A deduction is one such expense that can be deducted from the gross Income of an individual or a married couple. The reason behind this subtraction is to decrease the amount that is generally subjected to income tax.
Mostly, it is also referred to as an allowable deduction.
In the country, salaried employees are the major chunk of taxpayers. And, their contribution to the collection of tax is quite substantial. In a way, income tax deductions provide several opportunities to save tax. With these deductions, it becomes easier to decrease the tax amount to a great extent.
While putting the Union Budget 2018, the Indian Finance Minister announced a standard deduction that amounts to Rs. 40,000 for salaried individuals. However, back in 2019, this limit was increased to Rs. 50,000.
This was introduced in the place of medical reimbursement and transport allowance. As a result of it, now salaried individuals can get an additional income tax exemption of Rs. 5,800.
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Although the government allows claiming deductions in regards to several sections, here are a few essential ones that turn out to be helpful to a great extent.
The Income Tax Act offers a deduction on education loan interest. However, the condition to claim this deduction is that the loan should be taken from a financial institute or a Bank either by the person himself or his spouse.
This section helps an gain income tax deduction to assessee who donates to charitable trusts and organizations. This deduction generally varied on the Basis of the receiving organization.
Let’s take a deduction example here. Suppose that you earn Rs. 50,000 in a month and make a donation of Rs. 1,000 to an NGO every month. Thus, you will be eligible to claim your deduction for this donation, which will decrease your taxable income to Rs. 49,000.
This section provides a deduction of up to Rs. 10,000 on income that is earned from the interest on Savings Account. This exemption can be availed by HUFs and individuals. In case the income earned is less than Rs. 10,000; the whole amount can be deducted. And, if the amount is more than Rs. 10,000; the entire amount will be taxable.
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