How to report tax-exempt incomes in ITR-1
This is the third tab of the online ITR-1 form that is available on the income tax department’s e-filing website. A separate head for reporting exempt incomes is given after the details related to income and tax-saving deductions under sections 80C to 80U is mentioned.
The drop-down provides 16 sub-heads. Let us have a look at the options which are the most commonly used to report tax-exempt incomes.
If in FY 2018-19 you have received maturity proceeds from your life insurance policy then, even though it is tax -exempt, you are required to report it your ITR. You will be required to report this by selecting – ‘Section 10(10D) – Any sum received under life insurance policy, including sum allocated by the way of bonus on such policy except sum as mentioned in sub clause (a) to (d) of Section 10(10D)’ under the head ‘Exempt income’.
Do keep in mind that maturity proceeds received from an insurance policy is exempt from tax if it satisfies certain conditions. As per the rules, maturity amount will be tax-exempt if:
a) Premium paid during any year does not exceed 20 percent of the actual sum assured for a policy issued on or after April 1, 2003 but on or before March 31, 2012.
b) The premium paid during any year does not exceed 10 percent of the actual sum assured for policy issued on or after April 1, 2012.
Chartered Accountant Naveen Wadhwa says, “If you have received money from insurance policy by surrendering it, then it might be taxable in certain situations.”
Withdrawal from Statutory Provident Fund
Statutory Provident Fund (SPF) is meant for employees working in Government or Semi-Government organisations, local authorities, universities, recognised educational institutions or railways. Any withdrawal made by an employee from SPF if tax-exempt is required to be reported.
To report this tax-exempt income, select – ‘Section 10(11) Statutory Provident Fund received’ option from the drop down menu.
Withdrawal from Recognised Employees’ Provident Fund
Private sector employees are usually covered under the Recognised Provident Fund (RPF) under the Employees’ Provident Fund Act. If you have withdrawn money from your EPF account, then you are required to report the same by selecting – ‘Section 10(12) Recognised Provident Fund’ from the drop-down menu.
Remember, withdrawal from PF account will be tax-exempt only if you have completed five years of service. “Withdrawal from PF after the completion of five continuous years of service is exempt from tax. However, you are required to report the withdrawal in your ITR. The five years can be completed with one or more employer. Any withdrawal before the completion of five years will be taxable in your hands unless the amount is withdrawn on termination of job by reason of ill health or discontinuance of employer’s business or reasons beyond the control of the employee or if amount standing in his account is transferred to his pension scheme under Section 80CCD,” says Wadhwa.
Any amount received at the time of retirement from PF account is exempt from tax.
(Screenshot from Income Tax e-filing website to report exempt incomes)
(List of exempt incomes to be reported in ITR-1)
Section 10 (13) approved superannuation fund received
Superannuation fund is a retirement benefit provided by the employer to an employee. To build the superannuation fund, the employer makes a contribution every year to the group superannuation policy.
Wadhwa says, “Superannuation benefits are taxed at two stages. The first stage is when the employer contributes to the superannuation fund. The second stage is at the time of disbursal of superannuation benefit. Any contribution to an approved superannuation fund by the employer in excess of Rs. 1.5 lakh per employee shall be chargeable to tax in the hands of such employee. Payments received from an approved superannuation fund are fully taxable when the employee leaves the organisation except where he/she leaves due to retirement, death or incapacitation.”
Any payment made from a superannuation fund to an employee is exempt from tax only if it is made on the death of the employee, or in commutation of an annuity on his retirement at or after a specified age or on him becoming incapacitated.
The payment from a superannuation fund claimed to be exempt from tax will have to be reported in ‘Section 10(13) – Approved Superannuation Fund Received’ from the drop-down menu.
Exempted dividend income
Dividends received by you are not taxable in your hands. However, you are required to report them as your tax-exempt income. For the dividend received by you in FY 2018-19, you are required to report the same by selecting – ‘Section 10(34) (Exempted Dividend Income).’
Wadhwa says, “If dividend received by a resident shareholder exceeds Rs 10 lakh in FY 2018-19, then it will be taxable at the rate of 10 percent. Also, if you have received dividend from a foreign company, then these will be chargeable under the head ‘Income from other sources’ at the tax rates applicable to you.”
Agriculture Income not exceeding Rs 5,000
If you have earned any sort of agriculture income which does not exceed Rs 5,000 in FY 2018-19, then you are required to report the same in your ITR as tax exempt income.
Select ‘Agriculture income (=<Rs 5000)’ from the drop down menu and enter the amount received by you. “If agriculture income exceeds Rs 5,000, then return can’t be filed in ITR-1. In that case, the return shall be filed either in ITR 2 of ITR 3,” informs Wadhwa.
Apart from the incomes mentioned above, if you have received any other tax-exempt income such as interest from Public Provident fund (PPF) or maturity proceeds from PPF, then you are required to report such income by selecting – ‘Any Other’ option and providing description in respect of that income.
There are certain incomes which are usually received by few people. If you have received any of the incomes mentioned below, then select the option and enter the amount below.
Section 10 (10 BC): Any amount from the Central/State Govt/local authority by way of compensation on account of any disaster
Section 10 (16): Scholarships granted to meet the cost of education
Section 10 (17): Allowance to MP/MLA/MLC
Section 10 (17A): Award instituted by Government
Section 10(18): Pension received by winner of Param Vir Chakra or Maha Vir Chakra or Vir Chakra or any other gallantry award
Defence medical disability pension
Section 10(19): Armed forces family pension in case of death during operational duty
Section 10(26): Any income as referred to in Section 10(26), i.e., income received by scheduled tribes residing in specified areas
Any income as referred to in section 10(26AAA), i.e., income of a Sikkimese individual from any source in the State of Sikkim.