Trusted by 1 Million+ Users
4.8 Star User Rating
Secure & Safe
Section 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.
Contents
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 avail of deduction under section 80TTA?
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).
What is the amount of deduction u/s 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.
Which Organisation’s savings accounts are covered under Section 80TTA?
The savings accounts under the following institutions come under Section 80TTA :
- Banks: Banking companies formed as per the regulations of the Banking Regulations Act 1949. These include all the banks and banking institutions formed in compliance with Section 51 of the same act.
- Post Offices: All the Government of India post offices have the facility of savings accounts.
- Cooperative Societies: Cooperative Societies registered by the government and eligible to have savings accounts as a feature of their banking system.
What are the exclusions from 80TTA?
The exclusions from 80TTA are:
- Deposits in Non-Banking Finance Companies
- Interest from Fixed Deposits (FD)
- Interest from Recurring Deposits (RD)
Conclusion
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?
If the savings bank interest is more than Rs 40,000, TDS will be removed. If the income is below the basic exemption limit, the assessee can submit form 15G/H for no deduction.
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.
Trending Guides New
- Form 16: What is Form 16? Form 16 Meaning, Format & How to Upload
- Income Tax Slab & Tax Rates for FY 2022-23 (AY 2023-24)
- Income Tax Return (ITR) Filing FY 2022-23 (AY 2023-24): How to File ITR Online India
- Tax Benefits on Housing Loans for Home Buyers
- Section 234F: Penalty for Late Filing of Income Tax Return
People Also Ask New
