Section 80TTA of Income Tax Act: Claiming Deduction on Interest on Saving Accounts

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.

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.

Non-Resident Indians (NRIs) can take advantage of the Section 80TTA deduction, but there is an important detail to note:

NRIs can have two types of accounts in India - NRE (Non-Residential External) and NRO (Non-Residential Ordinary) accounts. Only NRO savings account holders can claim the deduction under Section 80TTA, while interest earned on NRE accounts is tax-exempt.

For individuals aged 60 and above (senior citizens), a separate provision, Section 80TTB, applies, which is different from Section 80TTA.

Features of Section 80TTA

1. Exemption Limit: The tax exemption on interest earned from savings accounts is capped at ₹10,000 per annum.
2. Eligibility: This deduction is available only to individuals and Hindu Undivided Families (HUFs) who hold savings accounts.
3. Multiple Accounts: If you have multiple savings accounts across different banks, the total interest income from all these accounts combined should not exceed ₹10,000 to qualify for full exemption. If the total interest exceeds this limit, only ₹10,000 is exempt from tax, and the remaining amount is subject to income tax.
4. Additional Deduction: The deduction under Section 80TTA is separate from the ₹1.5 lakh deduction available under Section 80C.
5. No TDS: There is no Tax Deduction at Source (TDS) on interest income from savings accounts held by individuals and HUFs.
6. Minimum Taxable Income: If an individual's Gross Total Income is below the minimum taxable limit, Section 80TTA does not apply, even if the interest income exceeds ₹10,000.

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.

The savings account can be with any of the following financial institutions:

• Bank
• Cooperative society
• Post office

You can claim this exemption for multiple savings accounts as long as the total interest amount does not exceed Rs. 10,000.

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. Claim your deduction under Section 80TTA.

Note:-If you want to claim your section 80TTA deduction, make sure you file your ITR before the ITR filing deadline, i.e., 31st July.