Personal allowances

Personal allowances are deductions granted to individuals that reduce their total income when calculating taxable income. They serve to lower the tax burden by recognizing basic living costs and responsibilities, such as supporting oneself or dependents. Key Features of Personal Allowances Reduction in Taxable Income Personal allowances are subtracted from gross income to determine the taxable portion of an individual’s income. Coverage Common allowances include: Individual allowance – for the taxpayer themselves Spousal allowance – for a dependent spouse Children or dependent allowance – for minor or financially dependent children Other dependent allowances as permitted by law Purpose To relieve basic living expenses from taxation To provide fairness by considering family responsibilities To encourage compliance with tax laws by making taxation equitable Example An individual has a total income of ₹10,00,000. Personal allowance for self = ₹2,50,000 Personal allowance for spouse = ₹1,50,000 Taxable income = ₹10,00,000 − (₹2,50,000 + ₹1,50,000) = ₹6,00,000