Exemptions in Payable Tax
Taxes are how the government raises funds to spend on the numerous services and items that it provides throughout the year. One can lower their tax liability by filing for tax deductions. Tax deductions are the expenses that one has throughout the year. These can then be removed from your income to determine the final amount of tax due. Here are a few examples of situations when a tax deduction might be claimed –
- HRA (House Rent Allowance)
If you rent an apartment, you may be eligible for the HRA tax advantage. The amount exempted from income tax might be fully or partially exempt.
- Medical Insurance Deduction
If you have purchased a medical insurance policy, the premium you paid for the coverage may be deducted from your gross income, allowing you to save money on taxes (up to a limit).
- Deductions on Investments
Section 80C allows you to deduct Rs 1.5 lakh from your total income.
- Insurance Premium
Insurance Premium Deduction for Premiums Paid for LIC or Other Insurer Annuity Plans Contribution Deduction for Pension Account Contributions.
- Interest on Savings Account
Interest on Savings Bank Account Deduction from Gross Total Income.
- Interest on Education Loan
Deduction for Interest on Education Loan for Higher Studies.
To pay income tax at reduced rates under the New Tax system in exchange for foregoing certain allowed exemptions and deductions available under income tax, or to pay taxes at current rates.
By continuing in the previous regime and paying tax at a higher rate, the assessee can get refunds and exemptions.
To know more about the differences between the two regimes, read the article, Income Tax Slabs FY 2020-21, AY 2021-22 & Tax Rates for FY 2020-21/ FY 2019-20/ FY 2018-19.
Conclusion:
When we consider the government’s many obligations, we must remember that we are required to pay taxes in line with the law. As citizens, we must act responsibly in order for the country to function properly.
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