As an individual or a Hindu Undivided Family (HUF), it is important to be aware of the various tax deductions and exemptions that can help lower your tax liability. One such provision that can help you save on taxes is Section 80TTA of the Income Tax Act. This section provides for a deduction of up to Rs. 10,000 in respect of interest on savings account with banks, post offices, and co-operative societies carrying on business of banking.
What is Section 80TTA?
Section 80TTA was inserted by the Finance Act, 2012 to provide a deduction of up to Rs. 10,000 in the hands of individuals and HUFs in respect of interest on savings account with banks, post offices, and co-operative societies carrying on business of banking. This means that if you have an interest income of up to Rs. 10,000 from your savings account, you can claim a deduction of the same amount while computing your taxable income.
Limitations of Section 80TTA:
However, it is unlikely that salaried individuals would keep their entire savings in a savings bank account, which earns a much lower rate of interest as compared to term deposits. They are likely to transfer some portion of their savings to several deposits to earn comparatively better returns. Therefore, since the money is anyway kept within the banking channels, it is suggested to include all types of deposit interest within the ambit of section 80TTA.
Suggestions for Rationalization:
It is suggested that interest on all types of deposits (e.g. FDRs as well as dividend from equity shares and mutual funds and share from cooperative society) may also be included within the scope of section 80TTA. Further, it is suggested that limit of Rs. 10,000 may be revised upwards as it was revised long time ago.
By taking advantage of Section 80TTA, you can lower your tax liability and maximize your savings. However, it is important to note that the provision has its limitations and suggestions have been made to rationalize it. It is always a good idea to consult a tax expert or financial advisor to understand how you can make the most of this provision and other tax-saving options available to you.