What are the Section 80TTA and 80TTB of Income Tax Act?

Section 80TTA of the Income Tax Act in India is a provision that offers tax benefits to individuals and Hindu Undivided Families (HUFs). The interest income earned from savings accounts held with banks, post offices, or cooperative societies engaged in the banking business is eligible for this deduction.

This section is designed to encourage savings among taxpayers by allowing a deduction from their gross total income for interest earned up to a specified limit.

Section 80TTB, Income Tax Act in India, is a specific provision aimed at providing tax relief to senior citizens. This section recognises the need for a more supportive tax framework for older people. It allows senior citizens, individuals who are 60 years old or above, to claim a deduction from their gross total income for interest income earned on deposits.

The types of deposits covered under this provision include savings accounts, fixed deposits, and recurring deposits held with banks, post offices, and cooperative societies that conduct banking activities.

Eligibility Criteria for Section 80TTA:

The taxpayer must be a resident individual or a Hindu Undivided Family (HUF).

The interest income must be earned from savings accounts only.

Accounts should be with a bank, a post office, or a cooperative society conducting banking activities.

Eligibility Criteria for Section 80TTB:

The taxpayer must be a senior citizen aged 60 years or above.

The deduction is available on interest income from savings accounts, fixed deposits, and recurring deposits.

The financial institution must be a bank, post office, or cooperative society engaged in banking.

Deduction Under Section 80TTA of Income Tax Act

Under Section 80TTA, ₹10,000 per annum is the maximum deduction allowed.

This means that even if the interest income from all the eligible savings accounts exceeds ₹10,000 in a financial year, the taxpayer can claim a deduction of only up to ₹10,000 while computing their taxable income. On the other hand, if the interest income is less than ₹10,000, the entire amount can be deducted.

Section 80TTA deduction limit is only applicable to the interest income from savings accounts. It does not apply to interest earned from fixed deposits, recurring deposits, or any other time deposits with banks or post offices. Moreover, the benefit under Section 80TTA is over and above the deduction of ₹1,50,000 allowed under Section 80C of the Income Tax Act.

Section 80TTB Deduction for Senior Citizen

Section 80TTB, allows a maximum deduction of ₹50,000 per annum. This is a significant benefit as it helps senior citizens reduce their taxable income by the amount of interest earned up to ₹50,000 in a financial year.

If the interest income exceeds this limit, the deduction will be restricted to ₹50,000. On the other hand, if the interest income is less than ₹50,000, the entire amount of interest income can be deducted.

It is important to note that this deduction is exclusive to senior citizens, and it supersedes the benefits under Section 80TTA. It is applicable to resident individuals and members of the Hindu Undivided Families (HUFs) but does not cover interest on fixed deposits or recurring deposits.

Therefore, senior citizens cannot claim deductions under both sections; they are eligible only for the benefits under Section 80TTB.

Let’s take a scenario:

Two assessees, one aged below 60 years and another above 60 years, earn a gross income of ₹ 15 lakhs in the assessment year 2023-2024. Both avail ₹1,50,000 as a deduction under section 80C. Let’s take two cases to calculate their Net Taxable Income:

Calculation:

To claim deductions under Section 80TTB, you may need to present various documents that substantiate the interest income earned from specified investments such as bank deposits, savings accounts, fixed deposits, or post office deposits.

Passbook Entries or Bank Statements: These show the interest income earned from eligible sources like bank or post office deposits in the financial year.

Interest Certificates: Issued by banks or financial institutions for tax purposes, these certificates detail the interest received on deposits, aiding in the deduction claim under Section 80TTB.

Savings Account Statements: To claim interest from savings accounts, provide bank statements that highlight the interest credited to your account.

Post Office Deposit Documents: For investments in post office deposits, present the deposit certificates or statements that reflect the interest income.

Other Relevant Documents: Depending on the requirements of the tax authority, additional documents verifying your interest income from other sources, such as recurring deposits or bonds, may be necessary.

Determine Eligibility: Determine whether you can claim deductions under Section 80TTA or 80TTB based on the above-discussed eligibility criteria.

Calculate Interest Income: Summarise the interest income earned from these savings accounts during the financial year. This information can be obtained from your bank statements or passbook entries.

Claim Deduction: When filing your Income Tax Return (ITR), report the calculated interest income under the income from other sources. Then, claim a deduction up to ₹10,000 under Section 80TTA or up to ₹50,000 under Section 80TTB. This deduction is available in the deduction section of the ITR form.

Similar to 80TTA, Section 80D of the Income Tax Act provides taxpayers with a valuable opportunity to avail deductions on premiums paid towards health insurance policies. This deduction is aimed at promoting healthcare and encouraging individuals to safeguard their well-being through insurance coverage.

Along with the deduction under section 80D, medical insurance plans allow you to keep yourself protected from unexpected medical treatments and their expenses.

Moreover, among the various kinds of medical insurance policies available, cashless health insurance is the best option to avoid dealing with extensive medical bills out of your pocket.

With a Tata AIG health insurance plan, you can get cashless treatment at any of your preferred hospitals without the hassle of paying cash for the covered expenses.

Section 80TTA and 80TTB provisions offer valuable tax deductions, helping individuals and senior citizens to reduce their taxable income and, ultimately, their tax liability. Taxpayers need to assess their eligibility for these deductions, accurately calculate their interest income, and claim the deductions while filing their Income Tax Returns.

Additionally, maintaining proper documentation to substantiate the interest income earned is crucial for a smooth deduction claim process. By leveraging the benefits of Section 80TTA and 80TTB, taxpayers can optimise their tax-saving strategies and ensure compliance with the Income Tax Act.