Why tax deductions

Your Practice. Popular Courses. Part Of. Understanding Tax Breaks. Tax Credits. Tax Deductions. Tax Deductions for Real Estate. Tax Deductions for Retirement Savings. What Is a Tax Deduction? Taxpayers have the option to take a standard deduction or itemize deductions if a taxpayer chooses to itemize deductions, then deductions are only taken for any amount above the standard deduction limit. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.

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If you happen to leave the organisation before completing this period, the organisation may recover the notice pay or the joining bonus paid to you initially. The tax liabilities for these components are explained with illustrations below: Illustration I Notice Pay: Consider that Mr C, with a work experience of 1 year 6 months, was working with Organisation A with an agreement of 2 years.

The agreement stated that if he quits the job within the agreement period, he must pay the salary of 3 months as notice pay. Mr C wanted to quit the job and join the Organisation B. The new firm agreed to pay the notice amount so that Mr C could join them sooner. If the organisation does not make necessary adjustments in Form 16, Mr C cannot get a refund.

Say, he had received a joining bonus of Rs. Since he has not completed the agreement period, he must pay back the joining bonus while leaving the company. Let us consider that he asks the new company to reimburse the joining bonus for him and the new organisation does reimburse.

In this case, Mr C must check the Form 16 given by both the organisations. If Organisation 1 has also included the joining bonus in Form 16, then Mr C will not be able to obtain a refund of the TDS from the income tax department.

Employers generally provide cab facility to and from the office and residence of the employees. Such a facility is not taxed as a perquisite for the employee. The facility would be an expense for the employer.

As per the Indian Income Tax Act, use of any vehicle provided by a company or an employer for a journey by the employee from his residence to his office or another place of work, shall not be regarded as a taxable perquisite, even if provided to him free of cost or at a concessional rate.

In the case of a health club facility provided by employer uniformly to all employees, the facility is not taxable as a perquisite in the hands of the employee. Gifts or vouchers given by an employer in cash or in kind are tax exempt up to Rs 5, per year.

Also the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. The above expenditure would be exempt from tax for the employee subject to the condition that —. Thank you for your response.

Are you a salaried employee? Download link sent. How to check if your Form 16 carries a valid digital signature. What is the difference between Assessment Year and Financial Year? All federal income taxpayers have the right to chose either the standard deduction or to itemize a range of deductions, thereby lowering their taxable income. Tax deductions are related to but distinct from tax exemptions. A tax deduction is a portion of taxable income that may be excluded from taxation when certain conditions are satisfied, while tax exemption constitutes income that is not subject to taxation in the first place.

Meanwhile, a tax credit is applied to reduce the amount of tax owed, independent of taxable income. The standard deduction is a single, fixed deduction, whereas itemized deductions comprise a variety of expenses that may add up to a greater amount than the standard deduction.

Your standard deduction increases if you are 65 or older or blind. State and local taxes SALT — including income, property, and sales taxes — can be itemized for deduction. About one-third of taxpayers itemize deductions on their federal tax returns, and nearly all itemizers claim a deduction for local and state taxes paid.

Remember, with TurboTax , we'll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we've got you covered. Feel confident doing your own taxes. Just answer simple questions about your life, and TurboTax Free Edition will take care of the rest. For Simple Tax Returns Only. Video: What Are Tax Benefits? What Are Standard Tax Deductions? Tax Exemptions and Deductions for Families. What Are Tax Deductions?

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