Deduction and Exemption

Exemption - An income which is exempt means the same does not form part of my gross total income or total income. For eg exemption available under section 10 or 54 etc. This type of incomes are shown separately in ITR in Schedule EI.

Deduction - Once the Income is included in gross total income of the assessee and of chargeable to tax, then from such income, an assessee is eligible to take deduction of investments/Log etc. covered under section 80C to 80U

TAX EXEMPTION

In the world of taxation, the word ‘exemption’ means exclusion. So, if a particular income is exempt from tax, it will not be included in the total revenue for tax purposes. This reduces the total taxable income of a taxpayer. All exemptions are dealt with under Section 10 of the Income Tax Act.
Some incomes are completely exempt such as agricultural income and some are partially exempt suuch as HRA, LTA, LTCG on equity funds etc.

TAX DEDUCTION

Tax deduction refers to the amount of money that is reduced from your total taxable income. The final tax payable is calculated depending on the balance ‘taxable income’. Tax deductions aim to promote the culture of savings and investments among the general public..

The Income Tax Act sections between 80C and 80U deal with all the deductions available to taxpayers