September 30, 2022

Section 80TTA of Income Tax Act- Claim Deductions Under 80TTA

Jan 28, 2022

Taxpayers in India can claim deductions on their income, investments, and various payments. For instance, do you know that the interest you earn from your savings account is eligible for tax deductions under Section 80TTA?

As every taxpayer in the country may have a savings bank account, Section 80TTA deserves your attention as it can help reduce your tax liabilities. Here’s everything you should know about Section 80TTA.

What is Section 80TTA of the IT Act?

Section 80TTA of the IT Act allows a deduction of up to ₹10,000 on the interest generated from savings account in a financial year. Individuals and HUFs (Hindu Undivided Families) can claim this deduction on the interest generated from a savings account in a bank, cooperative society that offers banking services, or post office.

However, the interest generated from Fixed Deposits (FDs), Recurring Deposits (RDs), or any other time-based deposits are not eligible for 80TTA deductions.

Can You Claim Interest Deductions from Multiple Savings Accounts?

It is not uncommon for people to have multiple savings accounts. Section 80TTA allows a tax deduction on the interest income irrespective of whether the interest is generated from a single or multiple savings account. So, you can claim deductions even if you earn interest from more than one savings account.

However, you can claim the deduction only up to ₹10,000 in a financial year.

If the interest generated from more than one savings account is under ₹10,000, you can claim full deduction on the interest amount. But if the interest income is higher than ₹10,000, the deduction can still be claimed only up to ₹10,000. The remaining interest will be taxable.

How to Claim Deduction Under Section 80TTA?

Any income tax exemption or deduction can be claimed while filing tax returns. For claiming a deduction on the interest income from savings bank account/s, taxpayers should disclose their interest earnings under the head ‘Income from Other Sources’ while filing tax returns.

For instance, Mr Shankar earns a salary of ₹6 lakhs in a financial year. He also earns an interest income of ₹12,500 from a savings account. Let us assume that he does not claim any other tax deductions or exemptions. So, the gross income for the financial year will be as follows:

Particulars Total Amount (in ₹)
Salary Income ₹6,00,000
Income from Other Sources

–          Interest from the savings account

 

₹12,500

Gross Total Income ₹6,12,500
Chapter VI-A Deduction

–          80TTA

 

₹10,000

Taxable Salary ₹6,02,500

Important Points to Know About Section 80TTA

Here are some additional things you should know about Section 80TTA:

  • Only taxpayers whose total income in a financial year is higher than the NIL tax slab can claim deductions under Section 80TTA
  • Seniors or taxpayers above 60 years cannot claim 80TTA deductions; however, they can claim deductions under Section 80TTB
  • NRIs with NRO savings account can also claim 80TTA deductions

Reducing Your Tax Liabilities with 80TTA Deductions

Interest income from a savings account is the most common income earned by almost all taxpayer. Under Section 80TTA, you can claim deductions on the interest income up to the prescribed limit to reduce your tax liabilities.

Taxpayers should take advantage of all the applicable tax provisions to legally save as much tax as possible. You can also consult with a professional tax advisor to boost your tax savings and invest confidently.

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Find Out How SIP Returns are Calculated

Jan 21, 2022

With a gamut of options for different risk appetites, multiple investing modes like SIP (Systematic Investment Plan) and lump sum investments, as well as inflation-beating returns, mutual funds are rightly one of the most popular investment instruments in India.

One can invest in a mutual fund scheme for varied goals and needs, both long-term and short-term. Different income groups can also use mutual funds as they allow investments as little as Rs 500. However, before you choose a mutual fund, you must know how its returns are calculated. Not only will this help you pick the right product, it will also help you track your investments along the way.

SIP calculators offer you simplified solutions in a matter of minutes. They are easy to use and can come up with precise estimates of your SIP returns. Here are five things to know about how your SIP returns are calculated:

  1. Compound Annual Growth Rate (CAGR)

There are three ways to calculate the returns from a mutual fund. The first is known as the compound annual growth rate (CAGR) method. As the name suggests, CAGR is the compounded growth rate of your investment over a period of time. It can be used to calculate the historical returns of different mutual funds.

CAGR is calculated based on three things:

  • The beginning value of your investment
  • The ending value of your investment
  • The tenure of your investment

Formula to calculate CAGR: [(Ending value/ Beginning value) x (1/Tenure)] – 1

  1. Extended Internal Rate of Return (XIRR)

XIRR is a more accurate method to calculate the returns from a SIP. When you invest through SIPs, you can have multiple investments of different values for different durations. XIRR calculates the CAGR of each installment and adds them up to give you the overall compounded growth rate of the investment.

You can calculate XIRR in Excel by using the function = XIRR (value, dates, guess)

  1. Absolute Returns

The third method to calculate the returns from mutual funds is the absolute returns method. This method shows you the point-to-point growth of your investment. You can use this to check the total profit or loss from a mutual fund scheme.

Formula to calculate absolute returns: (Final value – Initial value) / Initial value x 100.

Choosing the Ideal Method for Calculation

All of these methods have their pros and cons. Absolute returns are very easy to calculate. However, since the formula does not use the investment tenure, you cannot ascertain the exact growth of your investment over time.

XIRR may be the most accurate when calculating the returns from a SIP. It is also easy to use in Excel. CAGR is ideal for calculating the annual average returns of a mutual fund. However, it may be better suited for lump sum investments and is inaccurate when calculating SIP returns.

Conclusion

Understanding these different methods to calculate the SIP returns can help you plan your mutual fund investments better. Now that you are familiar with the basics, why not install the Tata Capital Moneyfy App and consolidate your investment journey?

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How To Save Money on Your Home Phone and Broadband

Jan 7, 2022

Saving money is something that we all want to do. It does not matter how much money you make, or how much you have. We would all prefer to save money on our home phone service and broadband needs. There are several steps that you can do to ensure that you get the best price for the amount of broadband that you need.

  1. Compare-This cannot be stressed enough. Compare every company that offers service in your area. It may seem like a daunting task that you would prefer to skip over, and you would be partially correct. It would be a chore to check with every service provider. There is an easier way. Use an online platform that will do the leg work for you. One that will compare them for you. All you must do then is read over the contract details and pick the one that fits your needs.
  2. Plans-You do not need to pay for a premium plan if you have low needs. Go through each plan that the providers can offer to you, and find the one that fits your needs, and wants. You will see that some providers do not offer all the choices that are available. This is another reason why it is so important for you to compare plans. Do not ever let yourself get stuck in a basic offer that will not meet your needs, but you need to ensure that you are not talked into a plan that offers more than you need. Keep your service plan at the level that you need. Yes, it is nice to have a ton of speed with little chances of lagging, but is it worth the extra cost?
  3. Hidden Fees-Check the plan for any hidden fees. You will probably have to pay some taxes on the service, which is a small amount that every customer is charged. If it is an excessive amount, find a new provider. Read through the entire contract before agreeing to anything. Make sure there are not fees put on as riders, or exclusions. For instance, if the contract charges you extra for calls made during certain times, or if the broadband delivered to you could fluctuate due to demand around you. Check everything in your broadband plans. If it sounds fishing, then it probably is.
  4. Add-Ons-When reading through the contract you need to also check for any add-ons that may be present. If there is, have the carrier remove the ones that you will not need. Especially check the details on your home phone because they may very well try and charge you for calling details that you do not need. An example would be long distance calling if you do not need it. No point in paying for anything that you will never need.
  5. Time To Switch-Even if you are happy with your service provider it may be possible for you to get a better deal for the same service elsewhere. Not all plans are created the same, and not all companies try to offer great service at an affordable cost. You need to follow the steps above and compare all the providers in your area.

Saving money is not a complicated task, but it will take some effort on your part. Using an online platform that compares the providers in your area will save you a ton of time and will reduce the amounts of stress that you would normally gain.

Never fall for the trick that companies use to get your business. A discount that is good for your first couple of months may seem good, but once the true price kicks in you may find that you are paying more than expected.

To save money on your home phone and broadband lines all you really need to do is check through all the contracts and read every part of them, including the small print. Get the plan that you want, not the plan that the provider wants you to have.

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