ITR Filing: Essential income tax exemptions and deductions every taxpayer should know

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income tax return (ITR).Utilizing deductions and exemptions presents an excellent opportunity for salaried employees to reduce their tax liabilities. However, taxpayers must understand the fundamental difference between deductions and exemptions.

While they might appear similar to first-time ITR filers, a closer examination reveals distinct definitions and their respective significance in tax payments.Deductions refer to specific expenses that decrease your taxable income. Typical deductions for salaried individuals include investments made under Section 80C (such as PPF and ELSS), medical insurance premiums under Section 80D, and home loan interest under Section 24 of the Income Tax Act, 1961.Exemptions refer to types of income that are entirely exempt from taxation.

Allowances such as HRA and LTA fall into this category. By utilizing these exemptions, you effectively lower the taxable income considered by the government when determining your tax liabilities.ALSO READ: Changing jobs often? Here's why Form 16 is critical for your income tax returnWhether the property is rented out or self-occupied affects the deduction limit.Additionally, five equal installments of pre-construction interest may be obtained starting in the year that construction is completed.

For a smooth tax filing process, it is essential to keep accurate records of loan documents and interest payment receipts.Below is a summary of the deductions that qualify under Section 80C:Section 80C allows for a maximum deduction of ₹1.5 lakh per fiscal year. Investments made in your name, the name of your spouse, and the names of your dependent children are all eligible for deductions.