Income tax appears as a form of corporate taxation (joint stock company, limited liability company and simple limited liability company). By making a profit through business, there is a need for a new form of taxation, and that is income tax. Income tax is a type of capital tax that should be taxable as income. The realized profit is distributed and becomes the taxable income of the owner of the company. When speaking of income tax, entities are subjects who perform economic activity for the purpose making a profit. Income tax is determined based on the results of a particular economic activity. With regard to income taxes, there are various reliefs and exemptions for certain groups of taxpayers as well as state aid. In Croatia, income tax is determined according to the provisions of the Income Tax Act. The Income Tax Act changes over the years, as well as, exemptions, incentives and grants, and they also facilitate. The beneficiary of state aid is any legal and natural person who, performing an economic activity, participates in the trade of goods and services, and receives state aid, regardless of its form and purpose. State aid can be granted on the basis of a state aid scheme, and can also be granted as individual aid. By amending the Law on Profit Tax from 01.01.2021. and due to the situation caused by Covid, a relief is added which reduces the tax base and the amount of aid received to mitigate the negative consequences in the event of special circumstances. The purpose of this paper is to analyze the effectiveness of tax breaks, incentives and exemptions in income taxation. I will mention some of them in my final paper.