Exemptions and deductions

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ALEN CYRIAC (Querist)
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24 January 2014 some items of income are exempt, while others are deductable from gross total income. but both have the same effect on taxable income. mi question is sir, why should we exempt some, and deduct others. ?

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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24 January 2014 Even though both effects are same there is some difference between exempt and deduction in their meaning and concept.

Exempted income doesn't included in gross total income but deduction shall include in gross total income

Means exempted income not important to decide return filing liability means to decide gross total income(because of those whose gross total income exceeds basic exemption limit are must and should be required to file their income tax returns) but deduction income important to decide income tax return filing liability or gross total income

Exempted means not an income means not included in income for the year(period) for computation of taxable income but deduction is an income and included in income for the year(period).

Agricultural income and dividend incomes are example for exempted incomes and Interest on NSC Bonds and Savings bank interest are deduction incomes.

Like many of above reasons we differentiate between exempted and deduction.

One more important thing for exempted income no limit but for deduction income there is limit(for example savings bank interest deduction available u/s 80TTA upto maximum of Rs.10000 and interest on NSC bonds deduction available u/s 80C upto maximum of Rs.100000)

So difference between exemption and deduction incomes is most important.

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