Budget 2025 Wishlist: Taxpayers Seek Higher Deductions on Savings and Fixed Deposit Interest Income

As the Union Budget 2025 approaches, individual taxpayers, especially senior citizens, are hopeful for much-needed relief from rising inflation and escalating healthcare costs. One of their key demands? Increased tax deductions on interest income from savings and fixed deposits under Sections 80TTA and 80TTB of the Income Tax Act.

Finance Minister Nirmala Sitharaman will present the Budget for FY 2025-26 on February 1, and taxpayers across age groups are optimistic about a revision in these outdated deduction limits, which have remained unchanged for years.

Current Tax Provisions and Gaps

1. Section 80TTA
   • Offers a deduction of up to ₹10,000 on interest income earned from savings accounts held in banks, cooperative banks, or post offices.
   • Applicable to individuals below 60 years and Hindu Undivided Families (HUFs).
   • Does not include interest income from fixed or recurring deposits.
   • Introduced in FY 2012-13, this threshold has not been revised despite rising inflation.
2. Section 80TTB
   • Grants senior citizens a deduction of up to ₹50,000 on interest income from bank and post office deposits, including savings and fixed deposits.
   • Excludes interest earned on bonds and debentures.
   • Serves as a vital relief for retirees relying on fixed-income investments.

Demands for Revision

For Younger Taxpayers

Tax experts are pushing for an upward revision of the deduction limit under Section 80TTA from ₹10,000 to ₹20,000. Additionally, they propose expanding the section to include interest earned from fixed deposits, offering greater relief to younger taxpayers and promoting savings in secure instruments.

For Senior Citizens

The current deduction of ₹50,000 under Section 80TTB for senior citizens is considered insufficient, given the rising costs of healthcare and increased life expectancy. Financial planners suggest raising this limit to ₹1 lakh, which would alleviate financial stress for those heavily dependent on interest income.

Need for Inclusion in the New Tax Regime

Currently, deductions under Sections 80TTA and 80TTB are available only under the old tax regime, which allows exemptions and deductions. Experts argue that extending these benefits to the new tax regime, which offers minimal exemptions, would encourage taxpayers to switch, aligning with the government’s vision of simplifying taxation.

Rationale Behind the Wishlist

1. Inflationary Pressures
   The static deduction limits fail to account for inflationary erosion in purchasing power. A revision would help individuals and senior citizens better manage their finances in a high-cost economy.
2. Retiree Dependency on Fixed Income
   Senior citizens often rely on fixed deposits for regular income. Increasing the deduction limits acknowledges the limited investment options available to them due to their risk-averse financial profile.
3. Promoting Savings
   Enhanced deductions on savings and fixed deposit interest would incentivize more individuals to invest in secure instruments, contributing to a stable financial system.
4. Adapting to Policy Shifts
   With potential repo rate cuts by the Reserve Bank of India (RBI) leading to lower interest rates, higher deductions would help mitigate the impact on taxpayers’ disposable income.

The Road Ahead

While taxpayers eagerly await the Budget 2025 announcement, experts emphasize that revising these deduction limits would provide widespread relief, especially to senior citizens grappling with rising costs and limited income sources.

Will the Finance Minister meet these expectations and introduce much-needed reforms? All eyes are now on February 1, 2025.

Disclaimer: This blog has been written exclusively for educational purposes. 

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