Outlook Money
While filling ITR, one comes across terms like tax exemption and tax deduction. Therefore, it is important to understand the two.
Tax deduction mean investments or expenses that one can deduct from the total income. By claiming the benefit of deduction, taxable income is reduced.
1. Deduction on investments and expenses- Section 80C; Under this section, exemption on investments like Public Provident Fund, National Savings Certificate etc is provided.
Under Section 24(b), one can claim income tax deduction of up to Rs 2 lakh in a year on the interest paid on this loan.
Exemptions are present under different sections that include Section 80C, 80CCC, 80CCD, 80E and 80D etc.
Tax exemption means such income which is not considered as part of the taxable income in terms of income tax. In the tax exemption, income under exemption is not added to taxable income.
1. House Rent Allowance (HRA): If salary package includes a house rent allowance (HRA) from the employer, then one can get an exemption on it under section 10(13A).
Travel Allowance Leaves granted by employer are eligible for tax exemption under section 10(5).