Section 80TTA and Section 80TTB of the Income Tax Act of 1961 help all tax-paying individuals save money on their savings and interest earned. The deductions allow all taxpayers to significantly reduce taxable liability.
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Let's take a closer look at these deductions and their eligibility criteria.
Section 80TTA allows HUFs or individuals to claim a deduction of up to Rs. 10,000 on interest earned from a savings account. The deduction is available on the interest earned from a savings account held with a bank, post office, or cooperative society. The maximum deduction limit is Rs. 10,000 irrespective of the amount of interest earned.
It is important to note that the deduction under Section 80TTA is not available on interest earned from fixed deposits, recurring deposits, and other term deposit schemes. Additionally, the deduction is not available to non-resident Indians (NRIs).
Section 80TTB is a recent amendment that offers a deduction for senior citizens on interest earned from deposits. This section was introduced in the Finance Act 2018 and applies to individuals aged 60 years and above. Although higher than section 80TTA, the deduction under Section 80TTB has a limit of Rs. 50,000.
Senior citizens can claim this deduction on interest earned from savings accounts, fixed deposits, recurring deposits, or any other term deposit.
It is important to note that the deduction under Section 80TTB is not available to HUFs or any other category of individuals except senior citizens. The maximum limit of total deduction under this section is Rs 50,000.
All individuals or HUFs can claim a deduction under Section 80TTA. Under section 80TTB, all senior citizens of age 60 years and above are eligible to claim a deduction.
It is important to note that the interest income earned above the deduction limit will be taxed at the tax rate applicable to the individual. For example, if an individual earns an interest income of Rs. 12,000 from a savings account, the deduction under Section 80TTA will only be available on Rs. 10,000. The remaining Rs. 2,000 will be taxable.
The deduction under Section 80TTA and Section 80TTB is not available for interest income earned from sources other than savings accounts or deposits. For example, interest earned on bonds, shares, or mutual funds does not qualify for these deductions.
Furthermore, it is important to declare all the interest income earned from savings accounts or deposits while filing income tax returns. Failure to do so may result in a notice from the Income Tax Department and could lead to penalties.
Some benefits of sections 80TTA and 80TTB are:
Claiming deductions under Section 80TTA and Section 80TTB can reduce the taxable income, which further reduces overall tax liability.
The deductions can help individuals save a considerable amount, especially senior citizens who have limited sources of income.
To claim deductions under Section 80TTA or Section 80TTB, individuals must provide the following documents:
Proof of age
Any other government-issued ID
In the case of joint accounts, the deduction under Section 80TTA or Section 80TTB can only be claimed by the first account holder. If the second account holder is a senior citizen, they can claim the deduction under Section 80TTB on the interest earned from their share of deposits. The tax deductions apply to each account holder individually as per the slab they fall in.
To claim the deduction under Section 80TTA or Section 80TTB, the individual or HUF must file their income tax return (ITR). Taxpayers can fill out ITR forms online or offline with appropriate details to claim deductions. This benefit is not available to people who do not claim it while filing ITR.
Individuals and HUFs should ensure that they keep a record of the interest earned and the deduction claimed for future reference.
Section 80TTA and Section 80TTB are two useful deductions that help save taxes on interest income earned from savings accounts or deposits. These deductions are aimed at encouraging savings and investments among individuals/HUFs and senior citizens. It is important to ensure that all necessary documents and proofs are available while claiming these deductions. The taxpayers can also consult their advisors for further guidance.
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