Section 80TTA - Deduction under Section 80TTA

What is Section 80TTA?

Various deductions are provided under the Income Tax Act of India to the Indian taxpayer to decrease their income tax liability and, thereby, lower their tax outgo. These deductions can be salary-based, investment-based or payment-based.

Under Section 80TTA of Income Tax Act, tax deductions are provided to eligible taxpayers on the interest earned on a savings account. The savings account in question can exist at a bank, cooperative society or a post office.

Section 80TTA became a part of the Finance Bill in 2013 and has since provided relief to many a taxpayer.

Let us take a look at the terms and conditions applicable to avail benefits of Section 80TTA.

Deduction applicable under Section 80TTA- Terms & Conditions

The terms and conditions applicable on tax deductions under Section 80TTA are listed below:

• Up to INR 10,000 is deductible per year on the interest earned on savings accounts

• Deductions can be claimed by individuals and Hindu Undivided Family (HUFs)

• If an entity has more than one savings account in multiple banks, the combined interest income from all accounts should be under INR 10,000 to avail deductions

• In case of the cumulative interest income in the aforementioned case exceeding the limit of INR 10,000, the tax exemption can be claimed for INR 10,000 and the remaining amount shall be taxed.

Eligibility for Claiming Deductions under 80TTA

According to the Income Tax Act, deductions under section 80TTA can be claimed by:

• Taxpayers falling under the category of individuals or Hindu Undivided Family (HUF)

• Indian Residents

• Non-Resident Indians (NRIs) owning NRO savings accounts

• An entity with savings accounts at institutions like banks, post offices, or cooperative societies

Claiming 80TTA Tax Deductions

Under Section 80TTA, a tax deduction of up to INR 10,000 for an eligible assessee can be claimed over and above the INR 1.5 Lac limit of Section 80C. Remember to list interest from savings bank accounts under the Income from Other Sources section while filing for Income Tax.

Exceptions under Section 80TTA

• If the Gross Total Income of an entity is less than the minimum taxable income slab, one can not claim tax deduction under Section 80TTA

• Senior Citizens can’t avail the tax exemption under Section 80TTA

• The 80TTA tax deduction is not applicable to the following:

  • Term Deposits

  • Fixed Deposits

  • Recurring Deposits

  • Deposits from NBFC (Non-Banking Finance Companies)

• NRIs with an NRE account can’t claim tax deduction under Section 80TTA as NRE accounts are exempted from taxation.

Key differences between Section 80TTA and Section 80TTB

There are stark differences that can be noticed under the provision of Section 80TTA and Section 80TTB. The following are the key distinctions.

Conclusion

Many people with savings bank accounts are not aware of the taxation applicable to the interest earned on savings bank accounts. Section 80TTA of the Income Tax Act, 1961 deals with the income tax deductions granted for the interest earned on savings accounts with maximum deduction being INR 10,000 per year.

This deduction is applicable to individuals or Hindu Undivided Families (HUF).