- The benefits of section 80TTA are forecasted to be extended to interest earned from all kinds of deposits. Also, the exemption limit can be increased upto Rs 50,000.
What is section 80TTA?
Section 80TTA of the Income Tax Act 1961 provides 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 deduction 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.
Who can avail 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 deduction u/s 80TTA.
NRIs can open only NRE and NRO accounts in India. Interest earned on NRE accounts is tax-free. Hence, 80TTA benefit is available only on the NRO savings accounts. Please note that no deduction is allowed on NRO term deposits.
What is the amount of deduction u/s 80TTA?
Rs.10,000 deduction is allowed u/s 80TTA on the interest earned from 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 account 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 that have the facility of savings account.
- 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)
Section 80TTA of the Income Tax Act, 1961 deals with the tax deductions granted on interest. 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?
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, till 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 80 TTA be claimed?
Ans: 80 TTA can be claimed only if the assessee has earned interest income from the savings account.
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.
Q- Can 80TTA be claimed by NRI?
Ans: Yes, Section 80TTA can be claimed by NRIs like resident Indians.
Q- For how many bank accounts I can claim a deduction under section 80TTA?
Ans: 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 on my interest income?
Ans. No there is no provision under the income tax act to deduct TDS on interest income received on saving accounts.
Q- What happens if the interest rate changes by RBI?
Ans: Earlier, the RBI had fixed the interest rate for a savings account around 4%. This rule has been relaxed, hence, nowadays the Banks offer around 6% interest rate, which is calculated on the daily balance. Section 80TTA has no relation with the interest rate. It provides deduction on the interest amount earned on the savings account.
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