility, and product terms cited on this page reflect the sources above at the time of publication and may have changed since. Always verify directly with the lender or regulator.