Deduction

Deduction refers to the amount subtracted from a taxpayer's gross income to determine taxable income. It includes expenses, contributions, or allowances permitted by tax laws to reduce taxable income.Deduction – A deduction represents an amount permitted by tax law to be subtracted from a taxpayer’s total or gross income in determining taxable income. It covers eligible expenses, investments, or allowances and serves to lower the taxpayer’s overall tax burden.

Example: Contributions to provident funds or payments for medical insurance premiums, as allowed under Sections 80C and 80D of the Income Tax Act, are common deductions that reduce taxable income.