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Difference between Exemption and Deduction.?

Ravi Gupta (Student of CA-IPCC CS and M.COM) (243 Points)

23 December 2010

Plz tell me the Difference between Exemption and Deduction in Detail..!
It is said that Exemption can never exceed Taxable income but Deduction can exceed..!
How.?
Plz reply anyone..

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student (WORKING) (757 Points)
Replied 23 December 2010

deductions--investment oriented [i.e. if u invest u get it] for eg 80C u invested 2 lac in nsc & ur GTI =80000 then also u r eligible for ded=min(gti or 1 lac) therefore here ur ded eligibile=1 lac but since ur ded can't exceed gti therefore ded=gti.

but in case of exemption [specified by law like minor=10(15)=rs. 1500/minor child eg if minor earns earns IOS=26000 his parents wil be taxable==1200-1500=0 so exemption can exceed respective head's income but can't exceed total taxable income (gti)

any doubt ask further

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Manmohan ACA, CS (Chartered Accountant ) (14243 Points)
Replied 23 December 2010

Exemption

Deduction

Every income of the assessee is charged to tax unless specifically exempted under the Act. Sec. 10 (or 10A, 10AA, 10B)provides list of incomes which are not to be included in the total income of the assessee for tax purpose. In other words, these incomes are out of the purview of income tax and for tax purpose, total income is computed without taking these incomes into consideration.

From the gross total income of the assessee, deductions are allowed on fulfillment of conditions as prescribed in the various sections of chapter VIA. Chapter VIA of the Act (comprises of sections 80C to 80U) provides for various deductions from gross total income. Apart from deduction under chapter VIA, several sections of the Act also provide for deduction while computing income under each head of income E.g. Sec. 16(i) allows Standard Deduction to compute income under the head “Salaries”, sec 24(a) standard deduction @ 30%.

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Sunshine (Helping All) (10575 Points)
Replied 23 December 2010

exemptions means the income which is not taxable ...ie. exempted...chod diya gaya hai......for income tax calculations not to be considered...eg-sec 10

deductions means the income is taxable but due to certain provisions the taxability has been reduced...ie. decreased...eg the 80s

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Vikas Gupta (CHARTERED ACCOUNTANT) (16295 Points)
Replied 23 December 2010

Originally posted by : Sneha.... sunshine
	exemptions means the income which is not taxable ...ie. exempted...chod diya gaya hai......for income tax calculations not to be considered...eg-sec 10 deductions means the income is taxable but due to certain provisions the taxability has been reduced...ie. decreased...eg the 80s

Nikhil Kothari (CEO at Sequinox Business Advisories) (4671 Points)
Replied 23 December 2010

Originally posted by : Sneha.... sunshine
	exemptions means the income which is not taxable ...ie. exempted...chod diya gaya hai......for income tax calculations not to be considered...eg-sec 10 deductions means the income is taxable but due to certain provisions the taxability has been reduced...ie. decreased...eg the 80s

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CA. ANKUR JAIN (CA.....) (2800 Points)
Replied 23 December 2010

Originally posted by : Sneha.... sunshine
	exemptions means the income which is not taxable ...ie. exempted...chod diya gaya hai......for income tax calculations not to be considered...eg-sec 10 deductions means the income is taxable but due to certain provisions the taxability has been reduced...ie. decreased...eg the 80s

and further

deductions first includes in gross total income then allowed under specific provisions

but exemptions even not includible in gross total income of an assessee....

eg:- divident is exempt so it is not required to add it in GTI

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