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.This deduction is allowed to all individuals and HUFs other than senior citizens (those above the age of 60) because they have a separate 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 United 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/-.
Tax 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 companies 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)
Conclusion
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. This deduction is over the permissible Rs.1.5 lakh under Section 80C.
