Tax Deductions

Tax deductions are expenses or contributions that the law permits you to subtract from your gross income. Because these amounts are removed before calculating tax, they reduce the income on which tax is computed and thereby decrease the final tax payable. Deductions can relate to a range of personal and financial activities, such as contributions to approved savings schemes, insurance payments, interest on certain loans, charitable donations, and various eligible business or employment-related costs. The objective behind deductions is to encourage individuals to save, invest, and spend on essential needs while easing their tax burden.

Example: If your annual income is ₹6,00,000 and you qualify for deductions such as ₹1,50,000 contributed to PPF and ₹20,000 spent on health-insurance premiums, your total deductions amount to ₹1,70,000. Your taxable income becomes: ₹6,00,000 – ₹1,70,000 = ₹4,30,000, reducing the tax you ultimately owe.