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What is Income Tax Deduction? What is Exempted Income in Income Tax?

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Ishita Ramani Ishita Ramani
Answered on April 14,2022

Individuals can use Income Tax Deductions to reduce their taxable income for the year. IT deductions, in other words, are investments made throughout a fiscal year that are deducted from gross annual income when completing your ITR (Income Tax Return). The provision of tax deductions was made in order to encourage people to save and help them build a secure financial future.

National Pension Scheme (NPS),  Public Provident Fund (PPF), investments made under Section 80 of the IT Act, 1961, in ELSS (Equity Linked Saving Scheme) funds, principal repayment of a home loan, and so on are some common examples of Income Tax Deductions.

Information on Exempted Income in Income Tax

Income tax exemptions/allowances are components of your gross income that are not counted toward your total taxable income, as the name implies. Individuals can keep a considerable portion of their earnings thanks to these exclusions. Income tax exemptions/allowances are mandated by the Income Tax Act of 1961 so that people can save more.

Children’s Education Allowance, House Rent Allowance (HRA), Leave Travel Allowance (LTA), as well as the exemptions provided under Section 24, are some well-known examples of Income Tax Exemptions.

 

Related Read: Income Tax Rates Slab for FY 2022-23 or AY 2023-24

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