N-CSR

Item 1: Report to Shareholders

 Tax-Free Income Fund February 29, 2008 

The views and opinions in this report were current as of February 29, 2008. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund’s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.

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Manager’s Letter

Fellow Shareholders

Tax-free municipal securities struggled in the 6- and 12-month periods ended February 29, 2008. In the last six months, munis were pressured by reduced liquidity and a continuing flight to quality, as monoline insurers unexpectedly reported significant mortgage-related exposure that seemed to jeopardize their ability to insure against municipal bond defaults. In an attempt to keep financial market turmoil and tighter lending conditions from pushing the economy into a recession, the Federal Reserve slashed the fed funds target rate from 5.25% to 3.00% in the last six months. The T. Rowe Price Tax-Free Funds produced mixed returns in the 6- and 12-month periods, as shorter-term and higher-quality municipal securities outperformed longer-term and lower-quality issues, but they outperformed their average competitors.

HIGHLIGHTS

• Municipal securities were pressured by reduced liquidity and a flight into Treasuries during the past six months.

• The funds’ returns were mixed, as shorter-term and higher-quality municipal securities outperformed longer-term and lower-quality issues.

• All four portfolios outpaced the average returns of their competitors during both the 6- and 12-month periods under review, thanks to our proprietary research, lower expenses, and investment strategies.

• Municipal bonds now offer compelling valuations relative to taxable bonds for investors in all tax brackets; valuations currently are more attractive than at any time in recent memory.

MARKET ENVIRONMENT

Economic growth slowed dramatically during the second half of our fiscal year. According to current estimates, the economy expanded at an annualized rate of only 0.6% in the fourth quarter of 2007 versus 4.9% in the third quarter. With the housing market continuing to deteriorate, the manufacturing and services sectors beginning to show signs of contraction, inflation pushing higher, and recent job growth sluggish, it seems that the economy is teetering on the edge of a recession—conventionally defined as two consecutive quarters of negative GDP growth.

As subprime mortgage losses mounted in the last six months and banks significantly curtailed their lending activities in an attempt to avoid additional losses, the Federal Reserve took several actions to encourage lending, increase liquidity, and keep credit market turmoil from toppling the economy. Perhaps the most far-reaching of these actions was a substantial, multistep reduction in the fed funds target rate—an interbank lending rate that banks also use as a benchmark for their prime lending rates to consumers—from 5.25% to 3.00%. Although inflation is currently higher than monetary policy officials would prefer, the central bank seems poised to continue cutting rates in the months ahead to keep the economy from deteriorating further. (After our reporting period ended, the Fed reduced the fed funds rate to 2.25% on March 18.)

Long-term municipal rates edged higher for most of the year, with 30-year AAA yields moving from about 4% to 4.4% at the beginning of February. In the last month of our fiscal year, these rates gapped up to more than 5%, as fears about monoline insurance companies, combined with a seizing-up of the auction-rate market, drove demand for municipals to very low levels. The broader environment weighing on brokerage firms’ need for capital meant there was little capacity left to support the municipal market.

Municipal bond yields are typically lower than taxable bond yields because their interest payments are exempt from federal income taxes. But due to a substantial February sell-off in the municipal market, tax-free bond yields spiked sharply above the yields of Treasury bonds with similar maturities. As of February 29, for example, the 4.12% yield offered by a 10-year municipal bond rated AAA was an unprecedented 117% of the 3.51% yield offered by a 10-year Treasury. In comparison, high-quality 10-year municipal bonds have provided an average of about 81% of the yield offered by 10-year Treasuries since 1990.

MUNICIPAL MARKET NEWS

New municipal issuance in 2007 reached a record $427 billion, according to The Bond Buyer, eclipsing the previous record of $408 billion in 2005. While demand from retail investors has been strong given the adjustment in tax-free interest rates, overall demand for tax-free securities from nontraditional investors, such as hedge funds and foreign entities, has slowed down, which has contributed to municipal market weakness. Although conventional new supply is down thus far this year, there has been an increase in secondary supply—stemming in part from the unwinding of structured transactions that create floating-rate securities from pools of long-term municipal bonds. In addition, tax-free bonds have been lagging in part because of concerns that the economic slowdown and falling real estate values will have an adverse impact on revenues collected by municipal governments.

The failure of the auction-rate securities (ARS) market in February is a relatively new concern for municipal investors. ARS typically have long-term maturities, but because they are structured with interest rates that are reset every seven, 28, or 35 days through an auction process, many have invested in these securities with the view that they could be treated as cash equivalents. Auctions have been failing because broker-dealers who typically support this market are either unable or unwilling to do so in the current environment. At this time, we believe that failures within the ARS market represent a liquidity issue, rather than a credit issue, and that the short-term credit implications for ARS issuers will be contained. However, an extended dislocation or a permanent end to this market in conjunction with the inability of certain issuers to refinance their debts could have a material impact on certain ARS issuers, particularly those with weaker financial situations.

Yet another negative factor affecting the municipal market is lingering uncertainty regarding monoline insurers that guarantee the timely repayment of bond principal and interest when an issuer defaults. Monoline insurers, which insure about half of the $2.5 trillion municipal bond market and are typically AAA rated by the major credit rating agencies, have come under substantial pressure due to apparently high exposure to structured financial products that house significant subprime mortgage risk. Downgrades of monoline insurance companies could compromise the related guarantees that they provide to a large portion of the municipal market and therefore lead to subsequent downgrades of the bonds they insure. This could force some portfolios to sell holdings whose ratings have fallen outside of a permissible range.

Although we realize this negative environment may linger, we have a positive long-term outlook for the municipal asset class. Current valuations, with AAA tax-exempt yields higher than Treasury yields across all maturities, present an attractive option for taxable investors in any tax bracket. The municipal bond market remains a high-quality market, where about half of the outstanding bonds are rated AAA or AA without an insurance guarantee. Many of the concerns regarding the financial health of monoline insurers seem to have already been discounted by the municipal bond market. Valuations of municipals relative to Treasuries are at historically cheap levels.

At T. Rowe Price, as an ongoing and integral part of our municipal bond investment process, we have always evaluated the fundamental merits of the issuer of each municipal bond investment, whether the security is insured or not. We believe this rigorous attention to fundamental research will continue to reward our investors over the long term.

PORTFOLIO STRATEGY

TAX-EXEMPT MONEY FUND
The fund outpaced its Lipper peer group average during the 6- and 12-month periods ended February 29, 2008, with returns of 1.42% and 3.12% versus 1.32% and 2.86%, respectively.

The past six months represent one of the most challenging market environments faced by the money market industry. Like a slow-moving wave, credit worries, liquidity concerns, and changing valuations—all stemming from the subprime mortgage crisis—rolled across the money markets. During the fall of 2007, investors focused their concerns on taxable money funds and their holdings of structured investment vehicles (SIVs)—short-term debt issued at relatively low rates that are used to buy higher-yielding assets, notably asset-backed securities that were at risk of credit rating downgrades. The focus turned to tax-exempt markets in late 2007, as new concerns about the viability of the monoline insurers, guarantors of much of the debt in the municipal money market, dominated the headlines. As experienced in the taxable money market during the fall, the municipal money market suffered similar dislocations, with investors quickly moving away from tainted monoline-insured debt in favor of investments deemed less prone to ratings downgrades, with spreads widening dramatically. We reduced exposure to insured bonds to 14% and held only securities that would still be money fund eligible if the insurance were not a factor.

During the reporting period, short-term interest rates dropped precipitously as the Fed cut the overnight funds rate 225 basis points (2.25%) to forestall the economic consequences resulting from the credit crunch. Short-term municipal yields fell far less than the fed funds rate. The aforementioned spread widening mitigated the decline in the overall level of interest rates. Seven-day municipal variable rates averaged 3.29% over the past six months versus 3.70% the prior six months—a decline of only 41 basis points. Longer-dated municipals, as represented by the one-year note yield, moved lower by 139 basis points to end the period yielding 2.27%. The substantially greater move in longer-term yields reflected a reaction to Fed easing and investor preference for “clean” state and local fixed-rate general obligations, without credit enhancement.

Our strategy reflected our expectations for ongoing Fed rate cuts as the credit crisis intensified. Therefore, our weighted average maturity remained substantially longer than that of our peer group, which gave us some yield advantage as interest rates fell. Our preference for high-quality, “untainted” variable-rate paper resulted in some sacrifice in yield as spreads widened over credit concerns; however, we remain convinced that prudence remains the hallmark of a well-managed money fund. As always, the fund never invests in securities subject to the alternative minimum tax (AMT). Our strategy in the near term remains centered on quality and liquidity. We expect the Fed to reach its terminal funds rate by early summer, although market disruptions are likely to persist intermittently.

The events of the past six months provide stark reminders to investors to remain true to a sound investment strategy based on solid credit work and a thorough understanding of liquidity provisions. There is no “free lunch;” higher returns are the result of higher risk. A long-instilled culture of prudent investing at T. Rowe Price means that, while large parts of the municipal money markets were convulsing with credit concerns, your fund was positioned to meet its investment mandate with minimal disruption. With the current credit cycle still having a long way to go before the excesses of the past few years are resolved, we remain extremely vigilant to any risks that might affect our shareholders.

TAX-FREE SHORT-INTERMEDIATE FUND
The fund significantly outpaced its Lipper peer group average during the 6- and 12-month periods ended February 29, 2008, with returns of 2.28% and 3.49% versus 1.52% and 2.43%, respectively. Dividends per share amounted to $0.09 over the last six months, and the portfolio’s 30-day SEC yield was 2.50%. The fund’s net asset value per share increased $0.03 to $5.34 as interest rates declined.

During the past six months, we maintained the same investment strategy that we had adopted in the spring of 2007. Our goal was to keep the portfolio’s duration, a measure of a fund’s sensitivity to interest rates (see Glossary for a more detailed explanation), longer than that of the benchmark. We maintained a minimum level of cash and very short-term securities, largely to avoid the risk of reinvesting at lower rates as securities matured with rates falling during the period. During the past six months, we cut our positions in bonds maturing in 2009 and redeployed the proceeds fairly evenly in two-, three-, four-, and five-year bonds.

Most of our new investments were in fairly high-quality general obligation and prerefunded bonds, as our goal was to extend maturities and avoid credit-quality risk. Now, with the yield spreads among various types of bonds wider than they had been, we are adding to sectors such as hospitals, investor-owned utilities, industrial development, and pollution control revenue bonds. Their yield premiums have doubled or tripled over the last six months, making these sectors more appealing. For the foreseeable future, we believe these yield spreads will remain under pressure, and while we may be early, we think they will significantly outperform high-quality issues over the long term.

Finally, we continued our longer-term effort to reduce exposure to bonds subject to the AMT, decreasing the portfolio’s allotment by another one percentage point to 8% of the portfolio at the end of February; this is significantly below the 16% level of 18 months ago. Cutting our exposure here has benefited returns since AMT spreads have widened significantly.

TAX-FREE INCOME FUND
In a challenging environment for long-term tax-free bonds, the fund lost ground over the past six months, returning -1.01%. Fund performance was ahead of the benchmark’s, however, as the Lipper average returned -2.14%. For the 12 months ended February 29, 2008, returns were -1.98% for the fund versus -3.59% for the peer group. (Performance for the Advisor Class was slightly lower, reflecting its higher expenses, but was still above the Lipper averages.)

Your fund ended its fiscal year on a weak note; in fact, at the lowest point of the past 12 months. While it is never pleasant to report a negative return, we are pleased that our results were significantly better than the peer group average for the last six months and year as interest rates rose and yield spreads widened. We structured the portfolio over time to weather a significant market downturn, although we certainly didn’t anticipate all the events that threatened this market over the past year. We believe the current environment of poor liquidity and risk aversion is overdone and the yields offered for municipal bonds today offer a significant opportunity.

We have historically been light on municipal bond insurance exposure, preferring to use our own credit research to buy uninsured bonds. Whenever we bought insured bonds, we always reviewed the underlying credit to make sure it was something we would like to own even without insurance. Our direct exposure to bond insurance in the portfolio is about 27% compared with 45% for the overall market. Our underweight in the sector and our focus on underlying credit quality benefited the portfolio as both insured bonds generally and insured bonds with weak underlying credits performed poorly.

At the same time, about 24% of the portfolio is invested in prerefunded and escrowed-to-maturity bonds, where the original proceeds have been escrowed to maturity or first call date with U.S. Treasury bonds. As the flight to quality intensified and Treasury bonds rallied, a significant percentage of the portfolio was protected from risk aversion and credit worries. Our overall portfolio structure also helped. The older seasoned bonds with higher coupons and shorter call dates outperformed the broader market as interest rates backed up, especially in the longer maturities.

Lower-quality credits performed poorly, especially municipal bonds with indirect corporate exposure, such as municipal utility and tobacco securitization bonds. These bonds were hurt not only by the interest rate environment but also by pressure on the corporate bond market. Hospital bonds, life care projects, and housing bonds—basically real estate-related investments—lagged the overall market as well. Fortunately, our practice of increasing diversification as we step down in credit quality means that we avoid having large exposure to any single issuer that could materially impact returns.

While the portfolio was not immune to the myriad problems infecting the municipal market, we also saw that we had some room to reinvest in new positions with much higher yields. Since the fall, we have been gradually increasing exposure to lower-rated bonds that our analysts like. In some cases, we think the elevated yields are more related to the lack of liquidity than to real credit concerns. We also saw a chance to buy insured bonds when the market was assigning no value to the insurance and we liked the underlying credits. February offered some unusual opportunities to buy bonds at yields we haven’t seen since the early part of the decade.

Our trading volume has increased with these additions, as we have undertaken loss swaps—selling a bond at a loss and simultaneously reinvesting the proceeds in a new bond with a higher coupon and more income to distribute. The losses are valuable to the portfolio because we can carry them forward for a number of years to offset any recognized gains that we would otherwise distribute.

Following the end of the fund’s fiscal year, the market bounced back 3% in a single week. This does not mean that we are on the road to recovery, but it does suggest that things can get overdone and investors will step in when they see exceptional value. We have kept some powder dry to participate when we see opportunities, and we will use the new environment to benefit the portfolio as we can.

TAX-FREE HIGH YIELD FUND
The Tax-Free High Yield Fund returned -3.84% over the past six months and -6.18% for the 12 months ended February 29, 2008. While the returns were negative, they were substantially ahead of the results for the Lipper average in both periods in an extremely difficult environment for high-yield tax-exempt bonds and for municipal bonds in general. Lower-quality municipals continued to trail the returns of their higher-quality counterparts.

It was particularly challenging for medium- and lower-quality municipals from August 2007 through February 2008. Risk premiums in many segments of the fixed-income market adjusted markedly higher, and municipals followed suit. This aggressive adjustment followed a period of expensive valuations, which we discussed in detail in earlier letters to shareholders. During the past 12 months, your fund maintained a considerable position (more than 8%) in prerefunded bonds backed by Treasuries as part of our defensive strategy. These holdings were in the intermediate area of the maturity spectrum and contributed significantly to our returns versus the benchmark as the yield curve steepened and investors sought the safety of higher-quality bonds. (See Glossary for a definition of the yield curve.) Toward the end of the period, we reduced our position in prerefunded bonds and redeployed the proceeds into higher-yielding securities.

Our holdings in corporate-backed industrial revenue bonds fared better than many other areas of the municipal market. We emphasized defensively structured bonds with high coupons and shorter call options—a strategy that paid off. The additional coupon income from these bonds cushioned the volatility in bond prices, and the shorter call structure tied the performance of these bonds closer to the intermediate area of the curve.

We entered the 12-month period with relatively low exposure to tobacco securitization bonds. The market encountered a historically large issuance of these bonds, which had a profoundly negative effect on returns for this sector. At that point, we opportunistically utilized this spate of new supply to move the portfolio closer to a market weighting in the group. We believe that litigation risks in the sector have decreased, while valuations have adjusted to compelling levels due to heavy issuance. We also maintained a considerable underweight in land-secured debt, as we were skeptical of special tax infrastructure bonds, whose revenues are derived from future real estate development, particularly in Florida, California, and Nevada. We expect these bonds to struggle as problems in the residential real estate market persist in those states.

Our holdings in life care revenue bonds detracted from results, as returns for the sector overall were impaired by concerns about projects that are ramping up occupancy during an economic and real estate slowdown. However, we had significant exposure to life care revenue bonds with solid balance sheets, backed by seasoned projects with strong occupancy and operating history, which helped somewhat on a relative basis.

In addition, the portfolio had low exposure to monoline insurers, and we always scrutinize the underlying credit as part of our research process. Going forward, we believe periods of volatility and credit market unrest create opportunities for mindful, research-driven investors. The municipal bond market is fundamentally sound. Current valuations of both high- and lower-quality municipals versus Treasuries and other taxable benchmarks are exceptionally attractive based on historical norms. We will continue to rely on our disciplined, risk-aware investment process to take advantage of opportunities within our segment of the municipal market.

OUTLOOK

Since last August, the Federal Reserve has slashed the fed funds target rate and introduced a series of measures to prevent ongoing financial market disruptions from spilling over into the broader economy. Nevertheless, the housing sector continues to weaken, and the likelihood of slower economic and job growth in the months ahead should permit the Fed to authorize additional interest rate cuts.

We believe the relative weakness of tax-free securities and the widening of credit spreads between higher- and lower-quality municipal securities in the last six months has been driven primarily by the flight to U.S. government securities and reduced liquidity, rather than by fundamental municipal credit concerns. In light of generally favorable fundamentals for the municipal market, municipals now offer very compelling valuations relative to taxable bonds, in our view, for investors in all tax brackets. In fact, valuations are more attractive than at any time in recent memory.

T. Rowe Price’s municipal bond portfolio managers and credit analysts are monitoring the municipal market very carefully and are identifyingopportunities to invest in securities with attractive yields and a good risk/reward tradeoff. Before investing, we will continue to rely on our rigorous, independent research to evaluate the fundamental merits of the issuer of each security under consideration.

Thank you for your confidence in our investment management abilities.

Respectfully submitted,

Joseph K. Lynagh
Chairman of the Investment Advisory Committee
Tax-Exempt Money Fund

Charles B. Hill
Chairman of the Investment Advisory Committee
Tax-Free Short-Intermediate Fund

Konstantine B. Mallas and Mary J. Miller
Co-chairs of the Investment Advisory Committee
Tax-Free Income Fund

James M. Murphy
Chairman of the Investment Advisory Committee
Tax-Free High Yield Fund

March 18, 2008

The committee chairmen have day-to-day responsibility for managing the portfolios and work with committee members in developing and executing the funds’ investment programs.

Effective November 1, 2007, Konstantine B. Mallas became co-chairman of the Investment Advisory Committee of the Tax-Free Income Fund along with Mary J. Miller. Mr. Mallas joined T. Rowe Price in 1987 and has been managing investments since 1991.

RISKS OF FIXED-INCOME INVESTING

Since money market funds are managed to maintain a constant $1.00 share price, there should be little risk of principal loss. However, there is no assurance the fund will avoid principal losses if fund holdings default or are downgraded, or if interest rates rise sharply in an unusually short period. In addition, the fund’s yield will vary; it is not fixed for a specific period like the yield on a bank certificate of deposit. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in it.

Bonds are subject to interest rate risk (the decline in bond prices that usually accompanies a rise in interest rates) and credit risk (the chance that any fund holding could have its credit rating downgraded or that a bond issuer will default by failing to make timely payments of interest or principal), potentially reducing the fund’s income level and share price. High-yield bonds could have greater price declines than funds that invest primarily in high-quality bonds. Municipalities issuing high-yield bonds are not as strong financially as those with higher credit ratings, so the bonds are usually considered speculative investments. Some income may be subject to state and local taxes and the federal alternative minimum tax.

GLOSSARY

Auction-rate securities (ARS): A type of security used in municipal financing. Although these securities have long-term maturities, their interest rates are reset every seven, 25, or 35 days through an auction process.

Average maturity: For a bond fund, the average of the stated maturity dates of the portfolio’s securities. In general, the longer the average maturity, the greater the fund’s sensitivity to interest rate changes, which means greater price fluctuation. A shorter average maturity usually means a less sensitive and, consequently, less volatile portfolio.

Basis points: One hundred basis points equal one percentage point.

Duration: A measure of a bond fund’s sensitivity to changes in interest rates. For example, a fund with a duration of six years would fall about 6% in price in response to a one-percentage-point rise in interest rates, and vice versa.

Fed funds target rate: An overnight lending rate set by the Federal Reserve and used by banks to meet reserve requirements. Banks also use the fed funds rate as a benchmark for their prime lending rates.

Lehman Brothers Municipal Bond Index: An unmanaged index that includes investment-grade, tax-exempt, and fixed-rate bonds with maturities greater than two years selected from issues larger than $75 million.

Lehman Brothers U.S. Aggregate Index: An unmanaged index made up of the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities of investment-grade quality or better, with at least one year to maturity and an outstanding par value of at least $250 million.

Libor rate: The London Interbank Offered Rate, which is a benchmark for short-term taxable rates.

Lipper averages: The averages of available mutual fund performance returns for specified time periods in defined categories as tracked by Lipper Inc.

Tender option bond: Obligations that grant the bondholder the right to require the issuer, or a specified third party acting as agent for the issuer, to purchase the bonds, usually at par, at a specified time prior to maturity or upon the occurrence of certain events or conditions.

30-day SEC yield: A method of calculating a fund’s yield that assumes all portfolio securities are held until maturity. The Securities and Exchange Commission (SEC) requires all bond funds to calculate this yield. Yield will vary and is not guaranteed.

Yield curve: A graphic depiction of the relationship among the yields for similar bonds with different maturities. A yield curve is positive when short-term yields are lower than long-term yields and negative when short-term yields are higher than long-term yields.

Performance and Expenses

GROWTH OF $10,000 

This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes.

AVERAGE ANNUAL COMPOUND TOTAL RETURN 

This table shows how the funds would have performed each year if their actual (or cumulative) returns for the periods shown had been earned at a constant rate.

FUND EXPENSE EXAMPLE 

As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period.

Actual Expenses
The first line of the following table (“Actual”) provides information about actual account values and actual expenses. You may use the information in this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Please note that a fund may have two share classes: The original share class (“investor class”) charges no distribution and service (12b-1) fee. Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee. Each share class is presented separately in the table.

Hypothetical Example for Comparison Purposes
The information on the second line of the table (“Hypothetical”) is based on hypothetical account values and expenses derived from the fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund’s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Note: T. Rowe Price charges an annual small-account maintenance fee of $10, generally for accounts with less than $2,000 ($500 for UGMA/UTMA). The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $25,000 or more, accounts employing automatic investing, and IRAs and other retirement plan accounts that utilize a prototype plan sponsored by T. Rowe Price (although a separate custodial or administrative fee may apply to such accounts). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS 

NOTE 1 - SIGNIFICANTACCOUNTING POLICIES

T. Rowe Price Tax-Free Income Fund, Inc. (the fund), is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end management investment company. The fund seeks to provide a high level of income exempt from federal income taxes by investing primarily in long-term investment-grade municipal securities. The fund has two classes of shares: the Tax-Free Income Fund original share class, referred to in this report as the Investor Class, offered since October 26, 1976, and Tax-Free Income Fund—Advisor Class (Advisor Class), offered since September 30, 2002. Advisor Class shares are sold only through unaffiliated brokers and other unaffiliated financial intermediaries that are compensated by the class for distribution, shareholder servicing, and/or certain administrative services under a Board-approved Rule 12b-1 plan. Each class has exclusive voting rights on matters related solely to that class, separate voting rights on matters that relate to both classes, and, in all other respects, the same rights and obligations as the other class.

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by fund management. Fund management believes that estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the fund ultimately realizes upon sale of the securities.

Valuation The fund values its investments and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business. Debt securities are generally traded in the over-the-counter market. Securities with original maturities of one year or more are valued at prices furnished by dealers who make markets in such securities or by an independent pricing service, which considers yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Securities with original maturities of less than one year are valued at amortized cost in local currency, which approximates fair value when combined with accrued interest.

Options on futures contracts are valued at the last sale price. Financial futures contracts are valued at closing settlement prices.

Other investments, including restricted securities, and those for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund’s Board of Directors.

Class Accounting The Advisor Class pays distribution, shareholder servicing, and/or certain administrative expenses in the form of Rule 12b-1 fees, in an amount not exceeding 0.25% of the class’s average daily net assets. Shareholder servicing, prospectus, and shareholder report expenses incurred by each class are charged directly to the class to which they relate. Expenses common to both classes and investment income are allocated to the classes based upon the relative daily net assets of each class’s settled shares; realized and unrealized gains and losses are allocated based upon the relative daily net assets of each class’s outstanding shares.

Credits The fund earns credits on temporarily uninvested cash balances at the custodian that reduce the fund’s custody charges. Custody expense in the accompanying financial statements is presented before reduction for credits, which are reflected as expenses paid indirectly.

Investment Transactions,Investment Income,andDistributions Income and expenses are recorded on the accrual basis. Premiums and discounts on debt securities are amortized for financial reporting purposes. Income tax-related interest and penalties, if incurred, would be recorded as income tax expense. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Payments (“variation margin”) made or received to settle the daily fluctuations in the value of futures contracts are recorded as unrealized gains or losses until the contracts are closed. Unsettled variation margin on futures contracts is reflected as other assets or liabilities, and unrealized gains and losses on futures contracts are reflected as the change in net unrealized gain or loss in the accompanying financial statements. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared by each class on a daily basis and paid monthly. Capital gain distributions, if any, are declared and paid by the fund, typically on an annual basis.

NewAccounting Pronouncements Effective August 31, 2007, the fund adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, a clarification of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 establishes financial accounting and disclosure requirements for recognition and measurement of tax positions taken or expected to be taken on an income tax return. The adoption of FIN 48 had no impact on the fund’s net assets or results of operations.

In September 2006, the FASB released the Statement of Financial Accounting Standard No. 157 (FAS 157), Fair Value Measurements. FAS 157 clarifies the definition of fair value and establishes the framework for measuring fair value, as well as proper disclosure of this methodology in the financial statements. It will be effective for the fund’s fiscal year beginning March 1, 2008. Management is evaluating the effects of FAS 157; however, it is not expected to have a material impact on the fund’s net assets or results of operations.

NOTE 2 - INVESTMENTTRANSACTIONS

Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks or to enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and Statement of Additional Information.

RestrictedSecurities The fund may invest in securities that are subject to legal or contractual restrictions on resale. Prompt sale of such securities at an acceptable price may be difficult due to substantial delays and additional costs related to their restrictions.

Futures Contracts During the year ended February 29, 2008, the fund was a party to futures contracts, which provide for the future sale by one party and purchase by another of a specified amount of a specific financial instrument at an agreed upon price, date, time, and place. Risks arise from possible illiquidity of the futures market and from movements in security values and/or interest rates.

Options Call and put options on futures contracts give the holder the right to purchase or sell, respectively, a particular futures contract at a specified price on or until a certain date. Risks arise from possible illiquidity of the options market and from movements in underlying futures prices. Purchased options are reflected in the accompanying Portfolio of Investments at market value.

Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $604,491,000 and $536,397,000, respectively, for the year ended February 29, 2008.

NOTE 3- FEDERAL INCOME TAXES

No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute to shareholders all of its income and gains. Federal income tax regulations differ from generally accepted accounting principles; therefore, distributions determined in accordance with tax regulations may differ significantly in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences.

Distributions during the year ended February 29, 2008, totaled $80,860,000 and were characterized as tax-exempt income. At February 29, 2008, the tax-basis components of net assets were as follows:

Federal income tax regulations require the fund to defer recognition of capital losses realized on certain covered options and/or futures transactions; accordingly, $1,984,000 of realized losses reflected in the accompanying financial statements have not been recognized for tax purposes as of February 29, 2008. For federal income tax purposes, market discount is recognized as income at the time of sale in the amount of the lesser of gain or scheduled amortization. Accordingly, at February 29, 2008, amortization of $1,891,000 that has been recognized as income for financial reporting purposes is treated as unrealized appreciation for tax purposes. The fund intends to retain realized gains to the extent of available capital loss carryforwards. As of February 29, 2008, the fund had $4,301,000 of capital loss carryforwards that expire in fiscal 2016.

For the year ended February 29, 2008, the fund recorded the following permanent reclassifications to reflect tax character. Reclassifications to paid-in capital relate primarily to a tax practice that treats a portion of the proceeds from each redemption of capital shares as a distribution of taxable net investment income and/or realized capital gain. Reclassifications between income and gain relate primarily to differences between book/tax amortization policies. Results of operations and net assets were not affected by these reclassifications.

At February 29, 2008, the cost of investments for federal income tax purposes was $1,787,689,000.

NOTE 4 - RELATED PARTY TRANSACTIONS

The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The investment management agreement between the fund and the manager provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.15% of the fund’s average daily net assets, and a group fee. The group fee rate is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.285% for assets in excess of $220 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At February 29, 2008, the effective annual group fee rate was 0.30%.

In addition, the fund has entered into service agreements with Price Associates and a wholly owned subsidiary of Price Associates (collectively, Price). Price Associates computes the daily share prices and provides certain other administrative services to the fund. T. Rowe Price Services, Inc., provides shareholder and administrative services in its capacity as the fund’s transfer and dividend disbursing agent. For the year ended February 29, 2008, expenses incurred pursuant to these service agreements were $171,000 for Price Associates and $423,000 for T. Rowe Price Services, Inc. The total amount payable at period-end pursuant to these service agreements is reflected as Due to Affiliates in the accompanying financial statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

Tothe Boardof Directors andShareholders of T.Rowe PriceTax-FreeIncomeFund,Inc.

In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of T. Rowe Price Tax-Free Income Fund, Inc. (the “Fund”) at February 29, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 29, 2008, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
April 11, 2008

TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 2/29/08 

We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements.

The fund’s distributions to shareholders included $196,000 from short-term capital gains.

The fund’s distributions to shareholders included $80,623,000 which qualified as exempt-interest dividends.

INFORMATION ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS

A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information, which you may request by calling 1-800-225-5132 or by accessing the SEC’s Web site, www.sec.gov. The description of our proxy voting policies and procedures is also available on our Web site, www.troweprice.com. To access it, click on the words “Company Info” at the top of our homepage for individual investors. Then, in the window that appears, click on the “Proxy Voting Policy” navigation button in the top left corner.

Each fund’s most recent annual proxy voting record is available on our Web site and through the SEC’s Web site. To access it through our Web site, follow the directions above, then click on the words “Proxy Voting Record” at the bottom of the Proxy Voting Policy page.

HOW TO OBTAIN QUARTERLY PORTFOLIO HOLDINGS

The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available electronically on the SEC’s Web site (www.sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth St. N.W., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.

ABOUT THE FUND’S DIRECTORS AND OFFICERS 

Your fund is governed by a Board of Directors (Board) that meets regularly to review a wide variety of matters affecting the fund, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and other business affairs. The Board elects the fund’s officers, who are listed in the final table. At least 75% of Board members are independent of T. Rowe Price Associates, Inc. (T. Rowe Price), and T. Rowe Price International, Inc. (T. Rowe Price International); “inside” or “interested” directors are employees or officers of T. Rowe Price. The business address of each director and officer is 100 East Pratt Street, Baltimore, Maryland 21202. The Statement of Additional Information includes additional information about the directors and is available without charge by calling a T. Rowe Price representative at 1-800-225-5132.

Independent Directors
Name
(Year of Birth)	Principal Occupation(s) During Past 5 Years and Directorships of
Year Elected*	Other Public Companies
Jeremiah E. Casey	Director, National Life Insurance (2001 to 2005); Director, The Rouse
(1940)	Company, real estate developers (1990 to 2004)
2006
Anthony W. Deering	Chairman, Exeter Capital, LLC, a private investment firm (2004 to
(1945)	present); Director, Vornado Real Estate Investment Trust (3/04 to
1983	present); Director, Mercantile Bankshares (2002 to 2007); Member,
	Advisory Board, Deutsche Bank North America (2004 to present);
	Director, Chairman of the Board, and Chief Executive Officer, The
	Rouse Company, real estate developers (1997 to 2004)
Donald W. Dick, Jr.	Principal, EuroCapital Advisors, LLC, an acquisition and management
(1943)	advisory firm (10/95 to present); Chairman, The Haven Group, a cus-
2001	tom manufacturer of modular homes (1/04 to present)
David K. Fagin	Chairman and President, Nye Corporation (6/88 to present); Chairman,
(1938)	Canyon Resources Corp. (8/07 to present); Director, Golden Star
2001	Resources Ltd. (5/92 to present); Director, Pacific Rim Mining Corp.
	(2/02 to present)
Karen N. Horn	Director, Federal National Mortgage Association (9/06 to present);
(1943)	Managing Director and President, Global Private Client Services, Marsh
2003	Inc. (1999 to 2003); Director, Eli Lilly and Company and Simon
	Property Group
Theo C. Rodgers	President, A&R Development Corporation (1977 to present)
(1941)
2005

John G. Schreiber	Owner/President, Centaur Capital Partners, Inc., a real estate invest-
(1946)	ment company (1991 to present); Partner, Blackstone Real Estate
1992	Advisors, L.P. (10/92 to present)
*Each independent director oversees 122 T. Rowe Price portfolios and serves until retirement, resignation,
or election of a successor.

Inside Directors
Name
(Year of Birth)
Year Elected*
[Number of T. Rowe Price	Principal Occupation(s) During Past 5 Years and Directorships of
Portfolios Overseen]	Other Public Companies
Edward C. Bernard	Director and Vice President, T. Rowe Price; Vice Chairman of the Board,
(1956)	Director, and Vice President, T. Rowe Price Group, Inc.; Chairman of the
2006	Board, Director, and President, T. Rowe Price Investment Services,
[122]	Inc.; Chairman of the Board and Director, T. Rowe Price Global Asset
	Management Limited, T. Rowe Price Global Investment Services
	Limited, T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price
	Savings Bank, and T. Rowe Price Services, Inc.; Director, T. Rowe Price
	International, Inc.; Chief Executive Officer, Chairman of the Board,
	Director, and President, T. Rowe Price Trust Company; Chairman of the
	Board, all funds
Mary J. Miller, CFA	Director, T. Rowe Price Trust Company; Director and Vice President,
(1955)	T. Rowe Price; Vice President, T. Rowe Price Group, Inc.; President,
2004	Tax-Free Income Fund
[38]
*Each inside director serves until retirement, resignation, or election of a successor.

Officers
Name (Year of Birth)
Title and Fund(s) Served	Principal Occupation(s)
R. Lee Arnold, Jr. (1970)	Vice President, T. Rowe Price, T. Rowe Price
Vice President, Tax-Free Income Fund	Group, Inc., and T. Rowe Price International, Inc.
Joseph A. Carrier, CPA (1960)	Vice President, T. Rowe Price, T. Rowe Price
Treasurer, Tax-Free Income Fund	Group, Inc., T. Rowe Price Investment Services,
	Inc., and T. Rowe Price Trust Company
G. Richard Dent (1960)	Vice President, T. Rowe Price and T. Rowe Price
Vice President, Tax-Free Income Fund	Group, Inc.
Roger L. Fiery III, CPA (1959)	Vice President, T. Rowe Price, T. Rowe Price
Vice President, Tax-Free Income Fund	Group, Inc., T. Rowe Price International, Inc.,
	and T. Rowe Price Trust Company
John R. Gilner (1961)	Chief Compliance Officer and Vice President,
Chief Compliance Officer, Tax-Free	T. Rowe Price; Vice President, T. Rowe Price
Income Fund	Group, Inc., and T. Rowe Price Investment
	Services, Inc.
Gregory S. Golczewski (1966)	Vice President, T. Rowe Price and T. Rowe Price
Vice President, Tax-Free Income Fund	Trust Company
Charles B. Hill, CFA (1961)	Vice President, T. Rowe Price and T. Rowe Price
Vice President, Tax-Free Income Fund	Group, Inc.
Henry H. Hopkins (1942)	Director and Vice President, T. Rowe Price
Vice President, Tax-Free Income Fund	Investment Services, Inc., T. Rowe Price Services,
	Inc., and T. Rowe Price Trust Company; Vice
	President, T. Rowe Price, T. Rowe Price Group,
	Inc., T. Rowe Price International, Inc., and
	T. Rowe Price Retirement Plan Services, Inc.
Marcy M. Lash (1963)	Vice President, T. Rowe Price and T. Rowe Price
Vice President, Tax-Free Income Fund	Group, Inc.
Patricia B. Lippert (1953)	Assistant Vice President, T. Rowe Price and
Secretary, Tax-Free Income Fund	T. Rowe Price Investment Services, Inc.
Konstantine B. Mallas (1963)	Vice President, T. Rowe Price and T. Rowe Price
Vice President, Tax-Free Income Fund	Group, Inc.

Hugh D. McGuirk, CFA (1960)	Vice President, T. Rowe Price and T. Rowe Price
Vice President, Tax-Free Income Fund	Group, Inc.
James M. Murphy, CFA (1967)	Vice President, T. Rowe Price and T. Rowe Price
Vice President, Tax-Free Income Fund	Group, Inc.
Timothy G. Taylor, CFA (1975)	Vice President, T. Rowe Price
Vice President, Tax-Free Income Fund
Julie L. Waples (1970)	Vice President, T. Rowe Price
Vice President, Tax-Free Income Fund
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International
for at least five years.

Item 2. Code of Ethics.

The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.

Item 3. Audit Committee Financial Expert.

The registrant’s Board of Directors/Trustees has determined that Ms. Karen N. Horn qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Ms. Horn is considered independent for purposes of Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

(a) – (d) Aggregate fees billed to the registrant for the last two fiscal years for professional services rendered by the registrant’s principal accountant were as follows:

Audit fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit-related fees include amounts reasonably related to the performance of the audit of the registrant’s financial statements and specifically include the issuance of a report on internal controls and, if applicable, agreed-upon procedures related to fund acquisitions. Tax fees include amounts related to services for tax compliance, tax planning, and tax advice. The nature of these services specifically includes the review of distribution calculations and the preparation of Federal, state, and excise tax returns. All other fees include the registrant’s pro-rata share of amounts for agreed-upon procedures in conjunction with service contract approvals by the registrant’s Board of Directors/Trustees.

(e)(1) The registrant’s audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such a service is required between regularly scheduled audit committee meetings, pre-approval may be authorized by one audit committee member with ratification at the next scheduled audit committee meeting. Waiver of pre-approval for audit or non-audit services requiring fees of a de minimis amount is not permitted.

    (2) No services included in (b) – (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Less than 50 percent of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.

(g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant’s principal accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant were $1,486,000 and $1,263,000, respectively, and were less than the aggregate fees billed for those same periods by the registrant’s principal accountant for audit services rendered to the T. Rowe Price Funds.

(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. Accordingly, these services were considered by the registrant’s audit committee in maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Schedule of Investments.

Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.

(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.

    (2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.

    (3) Written solicitation to repurchase securities issued by closed-end companies: not applicable.

(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.

SIGNATURES
	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
T. Rowe Price Tax-Free Income Fund, Inc.
By	/s/ Edward C. Bernard
	Edward C. Bernard
	Principal Executive Officer
Date	April 18, 2008
	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
By	/s/ Edward C. Bernard
	Edward C. Bernard
	Principal Executive Officer
Date	April 18, 2008
By	/s/ Gregory K. Hinkle
	Gregory K. Hinkle
	Principal Financial Officer
Date	April 18, 2008

EX-99.CERT

Item 12(a)(2).

CERTIFICATIONS 

I, Edward C. Bernard, certify that:
1.	I have reviewed this report on Form N-CSR of T. Rowe Price Tax-Free Income Fund;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
	to state a material fact necessary to make the statements made, in light of the circumstances under
	which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this
	report, fairly present in all material respects the financial condition, results of operations, changes in
	net assets, and cash flows (if the financial statements are required to include a statement of cash
	flows) of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining
	disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act
	of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the
	Investment Company Act of 1940) for the registrant and have:
	(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and
		procedures to be designed under our supervision, to ensure that material information relating to
		the registrant, including its consolidated subsidiaries, is made known to us by others within those
		entities, particularly during the period in which this report is being prepared;
	(b)   Designed such internal control over financial reporting, or caused such internal control over
		financial reporting to be designed under our supervision, to provide reasonable assurance
		regarding the reliability of financial reporting and the preparation of financial statements for
		external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
		this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
		a date within 90 days prior to the filing date of this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that
		occurred during the second fiscal quarter of the period covered by this report that has materially
		affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
		reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the
	audit committee of the registrant's board of directors (or persons performing the equivalent
	functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control
		over financial reporting which are reasonably likely to adversely affect the registrant's ability to
		record, process, summarize, and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a
		significant role in the registrant's internal control over financial reporting.

Date:	April 18, 2008	/s/ Edward C. Bernard
		Edward C. Bernard
		Principal Executive Officer

CERTIFICATIONS 

I, Gregory K. Hinkle, certify that:
1.	I have reviewed this report on Form N-CSR of T. Rowe Price Tax-Free Income Fund;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
	to state a material fact necessary to make the statements made, in light of the circumstances under
	which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this
	report, fairly present in all material respects the financial condition, results of operations, changes in
	net assets, and cash flows (if the financial statements are required to include a statement of cash
	flows) of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining
	disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act
	of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the
	Investment Company Act of 1940) for the registrant and have:
	(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and
		procedures to be designed under our supervision, to ensure that material information relating to
		the registrant, including its consolidated subsidiaries, is made known to us by others within those
		entities, particularly during the period in which this report is being prepared;
	(b)   Designed such internal control over financial reporting, or caused such internal control over
		financial reporting to be designed under our supervision, to provide reasonable assurance
		regarding the reliability of financial reporting and the preparation of financial statements for
		external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
		this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
		a date within 90 days prior to the filing date of this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that
		occurred during the second fiscal quarter of the period covered by this report that has materially
		affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
		reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the
	audit committee of the registrant's board of directors (or persons performing the equivalent
	functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control
		over financial reporting which are reasonably likely to adversely affect the registrant's ability to
		record, process, summarize, and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a
		significant role in the registrant's internal control over financial reporting.

Date:	April 18, 2008	/s/ Gregory K. Hinkle
		Gregory K. Hinkle
		Principal Financial Officer

EX-99.906 CERT

Item 12(b).
CERTIFICATION UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002
Name of Issuer: T. Rowe Price Tax-Free Income Fund
In connection with the Report on Form N-CSR for the above named Issuer, the undersigned hereby
certifies, to the best of his knowledge, that:
1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
	Exchange Act of 1934;
2.	The information contained in the Report fairly presents, in all material respects, the financial
	condition and results of operations of the Issuer.
Date: April 18, 2008		/s/ Edward C. Bernard
		Edward C. Bernard
		Principal Executive Officer
Date: April 18, 2008		/s/ Gregory K. Hinkle
		Gregory K. Hinkle
		Principal Financial Officer

EX-99.CODE ETH

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL     

OFFICERS OF THE PRICE FUNDS     

UNDER THE SARBANES-OXLEY ACT OF 2002     

I. General Statement. This Code of Ethics (the “Price Funds S-O Code”) has been designed 

to bring the Price Funds into compliance with the applicable requirements of the Sarbanes-Oxley 

Act of 2002 (the “Act”) rules promulgated by The Securities and Exchange Commission 

thereunder (“Regulations”). The Price Funds S-O Code applies solely to the Principal 

Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller of, or 

persons performing similar functions for, a Price Fund (whether such persons are employed by a 

Price Fund or third party) (“Covered Officers”). The “Price Funds” shall include each mutual 

fund that is managed, sponsored and distributed by affiliates of T. Rowe Price Group, Inc. 

(“Group”). The investment managers to the Price Funds will be referred to as the “Price Fund 

Advisers.” A list of Covered Officers is attached as Exhibit A. 

The Price Fund Advisers have, along with their parent, T. Rowe Price Group, Inc. (“Group”) 

also maintained a comprehensive Code of Ethics and Conduct (the “Group Code”) since 1972, 

which applies to all officers, directors and employees of the Price Funds, Group and its affiliates. 

As mandated by the Act, Group has adopted a Code (the “Group S-O Code”), similar to the 

Price Funds S-O Code, which applies solely to its principal executive and senior financial 

officers. The Group S-O Code and the Price Funds S-O Code will be referred to collectively as 

the “S-O Codes”. 

The Price Funds S-O Code has been adopted by the Price Funds in accordance with the Act and 

Regulations thereunder and will be administered in conformity with the disclosure requirements 

of Item 2 of Form N-CSR. The S-O Codes are attachments to the Group Code. In many respects 

the S-O Codes are supplementary to the Group Code, but the Group Code is administered 

separately from the S-O Codes, as the S-O Codes are from each other. 

II. Purpose of the Price Funds S-O Code. The purpose of the Price Funds S-O Code, as 

mandated by the Act and the Regulations, is to establish standards that are reasonably designed 

to deter wrongdoing and to promote: 

             Ethical Conduct. Honest and ethical conduct, including the ethical handling of actual or 

             apparent conflicts of interest between personal and professional relationships. 

             Disclosure. Full, fair, accurate, timely and understandable disclosure in reports and 

             documents that the Price Funds file with, or submit to, the SEC and in other public 

             communications made by the Price Funds. 

             Compliance. Compliance with applicable governmental laws, rules and regulations. 

             Reporting of Violations. The prompt internal reporting of violations of the Price Funds 

             S-O Code to an appropriate person or persons identified in the Price Funds S-O Code. 

             Accountability. Accountability for adherence to the Price Funds S-O Code. 

III. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest. 

Overview. Each Covered Officer owes a duty to the Price Funds to adhere to a high standard of 

honesty and business ethics and should be sensitive to situations that may give rise to actual as 

well as apparent conflicts of interest. 

A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the 

interests of, or his or her service to, the Price Funds. For example, a conflict of interest would 

arise if a Covered Officer, or a member of his or her family, receives improper personal benefits 

as a result of his or her position with a Price Fund. 

Certain conflicts of interest covered by the Price Funds S-O Code arise out of the relationships 

between Covered Officers and the Price Funds and may already be subject to provisions 

regulating conflicts of interest in the Investment Company Act of 1940 (“Investment Company 

Act”), the Investment Advisers Act of 1940 (“Investment Advisers Act”) and the Group Code. 

For example, Covered Officers may not individually engage in certain transactions (such as the 

purchase or sale of securities or other property) with a Price Fund because of their status as 

“affiliated persons” of a Price Fund. The compliance programs and procedures of the Price 

Funds and Price Fund Advisers are designed to prevent, or identify and correct, violations of 

these provisions. 

Although typically not presenting an opportunity for improper personal benefit, conflicts arise 

from, or as a result of, the contractual relationship between a Price Fund and its Price Fund 

Adviser (and its affiliates) of which the Covered Officers may also be officers or employees. As 

a result, the Price Funds S-O Code recognizes that the Covered Officers will, in the normal 

course of their duties (whether formally for the Price Funds or for the Price Fund Advisers, or for 

both), be involved in establishing policies and implementing decisions which will have different 

effects on these entities. The participation of the Covered Officers in such activities is inherent 

in the contractual relationship between each Price Fund and its respective Price Fund Adviser. 

Such participation is also consistent with the performance by the Covered Officers of their duties 

as officers of the Price Funds and, if consistent with the provisions of the Investment Company 

Act and the Investment Advisers Act, it will be deemed to have been handled ethically. 

Other conflicts of interest are covered by the Price Funds S-O Code, even if these conflicts of 

interest are not addressed by or subject to provisions in the Investment Company Act and the 

Investment Advisers Act. 

Whenever a Covered Officer is confronted with a conflict of interest situation where he or she is 

uncertain as to the appropriate action to be taken, he or she should discuss the matter with the 

Chairperson of Group’s Ethics Committee or another member of the Committee. 

Handling of Specific Types of Conflicts. Each Covered Officer (and close family members) 

must not: 

              Entertainment. Accept entertainment from any company with which any Price 

              Fund or any Price Fund Adviser has current or prospective business dealings, 

              including portfolio companies, unless such entertainment is in full compliance 

              with the policy on entertainment as set forth in the Group Code. 

              Gifts. Accept any gifts, except as permitted by the Group Code. 

               Improper Personal Influence. Use his or her personal influence or personal 

               relationships improperly to influence investment decisions, brokerage allocations 

               or financial reporting by the Price Funds to the detriment of any one or more of 

               the Price Funds. 

               Taking Action at the Expense of a Price Fund. Cause a Price Fund to take 

               action, or fail to take action, for the personal benefit of the Covered Officer rather 

               than for the benefit of one or more of the Price Funds. 

               Misuse of Price Funds’ Transaction Information. Use knowledge of portfolio 

               transactions made or contemplated for a Price Fund or any other clients of the 

               Price Fund Advisers to trade personally or cause others to trade in order to take 

               advantage of or avoid the market impact of such portfolio transactions. 

               Outside Business Activities. Engage in any outside business activity that 

               detracts from a Covered Officer’s ability to devote appropriate time and attention 

               to his or her responsibilities to a Price Fund. 

               Service Providers. Excluding Group and its affiliates, have any ownership 

               interest in, or any consulting or employment relationship with, any of the Price 

               Funds’ service providers, except that an ownership interest in public companies is 

               permitted 

               Receipt of Payments. Have a direct or indirect financial interest in commissions, 

               transaction charges, spreads or other payments paid by a Price Fund for effecting 

               portfolio transactions or for selling or redeeming shares other than an interest 

               (such as compensation or equity ownership) arising from the Covered Officer’s 

               employment by Group or any of its affiliates. 

               Service as a Director or Trustee. Serve as a director, trustee or officer of any 

               public or private company or a non-profit organization that issues securities 

               eligible for purchase by any of the Price Funds, unless approval is obtained as 

               required by the Group Code. 

IV. Covered Officers’ Specific Obligations and Accountabilities.   

               A. Disclosure Requirements and Controls. Each Covered Officer must 

               familiarize himself or herself with the disclosure requirements (Form N-1A registration 

               statement, proxy (Schedule 14A), shareholder reports, Forms N-SAR, N-CSR, etc.) 

               applicable to the Price Funds and the disclosure controls and procedures of the Price 

               Fund and the Price Fund Advisers. 

               B. Compliance with Applicable Law. It is the responsibility of each Covered 

               Officer to promote compliance with all laws, rules and regulations applicable to the Price 

               Funds and the Price Fund Advisers. Each Covered Officer should, to the extent 

               appropriate within his or her area of responsibility, consult with other officers and 

               employees of the Price Funds and the Price Fund Advisers and take other appropriate 

               steps with the goal of promoting full, fair, accurate, timely and understandable disclosure 

               in the reports and documents the Price Funds file with, or submit to, the SEC, and in 

               other public communications made by the Price Funds. 

               C. Fair Disclosure. Each Covered Officer must not knowingly misrepresent, or 

               cause others to misrepresent, facts about a Price Fund to others, whether within or 

               outside the Price organization, including to the Price Fund’s directors and auditors, and 

               to governmental regulators and self-regulatory organizations. 

               D. Initial and Annual Affirmations. Each Covered Officer must:

                     1. Upon adoption of the Price Funds S-O Code (or thereafter, as applicable, upon 

                     becoming a Covered Officer), affirm in writing that he or she has received, read, 

                     and understands the Price Funds S-O Code. 

                     2. Annually affirm that he or she has complied with the requirements of the Price 

                     Funds S-O Code. 

               E. Reporting of Material Violations of the Price Funds S-O Code. If a 

               Covered Officer becomes aware of any material violation of the Price Funds S-O Code 

               or laws and governmental rules and regulations applicable to the operations of the 

               Price Funds, he or she must promptly report the violation (“Report”) to the Chief 

               Legal Counsel of the Price Funds (“CLC”). Failure to report a material violation will 

               be considered itself a violation of the Price Funds S-O Code. The CLC is identified in 

               the attached Exhibit B. 

               It is the Price Funds policy that no retaliation or other adverse action will be taken 

               against any Covered Officer or other employee of a Price Fund, a Price Fund Adviser 

               or their affiliates based upon any lawful actions of the Covered Officer or employee 

               with respect to a Report made in good faith. 

               F. Annual Disclosures. Each Covered Officer must report, at least annually, all 

               affiliations or other relationships as called for in the “Annual Questionnaire for 

               Executive Officers and/or Employee Directors/Trustees of Group and the Price Funds.” 

V. Administration of the Price Funds S-O Code. The Ethics Committee is responsible for 

administering the Price Funds S-O Code and applying its provisions to specific situations in 

which questions are presented. 

               A. Waivers and Interpretations. The Chairperson of the Ethics Committee has 

               the authority to interpret the Price Funds S-O Code in any particular situation and to 

               grant waivers where justified, subject to the approval of the Joint Audit Committee of 

               the Price Funds. All material interpretations concerning Covered Officers will be 

               reported to the Joint Audit Committee of the Price Funds at its next meeting. Waivers, 

               including implicit waivers, to Covered Officers will be publicly disclosed as required 

               in the Instructions to N-CSR. Pursuant to the definition in the Regulations, an implicit 

               waiver means a Price Fund’s failure to take action within a reasonable period of time 

               regarding a material departure from a provision of the Price Funds S-O Code that has 

               been made known to an “executive officer” (as defined in Rule 3b-7 under the 

               Securities Exchange Act of 1934) of a Price Fund. An executive officer of a Price 

               Fund includes its president and any vice-president in charge of a principal business 

               unit, division or function. 

               B. Violations/Investigations. The following procedures will be followed in 

               investigating and enforcing the Price Funds S-O Code: 

                     1. The CLC will take or cause to be taken appropriate action to 

                     investigate any potential or actual violation reported to him or her. 

                     2. The CLC, after consultation if deemed appropriate with Outside 

                     Counsel to the Price Funds, will make a recommendation to the 

                     appropriate Price Funds Board regarding the action to be taken with 

                     regard to each material violation. Such action could include any of the 

                     following: a letter of censure or suspension, a fine, a suspension of trading 

                     privileges or termination of officership or employment. In addition, the 

                     violator may be required to surrender any profit realized (or loss avoided) 

                     from any activity that is in violation of the Price Funds S-O Code. 

VI. Amendments to the Price Funds S-O Code. Except as to the contents of Exhibit A and 

Exhibit B, the Price Funds S-O Code may not be materially amended except in written form, 

which is specifically approved or ratified by a majority vote of each Price Fund Board, including 

a majority of the independent directors on each Board. 

VII. Confidentiality. All reports and records prepared or maintained pursuant to the Price 

Funds S-O Code will be considered confidential and shall be maintained and protected 

accordingly. Except as otherwise required by law, the Price Funds S-O Code or as necessary in 

connection with regulations under the Price Funds S-O Code, such matters shall not be disclosed 

to anyone other than the directors of the appropriate Price Fund Board, Outside Counsel to the 

Price Funds, members of the Ethics Committee and the CLC and authorized persons on his or 

her staff. 

Preparation Date: 9/30/03 

Adoption Date:     10/22/03

Exhibit A 

Persons Covered by the Price Funds S-O Code of Ethics 

Edward C. Bernard, Chairman and Chief Executive Officer 

Gregory K. Hinkle, Treasurer and Chief Financial Officer 

Exhibit B 

Chief Legal Counsel to the Price Funds 

David Oestreicher