Should one mention non-taxable income in income tax returns?

Hi,

Have 2 queries regarding non-taxable income:

1) What\’s the purpose of mentioning non-taxable (exempt) income while filing tax returns? What problem(s) can be encountered if you omit this?

2) Upon Equity MF redemption (>1yr),  Exempt income = Redemption amount – Principal. If this is -ve , it will be loss and thus reduce the Total Exempt income – Is this understanding correct?

Thanks in advance.