Tax Deduction

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Definition
A tax deduction is a total amount an individual can claim to reduce their tax liability. It is a provision that allows any individual to reduce the tax liability on the total income.

Description
The deduction can be called the benefit through which you can save tax. You save more money and invest in other areas with the reduced income tax liability.

You can apply for tax deduction after investing in Life Insurance Policies, PPF, National Savings Certificate, ULIPs, Home Loans, Medical Insurance Premium, Pension Plans, Senior Citizens Savings schemes, and Tuition Fees. Example Akhil earned Rs.8 lakhs annually. For this salary bracket, the net taxable income will be Rs.6,50,000/-. According to the old tax regime, the net tax deduction will be applied at 20%. But if Akhil purchases a life insurance policy, he can reduce his tax deductions. The maximum limit of deduction that Akhil can save is Rs.1.5 lakhs under Section 80C.

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