What is the difference between tax deduction and tax exemption, know how to get benefit in ITR?

Deadline for filing ITR: Tax exemption and tax deduction are often mentioned while filing income tax returns or as a tax saving tool. Tax exemption means exemption from tax and tax deduction means deduction from tax. Although these two things are similar but there is a difference between them, let's find out…

Tax deductions

Tax deductions can reduce your taxable income by deducting investments and expenditure from your total income. You can avail tax deductions under various sections of the Income Tax Act.

Avail deduction on investments and expenditure under Section 80(C).

Section 80 (C) of the Income Tax Act, 1961 is a good option to save tax. Its benefit can be availed in the form of deduction in many types of investments and expenses. By which you can reduce your tax liability by reducing your taxable income. Benefit of Section 80 (C) You can take advantage of this deduction on various types of investments like Employees Provident Fund, Public Provident Fund, National Savings Certificate, Equity Linked Savings Scheme and Life Insurance Premium. In which you can claim tax deduction on investment up to Rs. 1.5 lakh during the financial year. That is, no tax will have to be paid on investment up to one and a half lakh.

Discount on home loan interest

Under Section 24 (B) of the Income Tax Act, one can claim tax deduction on interest up to Rs 2 lakh paid annually on home loan. Apart from this, deduction is also available on payment of health insurance and medical insurance premium under Section 80 (D). The amount of deduction depends on the age group and coverage.

You can claim tax deduction under this subsection of section 80

1. On various types of investments under Section 80(C).

2. On insurance premium under section 80(CCC).

3. On pension contributions under section 80(CCD).

4. Interest on savings account under section 80(TTA).

5. Employees who do not receive HRA from the company can claim tax benefits under Section 80(GG) for house rent.

6. Interest on education loan under section 80(E) is allowed at Rs.

7. On home loan interest under Section 80(ee).

8. On medical insurance under section 80(D).

Tax exemption

Tax exemption means the income that is not added to the taxable income of income tax. This income is not included in taxable income. In simple words, you can reduce your taxable income by claiming any investment and expenditure as tax deduction. When exemption is included the income is not included in taxable income. Which includes house rent allowance, leave travel allowance, long term capital gains, gifts from family or relatives, friends, income from agriculture…