Budget 2025: The upcoming Union Budget of 2025, to be presented by Finance Minister Nirmala Sitharaman on February 1, is eagerly anticipated by taxpayers nationwide. Of particular interest is the segment on income tax, where individuals are keen to see if any changes will be announced to alleviate the burden on the common man.
Speculation surrounding this year's budget focuses on possible alterations to tax slabs and the introduction of new relief measures. Additionally, there are expectations for higher deductions to be included in the Old Tax Regime. Experts suggest that the government should consider increasing the deduction limit under section 80TTA (savings account interest) from Rs 10,000 to Rs 20,000. Similarly, they recommend raising the deduction limit for senior citizens under section 80TTB, currently at Rs 50,000 (for fixed deposit interest), to Rs 1 lakh.
Deductions for savings interest
Section 80TTA of the Income Tax Act, 1961, provides individuals and Hindu Undivided Families (HUFs) with a deduction of up to Rs 10,000 on interest income earned from savings accounts held with banks, co-operative banks, or post offices. This deduction is applicable to individuals below the age of 60 and HUFs. However, it does not apply to interest earned from fixed deposits or recurring deposits.
The deduction limit for interest income on savings bank accounts remains at Rs 10,000 for individuals and HUFs under section 80TTA. This limit has been unchanged since its introduction in the financial year 2012-13.
For Senior Citizens
In contrast to Section 80TTA, which is restricted to interest from savings accounts, Section 80TTB is specifically designed for senior citizens and offers a broader spectrum of deductions on various types of interest income. Senior citizens can avail deductions on interest earned from savings, fixed, and recurring deposits under Section 80TTB, providing them with tax relief up to Rs 50,000.
This deduction applies to interest income from bank deposits, including savings and fixed deposits, as well as post office deposits, offering a financial benefit to seniors who rely on secure investments. It is important to note, however, that interest earned from bonds and debentures does not qualify for this deduction.
The current limit of Rs 50,000 for senior citizens under Section 80TTB should be increased to at least Rs 1 lakh to account for the rising healthcare expenses and longer life expectancy in India. This revision in the threshold limit will help counterbalance the potential decrease in interest rates due to expected RBI repo rate cuts. To incentivize more individuals to transition to the new tax regime, it is recommended that deductions under sections 80TTA and 80TTB be permitted, as these deductions are currently exclusive to the old tax system.