Income tax is levied on the income earned by individuals and businesses, but not all income is subject to taxation. The income tax laws in most countries provide for certain types of income to be exempt from tax, while others are taxable.
Exempt income refers to the income which is not subject to tax. This includes income from certain sources such as agriculture, savings in certain tax-free savings accounts, gifts received from specified relatives and in specified cases, and income from certain bonds or mutual funds. The exemptions are provided to encourage certain activities or to provide relief to certain sections of taxpayers.
On the other hand, taxable income refers to the income which is subject to tax. This includes income from various sources such as salary, house property, capital gains, business or profession, and other sources. Taxable income is calculated by taking into account the exemptions and deductions that a taxpayer is eligible for, and then applying the relevant tax rates.
It is important to note that the laws regarding exempt and taxable income can vary from country to country and may also change over time. Taxpayers should be aware of the exemptions and deductions available to them and should consult a tax professional or the relevant tax authority if they have any doubts.
In conclusion, income tax laws provide for certain types of income to be exempt from tax, while others are taxable. Exempt income is not subject to tax, while taxable income is subject to tax after taking into account the exemptions and deductions that a taxpayer is eligible for. The laws regarding exempt and taxable income can vary from country to country and may also change over time. Taxpayers should be aware of the exemptions and deductions available to them and should consult a tax professional or the relevant tax authority if they have any doubts.