Exemption refers to relief given on taxation for each dependent, being over the age of 65, blindness, and having other permanent disabilities. This results in the downward calculation of tax. Exemptions differ from deduction which lowers the taxable income.
The term exemption can also be explained as the right of exclusion from something. For example, in bankruptcy cases certain assets are exempted (protected) from being taken away by the creditors to pay off debts.