What is the difference between a Deductions and a tax credit?

April 17, 2024 10:40

Deductions:

Deductions are the amount of expenses or investments made by a taxpayer that are deducted from the Total Income of the taxpayer.

For example: Deduction u/s. 80C for various investments and expenses, Deduction u/s. 80D for Health Insurance Premium, etc.

Tax Credits:

Tax Credits are the amounts of tax that are deducted or collected from the taxpayer by specified persons. Tax Credits also include the amount of taxes paid in foreign countries on income that is taxable in India. Tax Credits are directly deducted from the Tax Liability of the taxpayer.

For example: Tax Deducted at Source (TDS), Tax Collected at Source (TCS), Foreign Tax Credits, etc.

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