Section 80TTA of the Income Tax Act, 1961, offers a tax deduction on interest earned from savings accounts, providing relief to individuals and Hindu Undivided Families (HUFs). Here’s a comprehensive guide to understanding this provision:
What is Section 80TTA?
Introduced in the Finance Act of 2013, Section 80TTA allows individuals and HUFs to claim a deduction of up to ₹10,000 per financial year on interest income earned from savings accounts held with:(taxbuddy.com)
- Banks
- Cooperative societies engaged in banking
- Post offices
This deduction is over and above the ₹1.5 lakh limit under Section 80C.
Eligibility Criteria
- Who Can Claim: Individuals (below 60 years) and HUFs.
- NRIs: Eligible only if they have Non-Resident Ordinary (NRO) savings accounts. Interest from Non-Resident External (NRE) accounts is tax-exempt and doesn’t qualify.
- Senior Citizens: Not eligible under Section 80TTA. Instead, they can claim deductions up to ₹50,000 under Section 80TTB.
Ineligible Interest Incomes
Interest earned from the following sources does not qualify for deduction under Section 80TTA:
- Fixed Deposits (FDs)
- Recurring Deposits (RDs)
- Time deposits
- Corporate bonds and debentures
- Interest from lending businesses
Deduction Limit
- Maximum Deduction: ₹10,000 per financial year.
- Multiple Accounts: If you have multiple savings accounts, the total interest from all accounts is aggregated. If the combined interest exceeds ₹10,000, only ₹10,000 is deductible; the excess is taxable.
How to Claim the Deduction
- Calculate Total Interest: Sum up the interest earned from all eligible savings accounts during the financial year.
- Report Interest Income: Include this interest under the head “Income from Other Sources” in your Income Tax Return (ITR).
- Claim Deduction: Under Chapter VI-A of the ITR form, claim the deduction under Section 80TTA.
- Choose the Appropriate Tax Regime: Note that deductions under Section 80TTA are available only under the old tax regime.
Section 80TTA vs. Section 80TTB
| Feature | Section 80TTA | Section 80TTB |
|---|---|---|
| Applicable To | Individuals & HUFs (below 60 years) | Senior Citizens (60 years & above) |
| Maximum Deduction | ₹10,000 | ₹50,000 |
| Eligible Interest Types | Savings Account Interest | Savings & Fixed Deposit Interest |
| Applicable Tax Regime | Old Tax Regime | Old Tax Regime |
Important Notes
- New Tax Regime: Under the new tax regime (Section 115BAC), deductions under Section 80TTA are not available.
- TDS on Savings Interest: Banks do not deduct TDS on savings account interest. However, it’s mandatory to declare this income while filing your ITR.
By understanding and appropriately applying Section 80TTA, taxpayers can effectively reduce their taxable income, leading to potential tax savings. Always ensure accurate reporting and consult with a tax professional if in doubt.
