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Tax Exemption

Posted on Mar 26, 2008 under TAX |

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The taxes which are collected within some state or nation are subject to certain Tax Exemption policies. To maintain or achieve the equilibrium among some section of the society the tax burden has been reduced in the form of tax exemption. Tax Exemption is offered to an individual or an organization which the government wants to promote.

Tax exemptions are present all over the world and are like exemption from property tax, income tax exemption which includes dependents like children or others financially. Tax exemption brings the change in the economy of the society but sometimes leads to adverse affects, for this some major conditions should be followed like:

1) The tax payer’s age.
2) The type of property owned.
3) Tax payer’s net income.
4) Services that are performed by the tax payer publicly.
5) Individual’s property location.

It should always be kept in mind that the concept of tax deduction is different from tax exemption, as tax deduction is the expense received by the taxpayer who is deduced from the gross income which in turn lowers the taxable income. There is much type of benefits as well as income that are exempted from the income tax like life insurance dealing, inheritances, gifts, payments for personal injuries, income from local bond, education scholarships etc. Some non-profit organizations are also exempted from tax.

Tax exemption in some states has the provision from other taxes like sales tax, property tax; this is done to increase the commerce in that state which is going through the economic depression. There are certain tax exemption that are allowed for dependents, the tax payer has to undergo certain test criteria which than enable the tax payer to claim the exemption on the tax return.