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Difference between Exemptions & Deductions under the Income Tax Act


What are Deductions under the Income Tax Act, 1961?

Chapter VI-A of Income Tax Act contains various sub-sections of section 80 that allows an assessee to claim deductions from the gross total income on account of various tax-saving investments, permitted expenditures, donations, etc.

 

What are Exemptions under the Income Tax Act, 1961?

Exemptions are provided on particular sources of income and not on the total income. It can also mean that you do not have to pay any tax for income coming from that source.

For example- As per Section 10(1) of the Income Tax Act, 1961 - Income from agriculture is exempted.

 

Difference between Exemptions & Deductions

Basis

Exemptions

Deductions

Incidence

These are not included in our Taxable income.

These are deducted from our Gross total income.

Application

Applied at each head of income.

Applied at Gross total income.


Disclaimer:

The contents of this article are solely for informational purpose. It does not constitute any professional advice. The author does not represent that the contents of the article are accurate or complete. Neither the Site/Blog 'Your Instasolv' and the author accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.


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