Difference between Exemptions and Deductions

What are Exemptions

• Income which is not taxable is called Exempt Income.
• Government has given lots of tax concessions called Exemptions
• If exemption is given,by government, no tax is payable Under Income tax Act.

   Example: - Agricultural Income is exempt

What are Deductions

  Items which are reduced from Income are called Deductions.

   Example:

                          Gross Total Income

            Less:     Deductions

                         Net total Income

Hence Deductions lead to decrease in Income and hence decrease in tax.