What is section 80TTA?

Section 80TTA of the Income Tax Act 1961 is the section which grants deductions on interest for a savings account, up to Rs.10,000/-. This exemption is allowed for all individuals and HUFs other than senior citizens (those above the age of 60) because they have a separate Section 80TTB all to themselves.

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.


Deduction under Section 80TTA

  • The maximum deduction that can be claimed for all savings accounts put together is Rs.10,000/-
  • If a person has multiple savings accounts with different banks, the cumulative interest for eligibility for exemption should be Rs.10,000/-
  • In the case that cumulative earnings by interest are above Rs.10,000/- you can claim the tax exemption for Rs.10,000 and pay income tax on income above it.
  • Tax deduction under section 80TTA is over and above the 1.5 lakh limit of Section 80C.

Who can claim deduction under section 80TTA?

The deduction is only valid for savings accounts held by individuals or Hindu United Families (HUF).


Which Organisation’s savings account can avail deduction under Section 80TTA?

The savings accounts under the following institutions come under Section 80TTA
  1. Banks: Banking companies formed as per the regulations of the Banking Regulations Act, 1949. These include all the banks and banking companies formed in compliance with Section 51 of the same act.
  2. Post Offices: All the Government of India post offices that have the facility of savings account.
  3. Cooperative Societies: Cooperative Societies registered by the government and eligible to have savings accounts as a feature of their banking system.

Can NRIs claim a deduction under 80TTA?

Like resident Indians, Non-Resident Indians (NRIs) also have eligibility for deductions under Section 80TTA. Since NRIs are only eligible for NRE and NRO accounts and given the interest earned on NRE accounts is tax-free, this only applies to NRO savings accounts, and not NRO term deposits which are liable to TDS at the rate of 30.9%


Exclusions from 80TTA

The exclusions from 80TTA are:

  • Deposits in Non-Banking Finance Companies
  • Interest from Fixed Deposits

Conclusion

The Government taxes the interest that one accrues on their savings account. Section 80TTA of the Income Tax Act, 1961 deals with the tax deductions granted on this interest. This deduction is applicable for savings accounts held by individuals or Hindu United Families (HUF). The maximum deduction that can be claimed for all savings accounts is Rs.10,000. Also, for those who have Income less than the lowest Tax slab, they get an additional Rs.10,000 over the permissible Rs.1.5 lakh under Section 80C.

Hence, we have now explained all the minutiae of Section 80TTA, and its various features and criteria. Now, let’s solve some common queries that most people have regarding Section 80TTA:


Frequently Asked Questions

Q- Can I claim a Tax deduction for fixed deposit under Section 80TTA?

Ans: No, Tax deduction under Section 80TTA is not allowed in the case of fixed deposit.


Q- If I have a savings bank account in a Cooperative Society, am I eligible for Tax deduction under Section 80TTA?

Ans: 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 annual Tax slab, do I need to pay tax on the interest earned on my savings bank account?

Ans: No, unless your 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. Hence, no of the deductions are required.


Q- If the assessee has earned capital gain or house property etc. income, can 80 TTA be claimed?

Ans: No, it cannot be claimed as 80 TTA can be claimed only if the assessee has earned interest income from the savings account.


Q- What happens if the interest rate changes?

Ans: Earlier, the RBI had fixed the interest rate for a savings account at 4%. This rule has been relaxed, hence, nowadays the Banks offer around 6% interest rate, which is calculated on the daily balance. This implies you can get an even higher rate than on previous occasions, and you can keep a tab of the same by checking your bank statement.


Q- What if someone’s income falls below the income tax exemption limit?

Ans: If the Gross Income of an Individual is below the exemption limit, no deduction will be applicable.


Q- Can 80TTA be claimed by senior citizens?

Ans: No, the deduction can be claimed by Senior citizen up to Rs.50,000 under section 80TTB. (Link of Section 80TTB will be added)


Q- Can 80TTA be claimed by NRI?

Ans: Yes, Section 80TTA can be claimed by NRIs like resident Indians.


CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.