New Delhi: The deadline for filing Income Tax Return (ITR) for FY23-24 is 31 July 2024. Crores of people file their ITRs every financial year. However, scores of them find it difficult to address the issues related to exemptions and deductions in Income Tax.
TDS is defined as tax deducted at source has to be deducted at the rates prescribed by the tax department. This is a part of your income that is not subject to tax and can be excluded from your total income. Tax exemptions are the income which the tax authorities can’t touch. The are exemptions as per the i-T rules and don’t fall under the category of taxable income, thus offering significant relief and a boost to your net income.
What is Income Tax exemption
Income Tax exemption is a crucial part of tax planning and helps individuals to reduce their taxable income. Tax exemption is a part of a taxpayer’s income that is not subject to tax and can be excluded from the total income. The Income Tax department defines exemptions as specific allowances, like House Rent Allowance (HRA), Leave Travel Allowance (LTA). The I-T laws allow exemptions on interest income from savings accounts up to a certain limit.
Income Tax exemption means income becomes tax-free in the hands of taxpayers, and also excludes certain income from tax calculation like agricultural income and scholarships.
Income Tax exemption helps in reducing the payable tax and enables deduction from a fixed amount from calculated tax. The rebate comes under Section 87A. Exemptions need to be claimed by the taxpayer while filing Income Tax Return.
Income Tax deduction
Income Tax deduction is claimed on total gross income, like on certain expenses or investments that can be subtracted before calculating the taxable income. The deductions are made under Section 80C. The examples include, ELSS, PPF, Life Insurance premiums, interest repayment of education loan, and premium payment for medical insurance, National Pension Scheme (NPS), and some government bonds qualify for deductions. Automatically considered while calculating taxable income by employers or tax authorities.
How does Tax deduction works
Let’s say a taxpayer has a gross total income of Rs 10 lakh, and the individual invests Rs 1.5 lakh in a PPF account. According to I-T rules, the person can deduct Rs 1.5 lakh from the gross income and thus reducing the taxable income to Rs 8.5 lakh.
Working of Tax Exemptions
If an individual is having a gross total income of Rs 10 lakh and is entitled to an HRA of Rs 2 lakh, and Rs 1.5 lakh of it is exempted from tax. In this scenario, the tax rule says that Rs 1.5 lakh will be excluded from the gross total income. The income for tax calculation will begin from Rs 8.5 lakh and further subtracting the exempted amount of Rs 1.5 lakh, bringing it to Rs 7 lakh.
The Income Tax Return season has arrived. In this article, let’s have a look at Tax Deduction and Tax Exemption that often appear when taxpayers discuss taxes. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
