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Unemployment benefits are always a very good help for those who are unemployed and those who lost their job due to any reason. Government has always tried to compensate people accordingly. But I have always a query in my mind that do I pay taxes on unemployment. As far as I have head and read about unemployment benefits, I know that these are the funds provided by the government while you are unemployed and thus it is not the taxable income. But I am not sure about this. A lot of people have similar query in their mind. Other important thing is that these benefits are paid for a fixed period of time initially and can be extended if required afterward. I tried to search this online and I found that hundreds of people have asked the same question on different websites and have got quite mixed up answers. I went to the unemployment office in order to find out the answer but they themselves do not know about it and asked me to check this out at income tax department.