As income tax return filing for Financial Year (FY) 2024-25 gains traction, taxpayers across the nation, especially senior citizens, are looking for ways to reduce and bring down their overall tax liability. Two key provisions of the Income Tax Act i.e., Section 80TTA and Section 80TTB provide deductions on the interest income for those selecting the old tax regime.
Section 80TTA: Claim up to ₹10,000 deduction on savings interest
Section 80TTA permits individuals below 60 years of age and Hindu Undivided Families (HUFs) to claim a deduction of up to ₹10,000 on interest earned from savings accounts held in banking institutions, post offices or cooperative societies. This particular benefit applies only if the taxpayer files under the old tax regime. Furthermore, this deduction does not apply to fixed or recurring deposits.
Section 80TTB: Bigger tax relief for seniors
Senior citizens who are aged 60 and above can claim deductions of up to ₹50,000 under Section 80TTB. These deductions are permitted on interest earned from savings, fixed deposits, recurring deposits with banking institutions, post offices or cooperative banks.
Explaining the same point further, CA Sonu Jain, Chief Risk and Compliance Officer, 9Point Capital said, “Senior citizens can save more tax under the old regime using Section 80TTB, which allows a deduction of up to ₹50,000 on interest from both savings accounts and fixed deposits. In contrast, those below the age of 60 get ₹10,000 under Section 80TTA,”
He further added that, “Senior citizens should also be cautious of the fact that this benefit isn’t available if the new regime is opted for when filing the ITR.”
No relief under new regime in FY 2024-25
It is critical to keep in mind that under the new tax regime applicable in FY 2024-25 and beyond, deductions under Section 80TTA and 80TTB are not permitted. That is why keeping the same thing in mind, taxpayers should carefully evaluate whether to opt for the lower slab rates under the new regime or simply stick with the old regime to claim the benefit of these exemptions.
Choose the right tax regime before ITR filing
In the case of taxpayers with high interest income, especially senior citizens, remaining in the old regime may provide greater benefits in FY 2024-25. Keeping the same points in mind, the tax saving potential of Section 80TTB makes it a crucial component of financial planning especially for retired government employees.
Further, those relying heavily on interest income for meeting their monthly expenses should check and analyse the long term tax implications before switching regimes as the old regime permits more flexibility through numerous deductions.
Disclaimer: This article is for informational purposes only and should not be considered financial or tax advice. Readers are advised to consult a qualified tax professional before making any decisions related to investments and income tax planning.