Which types of income are considered non-taxable?

Gifts, certain scholarships, and certain welfare benefits are considered non-taxable income because they typically do not constitute a monetary gain that is realized in exchange for services, capital, or investments. For instance, gifts are often given without expectation of return and are not earned income. Certain scholarships are designed to support educational endeavors and can be excluded from taxable income, provided they are used for qualified educational expenses. Similarly, certain welfare benefits, which are aimed at providing social support, are also not included in an individual's taxable income as they do not represent earned income through labor or investment.

In contrast, employment income, interest from savings, dividends from shares, rental income, capital gains, and royalties are generally taxable as they represent returns on work, investment, or property ownership. The tax system is designed to levy taxes on earnings that individuals acquire through active participation in the economy, rather than on transfers or benefits received without reciprocation. Thus, the specific nature of gifts, scholarships, and certain welfare benefits justifies their non-taxable status.