Sanmitra Sanjeev Ratnaparkhi (-) (223 Points)
06 April 2014Hello everyone!
Will someone please tell me about the difference between deductions & exemptions?
Actually, I know the difference but I just want to know the tax treatment of both, particularly, is there any effect of these on the total tax liability?
SURESHAN K
(Auditor)
(189 Points)
Replied 06 April 2014
Deductions are allowed after arriving Gross Total Income ie. after aggregation and set-off. If GTI is zero no deduction would be available. Where as exempted item of income would not form part of Total Income. Exemption is given before aggregation and set-off.
this can be illustrated as below:
X is a co-operative society having business income Rs 5,00,000/- and house property loss Rs3,00,000/-. Its business income is eligible for deduction u/s 80P.
in this case GTI is 5,00,000 + (-) 3,00,000 = 2,00,000
Less; deduction u/s 80P = 2,00,000 ( though BI is 5 lakh deduction is limited to GTI available)
Taxable income = Nil
If in the above case no deduction u/s 80P is avilable but BI includes exempt income to the tune of Rs 4,00,000
then GTI is (5,00,000 - 4,00,000) + (-) 3,00,000 = (-) 2,00,000
Taxable income = Nil ( HP loss 2 lakh will be allowed to carry forward)
Sanmitra Sanjeev Ratnaparkhi
(-)
(223 Points)
Replied 06 April 2014
Oh! Thaaaaaaaaaaaaaaank you so much Sir!!
It is really helpful to me!!!
Thanks again.
Have a great day ahead.
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