Answer
Exemptions are the deductions in the taxable income allowed by the law. There can be personal exemptions or dependent exemptions.
Work Step by Step
Exemptions are monetary relief provided in the taxable income. The exemption provides relief from taxes. It reduces the rate on items and provides benefits to tax payers. Exemptions can be of two categories:
1. Personal exemptions
2. Dependent exemptions
Personal exemptions are amounts that the tax payer of the resident country can claim against taxable income. These claims are related to tax payer only and not of dependents.
Dependent exemptions are claims that the tax payer made for his/her dependents. Dependents on tax payer shouldn’t fall under taxable income category and tax payer can only claim for them. Dependents can be tax payer’s children, brother, sister, parents, uncle, and aunt.
