Why government provide deductibility over tax? Is there any deductibility for consumption tax? If yes, Why?...

Why government provide deductibility over tax? Is there any deductibility for consumption tax? If yes, Why? If no, Why?

Expert Solution

Ans)
•A tax deduction is a reduction in the amount of tax payable by tax payer.
•Deductions are allowed for some specific expenses incurred by a taxpayer during the year and it will be subtracted from his gross income.
•E.g. Education,health and medical expenses etc.

•Goverment provides deductability over tax as amount as some amount of liability of taxpayer will be reduced and it increases real income and the same amount will be utilised by taxpayer for other purposes and in some cases goverment also provides deduction in tax in case of savings and investments.
•For achieving the benifit of deduction in tax saving habit of people also increases and due to which investment also increases.

•Consumption tax is related with purchase of goods and services.
• Like sale tax etc.some deductions are also available in case of sales tax for reduction of liability of taxpayer and ultimately selling price of goods and services also reduces to some extent.
•Consumers receives goods and services at reasonable and fair prices and maximise their satisfaction.

Rahul Sunny answered 7 months ago

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