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.

Sr. no

Section 80TTA

Section 80TTB

1

Availed by individuals and Hindu Undivided Family (HUF)

Availed by senior citizens above the age of 60

2

Fixed Deposits do not qualify under Section 80TTA

Savings bank accounts and fixed deposits qualify under Section 80TTB

3

Exemption limit under Section 80TTA is INR 10,000 per annum

Exemption limit under Section 80TTB is INR 50,000 per year

4

NRIs with NRO account are eligible

NRIs are not eligible

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).

FAQs

  • ✔️Can tax deduction under Section 80TTA be claimed for a fixed deposit account?

    No. Under Section 80TTA of the Income Tax Act, the deduction is applicable only on savings accounts.
  • ✔️What exactly is stated in section 80TTA?

    In the Income Tax Act, 1961, Section 80TTA states that the deduction is with respect to the interest on deposits in bank savings account of the entity. This income-based deduction offers a deduction of INR 10,000 on income earned through interest by individuals and/or HUF.
  • ✔️If an assessee earns interest from multiple savings accounts, will they be able to claim tax deduction under Section 80TTA?

    Yes, a deduction of INR 10,000 can be claimed on the interest earned from multiple savings accounts.
  • ✔️Will the change in interest rate by RBI affect tax deduction rules under Section 80TTA?

    Section 80TTA has no relation to the interest rate. It provides a tax deduction on the interest amount earned on the savings account.
  • ✔️Can Non Residential Indians avail the tax deduction under Section 80TTA?

    The tax deduction under Section 80TTA can be claimed on the Non-Resident Ordinary (NRO) savings account owned by the NRIs fitting the eligibility criteria.
  • ✔️What if I exhaust the deduction limit under Section 80TTA?

    If you end up exhausting the deduction limit under Section 80TTA, you can always claim deductions under different tax-saving sections like Section 80D. You can avail of deductions as high as Rs. 25, 000, under Section 80D. You can benefit from Section 80D deductions by investing in the Bajaj Allianz Health Insurance plan available on Finserv MARKETS. The health insurance plan on Finserv MARKETS not only offers you tax-savings but also a sum insured of up to Rs. 50 lakhs, coverage of pre and post hospitalization expenses and rapid claim settlements. Opt for the health insurance plan on Finserv MARKETS and make the most of the dual benefits of tax-savings and financial protection.

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