Difference between Income Tax Deduction, Rebate and Relief

Key Difference: Tax Relief is any program or incentive that helps reduce the tax in some way or another. This tax relief can be in the form of a tax deduction or a tax credit. A tax deduction is basically a deduction of tax. It allows one to deduct an amount from the total income of the person. A tax rebate, also known as tax refund, is a refund of tax that has already been paid by a person.

One of the responsibilities of growing up is to pay taxes to the government, so that it may continue to give its citizens the benefits that it always has. These benefits include things such as law enforcement, public services such as parks and recreation, sanitation, etc. In order to provide these services, as well as run the country, the government needs revenue. In fact, taxes are the primary source of income for any government.

However, despite of just taking taxes, the government can provide relief to its citizens. It does this by helping to reduce taxes via the form of tax relief. Tax Relief is any program or incentive that helps reduce the tax in some way or another. This tax relief can be in the form of a tax deduction or a tax credit.

 

A tax deduction is basically a deduction of tax. It allows one to deduct an amount from the total income of the person. Hence, the total taxable income of a person goes down, as does the tax payable. This deduction is usually on calculated on the basis of expenses, particularly those that are incurred to produce additional income.

 

 A tax rebate, on the other hand, is completely different. A tax rebate, also known as tax refund, is a refund of tax that has already been paid by a person. This refunds the tax that has usually been already paid in advance, or in excess, and for which the citizen is now eligible for a refund.

Comparison between Income Tax Deduction, Rebate and Relief:

 

Tax Deduction

Tax Rebate

Tax Relief

Description (Investopedia)

A deduction from gross income that arises due to various types of expenses incurred by a taxpayer.

The return of excess amounts of income tax that a taxpayer has paid to the state or federal government throughout the past year.

Any program or incentive that reduces the amount of tax owed by an individual or business entity.

 

Type

Reduction of income

Refund of tax paid

Any relief of tax

How it works

Indirectly reduce tax bills

Refunds excessively paid tax

Directly or indirectly reduce taxes

Reduction

Reduces the income on which the tax is calculated

Refunds tax that has been paid beforehand

Anything that reduces the tax that has to be paid. Can be a deduction or a credit.

On the basis of

Expenses, particularly those incurred to produce additional income

Taxes already paid

Can be on the basis of Taxes already paid or to encourage behaviors like investment or parenting. It can also be on the basis of expenses, particularly those incurred to produce additional income.

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