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Section 80TTA of Income Tax Act - 80TTA Deduction for Interest on Saving Accounts
Comprehensive Guide on 80TTA: Definition, limit, eligibility, exclusions for the FY 2021-22 (AY 2022-23), FY 2022-23 (AY 2023-24)
A Saving Bank Account is like a digital piggy bank on which interest is earned. Most people have savings bank accounts, but most need to be made aware of the taxability of interest earned on the savings bank account. Interest earned on a savings bank account is taxable under the head Income from Other sources, and interest deduction is also allowed u/s 80TTA.
What is section 80TTA?
Section 80TTA of the Income Tax Act 1961 provides a deduction on the interest earned on your savings account with a bank, cooperative society, or post office, up to Rs.10,000/-. No deduction for FD interest is available u/s 80TTA. This deduction is allowed to all individuals and HUFs other than super senior citizens (those aged 60 or more) because they have a separate deduction under Section 80TTB.
Section 80TTA was introduced in 2013 as a part of the Finance Bill passed that year, and it became applicable from the financial year 2012-13 onwards and still holds good.
Who can claim Section 80TTA deduction?
Individuals or Hindu Undivided Families (HUF) can claim a deduction under 80TTA on the interest earned on all their savings bank and post office accounts.
Can NRIs claim a deduction under 80TTA?
Like resident Indians, Non-Resident Indians (NRIs) are also eligible for claiming deduction u/s 80TTA.
NRIs can open NRE and NRO accounts in India. Interest earned on NRE accounts is tax-free. Hence, the 80TTA benefit is available only on the NRO savings accounts. No deduction is allowed on NRO term deposits (fixed deposits).
Deduction Limit Under Section 80TTA
Rs.10,000 deductions are allowed u/s 80TTA on the interest earned from the savings account. If a person has multiple savings accounts with different banks, then the maximum deduction that can be claimed for all savings accounts put together is Rs.10,000/-.
Deduction under section 80TTA is over and above the 1.5 lakh limit of Section 80C.
Type of Interest Incomes Allowed as Deduction Under Section 80TTA
Under Section 80TTA of the Income Tax Act, 1961 in India, individuals and Hindu Undivided Families (HUFs) are eligible for a deduction on interest income earned from certain sources. The deduction is available for interest earned up to a maximum amount of Rs. 10,000. Here are the types of interest incomes allowed as a deduction under Section 80TTA:
- Savings Account Interest: The deduction under Section 80TTA applies to interest earned on savings bank accounts. It includes interest earned on deposits in a savings account with a bank, cooperative society, or post office.
- Cooperative Society Deposit Interest: Interest earned on deposits in a cooperative society is also eligible for the deduction under Section 80TTA. However, this applies only to deposits made with a cooperative society engaged in banking business.
It's important to note that the deduction limit under Section 80TTA is applicable per individual or HUF and not per account. Therefore, if you have multiple savings accounts or deposits with different banks or cooperative societies, the total interest income from all accounts combined is considered for the deduction, subject to the maximum limit of Rs. 10,000.
Type of Interest Incomes Not Allowed as Deduction Under Section 80TTA
Under Section 80TTA of the Income Tax Act, 1961 in India, certain types of interest incomes are not allowed as deductions. Here are the interest incomes that are not eligible for deduction under Section 80TTA:
- Fixed Deposit (FD) Interest: Interest earned on fixed deposits, term deposits, or time deposits is not eligible for deduction under Section 80TTA. This includes interest income from bank fixed deposits, corporate fixed deposits, or any other fixed-income investment.
- Recurring Deposit (RD) Interest: Interest earned on recurring deposits is also not eligible for deduction under Section 80TTA. Recurring deposits are a type of savings scheme where individuals deposit a fixed amount every month for a specified period, and interest is earned on the accumulated deposits.
- Corporate Bond Interest: Interest earned on corporate bonds, debentures, or any other interest-bearing securities issued by companies is not eligible for deduction under Section 80TTA.
How to Claim Deduction Under Section 80TTA?
To claim a deduction under Section 80TTA of the Income Tax Act, 1961 in India, for the interest income earned from savings accounts and cooperative societies, follow these steps:
- Determine Eligibility: Confirm that you are an individual or a Hindu Undivided Family (HUF). This deduction is not available to non-individual taxpayers such as companies, partnerships, or LLPs.
- Calculate Interest Income: Calculate the total interest income earned from savings accounts and cooperative societies during the financial year. This includes interest earned on deposits in savings accounts with banks, cooperative societies, or post offices, as well as interest earned on deposits with cooperative societies engaged in banking business.
- Determine Deduction Amount: The deduction under Section 80TTA is allowed up to a maximum of Rs. 10,000. If your total interest income is less than or equal to Rs. 10,000, you can claim the entire amount as a deduction. If your interest income exceeds Rs. 10,000, you can claim a deduction of Rs. 10,000 only.
- Include in Total Income: Add the interest income to your total income while computing your tax liability. This is necessary as the deduction under Section 80TTA is claimed from the total income.
- File Income Tax Return: When filing your income tax return, report the interest income under the appropriate head (such as "Income from Other Sources") and claim the deduction under Section 80TTA. Ensure that you provide accurate details and supporting documents if required.
- Maintain Documentation: Retain the necessary documents, such as bank statements or passbook entries, to substantiate the interest income and claim made under Section 80TTA. These documents may be required for audit or verification purposes by the tax authorities.
Tax2win aim to streamline the tax filing process and help individuals claim deductions accurately. You can file ITR with Tax2win in under 4 minutes on the self-filing platform. While filing your income tax return (ITR), include the deduction under Section 80TTA in the appropriate section of Tax2win deduction ITR filing page.
If, you face any complexities, while filing ITR, you can always take help of our expert CA who help streamline the process and guide you end-to-end while filing the ITR and claiming the exemptions.
Section 80TTA of the Income Tax Act 1961 deals with the tax deductions granted on interest on saving banks. This deduction is applicable for interest on savings accounts held by individuals or Hindu Undivided Families (HUF). The maximum deduction that can be claimed for all savings accounts is Rs.10,000. This deduction is over the permissible Rs.1.5 lakh under Section 80C.
Frequently Asked Questions
Q- Can I claim a Tax deduction for a fixed deposit under Section 80TTA?
No, Tax deduction under Section 80TTA is not allowed in the case of fixed deposit. However, it is allowed for interest on a savings bank account.
Q- If I have a savings bank account in a Cooperative Society, am I eligible for Tax deduction under Section 80TTA?
Yes, you are eligible for Tax Deduction under Section 80TTA if you have a Savings Bank account under a registered Cooperative Society.
Q- My annual income comes below the minimum yearly tax slab. Do I need to pay tax on the interest earned in my savings bank account?
Once your total annual income is below the lowest tax slab. You don’t have to pay tax on the interest earned on your savings bank account even if it crosses Rs.10,000/- because there is no taxable income.
Q- If the assessee has earned capital gain or house property etc., income, can 80TTA be claimed?
80TTA can be claimed only if the assessee has earned interest income from the savings account.
Q- Can 80TTA be claimed by senior citizens?
No, the deduction can be claimed by Senior citizens up to Rs.50,000 under section 80TTB. Senior citizens can claim a deduction for interest on saving bank accounts and term deposit
Q- Can 80TTA be claimed by NRI?
Yes, Section 80TTA can be claimed by NRIs like resident Indians.
Q- How many bank accounts can I claim a deduction under section 80TTA?
Under section 80TTA, the limit is on the amount of interest and not on the number of the account you hold. Hence the tax benefit can be claimed for any number of accounts till the aggregate interest amount of Rs 10,000.
Q- Will TDS be deducted from my interest income?
No TDS is deducted by the banks on saving bank Interest.
Q- What happens if the interest rate changes by RBI?
Earlier, the RBI had fixed the interest rate for a savings account at around 4%. However, this rule has been relaxed; hence, nowadays, the Banks offer around a 6% interest rate, calculated on the daily balance. Section 80TTA has no relation with the interest rate. Instead, it deducts the interest amount earned on the savings account.