Tax Planning is a crucial component of achieving financial goals which makes sure the money is invested in a way that it grows without being eaten up by taxes, whether you are a salaried employee or retired.
Effective tax planning becomes essential for retired workers because they struggle to manage medical bills as they age. The Income Tax Act of 1961 has a number of sections that can help senior citizens save money.
What is Section 80TTB?
Section 80TTB is one such provision for senior citizens whereby the 60 years aged and above can make tax deduction claims up to Rs. 50,000.
The 80TTB deduction for senior folks gives them an avenue to save up on taxes and become financially secure. There are different types of interest income for which senior citizens can claim deductions.
- Interest salary that is held with a banking institution.
- Interest income on deposits held with the post office.
- Interest on deposits held in a cooperative society engaged in the business of banking.
(Also Read: EPFO higher pension scheme: Know how to get Rs 18,857 pension after retirement)
What is Section 80TTA?
Similar deductions are offered by Section 80TTA as by Section 80TTB. However, it only permits interest deductions from the gross total income of the individual taxpayer or a Hindu Undivided Family (HUF) up to Rs 10,000 on savings accounts held in banks, cooperative banks, or post offices.
Section 80TTB: How to calculate deductions under this section
Let’s consider the following income of a taxpayer:
Saving interest: 5,000
FD interest: 2,00,000
Other income: 1,50,000
This makes the Gross total income Rs. 3,55,000.
Now the deduction under Section 80TTB i.e., limited to Rs 50,000 which makes the taxable income Rs. 3,05,000 for senior citizens while taxable income for non-senior citizens will be Rs. 3,50,00 since the deduction from Section 80TTA of Rs. 5000 will also be deducted.
Senior citizens are no longer eligible for the deduction under Section 80TTA because Section 80TTB was introduced specifically for them.
