Section 80TTA – How to Save Tax on Savings Account Interest

Section 80TTA of the Income Tax Act provides relief by allowing deductions on the interest earned from their savings accounts, up to certain limits. Introduced in the Finance Act of 2013, this provision aims to encourage savings among individuals by reducing the taxable income.​ 

Section 80TTA of the Income Tax Act, 1961, allows individuals to claim a deduction of up to ₹10,000 on interest earned from savings accounts held with banks, post offices, or cooperative banks. This deduction helps lower taxable income and encourages regular saving habits.

 

However, this benefit is not available to senior citizens, as they are covered under Section 80TTB, which offers a higher deduction limit. It is also important to note that this deduction is applicable only under the old tax regime; taxpayers opting for the new tax regime cannot claim Section 80TTA deductions. 

The following entities can claim deductions under Section 80TTA: 

• Individuals- Resident individuals below 60 years of age who earn interest income from savings accounts are eligible. 

• Hindu Undivided Families (HUFs)- HUFs can also claim this deduction on interest income from savings accounts held in their name. 

• Non-Resident Indians (NRIs)- NRIs can claim this deduction only on interest earned from Non-Resident Ordinary (NRO) savings accounts. ​ 

Certain taxpayers and income earners cannot claim deductions under Section 80TTA: 

• Senior Citizens-Individuals aged 60 years or above are not eligible under Section 80TTA. Instead, they benefit from Section 80TTB, which allows a higher deduction limit. 

• Companies, Firms, LLPs, and Other Entities- Entities such as companies, partnerships, Limited Liability Partnerships (LLPs), trusts, and associations are not eligible. 

• NRIs on Interest Earned from NRE Accounts-Non-Resident Indians (NRIs) cannot claim these tax benefits on interest earned from NRE (Non-Resident External) accounts. That is already exempt from tax under Section 10(4). 

Deduction under Section 80TTA is allowed on interest income from the following sources: 

• Savings Accounts with Banks

This includes all scheduled banks operating under the Banking Regulation Act, 1949.​ 

• Savings Accounts with Cooperative Societies

Savings accounts held with cooperative societies that are engaged in banking business also qualify. 

• Savings Accounts with Post Offices

Interest earned on savings accounts with post offices is also eligible. 

The following types of income are not eligible for deduction under Section 80TTA: 

• Fixed Deposits (FDs)

Interest earned on fixed deposits, whether with banks or post offices, is excluded. 

• Recurring Deposits (RDs)

Interest from recurring deposits is not eligible for this deduction. 

• Term Deposits

Interest from any term deposits, where earnings are payable after a fixed period is excluded. 

• Non-Banking Financial Companies (NBFCs)

Interest earned from deposits or loans with NBFCs is not covered under Section 80TTA. 

• Corporate Bonds and Debentures

Interest from corporate bonds or debentures is considered as investment income and not eligible. 

• Other Savings Schemes

Income from other popular savings schemes like Public Provident Fund (PPF), National Savings Certificates (NSC), or Senior Citizens' Savings Scheme (SCSS) is not covered. 

The maximum deduction that you can claim under Section 80TTA in a single financial year is ₹10,000. This limit applies to the aggregate interest income earned from all eligible savings accounts combined. 

• If the total interest income from savings accounts is less than or equal to ₹10,000, the entire amount is deductible. 

• If the total interest income exceeds ₹10,000, the deduction is capped at ₹10,000, and the excess interest income is taxable as per the applicable slab rates. 

 

For example, if you earn ₹8,000 as interest income from savings accounts, the entire ₹8,000 is deductible. If your interest income is ₹12,000, only ₹10,000 is deductible; ₹2,000 will be added to your taxable income. 

Claiming the deduction under Section 80TTA is straightforward and can be done while filing your income tax return (ITR). The steps are: 

 

Step 1- Calculate Total Interest Income 

Add up all the interest earned from your savings accounts across banks, post offices, and cooperative banks during the financial year.

 

Step 2- Include Interest Income in Gross Total Income 

Report the total interest income under the head ‘Income from Other Sources’ in the ITR. 

 

Step 3- Verify the Details 

Make sure the amount matches what is shown in your bank statements and Form 26AS.

 

Step 4- Claim Deduction Under Section 80TTA 

In the relevant section of the ITR form, claim a deduction of up to ₹10,000 under Section 80TTA.

 

Step 5- Maintain Documentation 

Retain bank statements or interest certificates in case the Income Tax Department asks for verification.

 

Step 6- File Return Before Deadline 

Submit your return by the deadline (usually 31st July of the assessment year) to ensure the deduction is valid.

 

Note: No Tax Deducted at Source (TDS) is applicable on interest earned from savings accounts. However, if the interest income from fixed deposits or recurring deposits exceeds ₹40,000 (₹50,000 for senior citizens), the bank may deduct TDS.