Income tax credit

Income Tax Credit – An income tax credit is a benefit that allows taxpayers to directly reduce the amount of tax they owe to the government. Unlike tax deductions, which lower taxable income, tax credits reduce the tax liability dollar-for-dollar, making them generally more valuable than deductions of equivalent amount. Types of Tax Credits: Non-refundable credits: Can reduce tax liability to zero but not below. Refundable credits: Can reduce tax liability below zero, resulting in a refund. Carryover credits: Unused credits may be carried forward to future years. Example: If a taxpayer owes ₹50,000 in taxes and is eligible for a ₹10,000 tax credit, their final tax liability becomes ₹40,000.