What Are Section 80TTA & 80TTB Tax Deductions?

Posted on: Jan 23, 2025 | 3 mins | Written by: HDFC ERGO Team

What Are Section 80TTA & 80TTB Tax Deductions?

The Income Tax Act of India, 1961 allows taxpayers to claim various deductions each year while filing their tax returns, thereby reducing their tax liabilities. Section 80TTA and Section 80TTB are two key provisions that help individuals and senior citizens claim deductions on the interest income they earn. These sections encourage savings habits and provide significant financial relief to taxpayers.

In addition to the deductions available under Sections 80TTA and 80TTB, taxpayers can benefit from Section 80D, which offers deductions for premiums paid toward health insurance and critical illness insurance. This not only encourages better financial planning but also ensures enhanced financial security.

Let’s take a closer look at Section 80TTA and Section 80TTB.

Section 80TTA of the Income Tax Act

Section 80TTA of the Income Tax Act (1961) provides tax benefits to individuals and Hindu Undivided Families (HUFs). It allows a deduction on interest income earned from savings accounts held with banks, post offices, and cooperative societies involved in banking activities.

This provision aims to promote savings by offering taxpayers a deduction for the interest earned. A taxpayer can claim a maximum deduction of INR 10,000 under this Section.

Limitations of Section 80TTA

The following are the key limitations of Section 80TTA:

• Interest earned from term deposit schemes like fixed deposits (FDs) and recurring deposits (RDs) is not eligible for deductions under this Section.

• Non-resident Indians (NRIs) are not eligible to claim deductions under Section 80TTA.

Section 80TTB of the Income Tax Act

Section 80TTB was introduced in the Finance Budget 2018, specifically to benefit senior citizens by offering a deduction on interest income. Unlike Section 80TTA, which provides a lower deduction, Section 80TTB offers a higher deduction of up to INR 50,000 on interest earned from savings accounts as well as different types of deposits, such as fixed deposits and recurring deposits.

A higher deduction limit ensures substantial tax relief to senior citizens, helping them maintain better financial stability during their retirement years.

Limitations of Section 80TTB

The following are the limitations of Section 80TTB:

• The deduction under this Section is available only to senior citizens.

• HUFs or any other category of individuals cannot claim deductions under Section 80TTB.

• The maximum deduction limit under this Section is INR 50,000.

Eligibility for deduction under Section 80TTA

The following are the key eligibility points for deduction under Section 80TTA:

• The deduction is available only to individuals and HUFs.

• Senior citizens cannot claim deductions under this Section.

• The deduction is applicable on interest income earned from savings accounts with banks, post offices, and cooperative societies.

• Interest on term deposits is not eligible for deduction under this Section.

• The maximum deduction limit under Section 80TTA is INR 10,000.

Eligibility for deductions under Section 80TTB

The eligibility points for deductions under Section 80TTB are:

• The deduction is available only to senior citizens or individuals aged 60 years or above.

• Senior citizens can claim deductions on interest income earned from various sources, such as savings accounts, fixed deposits, and recurring deposits.

• The maximum deduction limit under Section 80TTB is INR 50,000.

Limitations of Sections 80TTA and 80TTB

While both these Sections offer substantial financial benefits to taxpayers, they have some limitations as well.

1. If the interest income exceeds the deduction limit, the difference amount will be subject to tax according to the individual’s applicable tax rate.

For example, suppose you earn an interest of INR 15,000 from your savings accounts. Under Section 80TTA, only INR 10,000 will qualify for the deduction, and the remaining INR 5,000 will be taxable.

2. Tax deductions under both these Sections apply exclusively to interest earned from savings accounts or deposits. Interest from other sources, such as mutual funds, bonds and shares, are not eligible for deductions.

3. When filing Income Tax Returns, taxpayers must disclose all interest income from savings accounts or deposits. Failing to do so could lead to penalties.

Benefits of claiming deductions under Section 80TTA and Section 80TTB

Both Section 80TTA and Section 80TTB offer significant benefits to taxpayers by reducing their tax burden. The following are the key advantages of claiming deductions under these Sections of the Income Tax Act —

• Reduces taxable income

These deductions help lower taxable income, ultimately reducing your overall tax liability.

• Provides financial relief

Claiming these deductions can offer substantial savings, particularly for individuals and senior citizens with limited sources of income or retirement funds.

Documents required to claim deductions under Section 80TTA and Section 80TTB

Taxpayers must submit the following documents to claim deductions under Sections 80TTA and 80TTB:

• Bank statements or passbook showing interest earned from savings accounts, fixed deposits, recurring deposits, and other term deposits

• Interest certificates from banks, post offices, and other financial institutions showing interest income earned from eligible sources

• Proof of age, such as an Aadhaar card or Passport

• Form 16 (if employed) for details of interest income earned

Deductions in joint accounts

Here’s how deductions work in joint accounts —

• For joint accounts, only the first account holder can claim deductions under Section 80TTA or Section 80TTB.

• If one of the account holders is a senior citizen, they can claim the deduction under Section 80TTB for the interest earned on their savings accounts and deposits.

• Tax deductions are applied individually to each account holder based on the applicable tax slab.

How to claim deductions under Section 80TTA and Section 80TTB?

Here’s how you can claim deductions under Section 80TTA and Section 80TTB —

1. Determine eligibility for claim

Check the eligibility criteria to determine whether you can claim deductions under these Sections. If you are eligible for deductions, you must file your income tax returns.

2. Online or offline filing

You can fill out and submit ITR forms either online or offline with the necessary details to claim deductions.

3. Eligibility for claim

You can claim the deduction only while filing your Income Tax Returns. The same cannot be availed after the return is filed.

4. Keep a record

When filing your Income Tax Returns, it is advisable to maintain a record of the interest earned during the financial year and the deduction claimed. This can come in handy for future reference.

Conclusion

To sum up, if you are eligible for deductions under Section 80TTA and Section 80TTB of the Income Tax Act, make sure you claim them while filing your tax returns to reduce your tax liabilities. Moreover, you can also claim deductions for health insurance premiums, critical illness insurance premiums, medical treatment for specified diseases, interest on educational loans, and more under various Sections of the Income Tax Act. Taking advantage of these deductions can significantly reduce your tax burden and enhance your financial well-being.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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