The Income Tax Act of India provides various deductions and exemptions to encourage savings and investments. Section 80TTA is one such deduction that allows taxpayers to reduce their taxable income by a specified amount. However, with the introduction of the new tax regime under Section 115BAC, there have been changes to the availability of certain deductions, including Section 80TTA.
This comprehensive guide will delve into the details of Section 80TTA and its applicability under the new tax regime. We will explore the eligibility criteria, the amount of deduction allowed, and alternative options for tax savings under the new regime.
Understanding Section 80TTA
Section 80TTA offers a deduction of up to Rs. 10,000 on the interest income earned from a savings account with a bank or a cooperative society. This deduction is available to both individuals and HUFs (Hindu Undivided Families).
Section 80TTA Under the New Tax Regime (Section 115BAC)
The new tax regime introduced under Section 115BAC offers lower tax rates but comes with certain conditions. One of these conditions is that several deductions and exemptions, including Section 80TTA, are not available under this regime.
Therefore, taxpayers who opt for the new tax regime are not eligible to claim the Section 80TTA deduction.
Alternative Options for Tax Savings
While Section 80TTA is not available under the new tax regime, there are other options for tax savings that taxpayers can explore:
- Standard Deduction: The new tax regime offers a standard deduction of Rs. 50,000, which is available to all taxpayers, irrespective of their income or expenses.
- Deduction for Employer’s Contribution to NPS: Contributions made by an employer to an employee’s National Pension System (NPS) account are eligible for a deduction under Section 80CCD(2).
- Deduction for Additional Employee Cost: Employers can claim a deduction for certain additional employee costs, such as leave encashment and gratuity, under Section 80JJA.
- Exemption for Interest on Home Loan: Interest paid on a housing loan for a self-occupied property continues to be exempt from tax under the new regime.
Section 80TTA is not available under the new tax regime introduced by Section 115BAC. Taxpayers who opt for the new regime should explore alternative options for tax savings, such as the standard deduction and employer contributions to NPS. By carefully considering these options, taxpayers can optimize their tax savings and reduce their tax liability.
New Tax Regime Exemption and Deduction 2023 List After Budget 2023
How to claim section 80tta deduction under 115bac?
First, add your total interest income under the head ‘ Income from Other Sources ’ in your return. Calculate your gross total income for the financial year from all the income heads and then show it as a deduction under Section 80TTA. Important: You cannot claim Section 80TTA deduction if you opt for the new tax regime under Section 115BAC.
What is section 115bac – the new tax regime?
From FY 2020-21, you can choose to pay income tax under an optional new tax regime. The new tax regime is available for individuals and HUFs with lower tax rates and fewer deductions/exemptions. We will discuss the features of the new tax regime and how you can benefit from it.
Who can take Option U/S 115bac?
The option u/s 115BAC can be taken by both residents as well as a non-resident taxpayers. Further, the option is available to senior citizens as well as other taxpayers. This section of the article gives you the income tax slab rates as prescribed u/s 115BAC in the case of New Tax Regime in comparison to Old Tax Regime:
Should you opt for 115bac?
The above table shows that it is beneficial to opt for the New Tax Regime of Section 115BAC if your Income is more than Rs. 12,25,000 with your eligible Deduction under 80C and Section 80D (it has been assumed that Deduction of Rs.