Most tax systems allow for deductions, exemptions, and tax credits to reduce taxable income or final tax liability. These provisions provide a vehicle through which people save taxes by exploiting certain conditions. Among the most common ones are as follows:
• Section 80C Deductions: Provident Funds, life insurance, and other schemes provide investment facilities that are eligible to be deducted up to a certain limit under the Indian tax structure.
• House Loan Interest: It is house loan interest which is fully deductible to its full amount extent.
• General Payday Expenses: Salaried employees' general expenditure for which a standard deduction would always cover all such expenses.
• Health Insurance Premiums: Even health insurance premium can be deducted for oneself and family.
Deductions reduce the income tax directly and when tax credits are available, they decrease the final tax liability.