Difference b/w Income Tax Rebate Vs Tax Deduction Vs Tax Exemption

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A common man is most of the times confused between the terms – Income Tax Rebate, Income Tax Deduction and Income Tax Exemption and ends up using them interchangeably. Although, all these terms are beneficial to the taxpayer and reduce their tax burden, the meaning and treatment of all these terms is different and is explained in this article.

Before understanding the meaning of these terms, it is important for a taxpayer to understand how tax on income is calculated:-

Income from Salaries
     Salary received xxx
    (Less) Amt Exempt (xxx) xxx
Income from House Property
      Rent received xxx
      (Less) Income Tax Deduction (xxx) xxx
Income from Business/Profession
      Income earned xxx
      (Less) Income Tax Deduction (xxx) xxx
Income from Capital Gains
      Capital Gains xxx
      (Less) Amt Exempt under Section 54, 54EC, 54F (xxx) xxx
Income from Other Sources
      Income from Other Sources xxx
      (Less) Amt Exempt (xxx) xxx
Gross Total Income xxx
(Less) Income Tax Deductions under Chapter VI-A (xxx)
Total Taxable Income xxx
Tax on total taxable income as per Income Tax Slab Rates xxx
(Less) Income Tax Rebate (xxx)
Total Tax payable xxx

Income Tax Exemptions

Income Tax Exemptions are allowed to be claimed from a specific source of Income and not from the Gross Total Income. For eg: Income Tax Exemptions allowed under head salary are not allowed to be claimed from any other head.

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Similarly, Income Tax Exemptions allowed to be claimed under head Capital Gains under Section 54, 54EC, 54F etc are not allowed to be claimed under any other head

Thus, Income Tax Exemptions are those items which are allowed to be claimed only from a specific source of Income and not from the Total Income

Income Tax Deduction

Income Tax Deduction is allowed to be claimed from the total income under each head and also from the gross total income. Deductions are allowed to be claimed in case the taxpayer has incurred some specified expenditure or made specified investments.

Examples of Income tax deductions allowed are as follows:-

Income Tax Rebate

income-tax-rebate

Income Tax Rebates are those items which are allowed to be claimed from the total tax payable. It is pertinent to note that Income Tax Exemptions and Income Tax Deductions are allowed from to be claimed from the Income whereas Rebate is allowed to be claimed from the Tax payable.

Various types of Rebates available for an Individual taxpayer are as follows

A Personal Finance enthusiast, Karan is the founder of charteredclub.com and loves to discuss about Money related matters.