Maximise your nest egg with section 80TTB tax tricks

In the Finance Budget of 2018, senior citizens hit the jackpot with several new benefits. One of these is Section 80TTB. This provision is here to lighten the tax load. Let’s look at how this tax rule can make retirement a little sweeter!

What is section 80TTB?

Section 80TTB of income tax is a special tax rule in India. It was set to help ageing residents save on taxes. This rule entitles them to claim deductions on the interest they make from the savings.

The elderly population generally have deposits in banks and other financial institutions for their nest. However, the taxes on the interest earned can be damaging. For this reason, the 2018 tax rule allows them to claim deductions on this interest income. Thereby reducing taxable income and, consequently, their tax liability.

How much of your interest gains can you deduct? The answer is ₹50,000 from one’s gross total income for that fiscal.

If you earn more than the limit in interest, the extra will be taxed according to your income tax slab rate.

To avail of this deduction claim, the assessee must be:

• At least 60 years of age. Even if you turn 60 on the last day of the financial year, you qualify.
• Indian resident. Non-resident Indians cannot use this benefit.

Remember, this tax rule is for the old income tax regime. The new tax regime under u/s 115BAC does not allow this deduction.

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Types of income covered for section 80TTB deduction

• The income from savings accounts and fixed deposits in banks is eligible for the deduction. 
• Interest from deposits in cooperative societies engaged in banking is also covered. This includes cooperative land mortgage and development banks.
• Additionally, gains from post office savings schemes also qualify.

Yet, if these deposits are held by or on behalf of a partnership firm, Association of Persons, or Body of Individuals, the tax rule is not applicable. Partners or members cannot claim this deduction when computing their total income.

Also note that by section 194A, no tax is deducted at source on interest payments up to ₹50,000 for senior citizens. This applies to all banks, post offices, and cooperative banks. The limit is calculated separately for each bank.

To know more:  Old vs. New – Which income tax regime is better for FY 2023-24?

Perks of section 80TTB of Income Tax Act

• It reduces taxable income and total tax payable
• More disposable income for essential needs and healthcare by easing the tax burden.
• Promotes saving in bank deposits or post office schemes, aiding in financial planning.
• It can be added with other tax deductions to maximise tax savings.

To better illustrate the advantages, let’s consider an example. I’m assuming the same income for both senior and non-senior individuals.

We can observe that a non-senior citizen can only claim a deduction of ₹10,000. Whereas a 60+ person gets a deduction of up to ₹50k u/s 80TTB, majorly relaxing their taxable income.

Also read: Section 194IB – TDS on rent under Section 194IB of Income Tax Act

Difference between section 80TTA and 80TTB

How to claim income tax under section 80TTB?

It’s simple to claim a deduction. The method is as follows.

Start by totalling the interest you receive from fixed deposits and savings accounts. When you file your tax return, include the sum in the “Income from other sources” column. You can then make a claim for the sec 80TTB deduction.

There are no specific documents mentioned for claiming the deduction. But here are some general records to maintain:

• Interest income documents: Bank statements or passbooks, interest certificates from banks, and post office documents.
• Form 26AS: Consolidated tax statement with TDS details.
• Income Tax Return (ITR) acknowledgement: Filed ITR acknowledgement.
• Identification documents: Proof of identity and residence.

Bottomline

Section 80TTB is a valuable provision for the 60+ population. It helps lower their tax. They can save more on interest income compared to Section 80TTA, which is for younger demography. 

Knowing the rules and benefits of these sections can help you make smart tax choices. For senior citizens, choosing the old tax regime and leveraging Section 80TTB can make a noticeable difference in managing their finances effectively.

FAQs

1. What is Section 80 TTB exemption?

Section 80TTB exemption is another code in the Indian tax system particularly for senior citizens. It helps them save money on taxes. It assists them in avoiding unnecessary taxes payments. For individuals paying taxes, they can offset up to ₹50,000 on the interest earned from savings accounts, fixed deposits, and post office deposits. Thus, the money they make from these sources is subject to lower taxation. 

2. What is the difference between 80TTA and 80TTB?

80TTA is for individuals who are below 60 years allowing a deduction of ₹10k on the interest from the savings account. For 60+ there is Section 80TTB. It even allows deduction of ₹50,000 on interest on savings account, fixed deposit and post office deposits. It concerns 80TTA but senior citizens cannot use it, only 80TTB. 

3. Who is eligible for 80 TTB with the new tax regime?

No one is allowed for the Section 80TTB deduction under the new tax system and structure. It applies if you opted for the old tax system. Consequently, the senior citizens need to file under the old tax regime for availing the benefit of 80TTB. 

4. What is the 80TTB limit for senior citizens?

The 80TTB limit for senior citizens is ₹50,000. This implies that they can subtract up to this limit from the interest proceeds while computing tax parts. It also facilitates a reduction in their taxable income and thus the tax they have to pay to the government. Yes, the following is a useful benefit for people, especially senior citizens, to be able to save on taxes as well as manage their money appropriately. 

5. Can I claim 80TTB for my parents?

No, you can’t claim 80TTB for your parents. This deduction is only available to the senior citizens themselves. They have to claim it on their own tax returns. If your parents are eligible, they need to include the interest income in their tax return and then claim the 80TTB deduction. You can’t claim it on your own tax return.