Exemptions v. Deductions: Underlying Philosophy In Tax Laws

Taxation, a structured process to fund public welfare, includes direct and indirect taxes governed by the Income-tax Act, 1961, and the Goods and Services Tax Act, 2017. This article explores the concepts of exemptions and deductions in tax law. Exemptions exclude entire incomes or transactions from taxation, focusing on the taxpayer's nature, while deductions reduce taxable amounts based on qualifying expenses. These provisions, upheld by courts, aim to promote social policy, equity, and economic efficiency. Despite concerns of discrimination, they ensure fair and equitable taxation, addressing diverse taxpayer circumstances and adhering to constitutional mandates.

Introduction