There are several important classes of income that are tax-exempt.

Income of a Disabled Person - 100%

The income of a person with a 100% disability or that of a person with a 90% degree of blindness is exempt from tax to an annual limit of NIS 614,400.
This figure is true of an individual's earned income (salary, business).
Passive income (rent, interest and the like) is exempt up to NIS 73,520 per annum.

Allowances

The following allowances are exempt from tax:
1) An allowance for war injury or for a injury suffered as a result of enemy action.
2) Disability allowances and old-age pension that are paid by the National Insurance Institute.
3) Allowances from countries outside Israel that are payable in Israel.

Rent from a Residential Apartment

In order to encourage the rental of empty flats while maintaining rents at a reasonably low tax, in tax year 2021 an exemption is allowed on an apartment rented for residential purposes up to a limit of NIS 5,070 a month.



Profit on the Sale of an Apartment

The profit from the sale of an apartment, subject to certain conditions, is, in most cases, tax-exempt. There are two principles of law that apply to most cases of a tax-exempt sale of a residential apartment:
1)The sale is of a single residential apartment, that is that you have no other apartment.
2)If the sale price is less than IS 4.455 million.
The exemption applies to non-residents too if they do not own a flat in their residence country.

Prizes, Inheritances and Gifts

Prizes, such as a win in a lottery up to a limit, inheritances and gifts that are received other than as a result of a business relationship, are tax-exempt in Israel.
(Prizes & lottery, only up to IS 30,360 IS per lottery are tax exempt).

Severance Pay

An employed person in Israel is entitled to severance pay at the rate of one monthly salary for each year that he has worked.
The limit of the monthly sum that is exempt from tax is NIS 12,340.
If the gross salary, which represents the basis for severance pay is higher than this, the difference will be taxable.



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