Section 80TTA of Income Tax Act – All about Claiming Deduction on Interest
The bank interest on your savings is taxed!
Have you ever wondered if you may avoid paying income tax on savings bank interest and how it is taxed?
All of us have a savings bank account, but the majority of us are unaware that the interest earned falls under the category of "Income from other sources" and is subject to taxes. On the other hand, interest payments up to ₹ 10,000 are tax deductible. The Income Tax Act, 1961's Section 80TTA allows for a deduction of ₹ 10,000 on this type of interest income. This article explores Section 80TTA in further detail.
What is Section 80TTA?
The Income Tax Act, 1961's Section 80TTA allows a deduction of up to ₹ 10,000 for interest income received from savings deposited in a bank, post office, or cooperative organization. Interest received from recurring and fixed deposits is not deducted.
Who is Eligible for an 80TTA Deduction? Can NRIs take advantage of the 80TTA Deduction?
Each Individual and HUF is eligible for a Section 80TTA deduction.
Yes, NRIs are eligible for the Section 80TTA deduction as well. It is important to remember that in India, NRIs can only open two kinds of accounts. for example, NRE and NRO accounts. However, because interest received on NRE accounts is tax-free, only owners of NRO savings accounts are eligible to benefit from Section 80TTA.
Note: Senior citizens sixty years of age or older are covered by Section 80TTB and are not subject to this section.
Which Interest Income Types Under Section 80TTA are allowable for Deduction?
You are eligible to deduct interest income from the following sources:
From a savings account with a bank
From a savings account with a co-operative society carrying on the business of banking
From a savings account with a post office
Interest Income excluded from Section 80TTA Deduction
The following situations will not qualify for the Section 80TTA deduction:
Interest from fixed deposits
Interest from recurring deposits
Time deposits mean deposits repayable on the expiry of fixed periods
Interest earned on corporate bonds and debentures
Interest from Provident fund deposits
Interest from lending business
Maximum Deduction allowed Under Section 80TTA
A deduction of no more than ₹ 10,000 may be made. The whole amount of interest income would be deducted from your income if it is less than ₹ 10,000. Your deduction will be restricted to ₹ 10,000 if your interest income exceeds that amount. If you have numerous accounts, you must take into account your entire interest income from all banks.
How to file a Section 80TTA Deduction claim?
First, in your return, tally up all of your interest income under the heading "Income from Other Sources." Determine your whole gross income for the fiscal year by adding up all of your revenue sources, and then declare it as a Section 80TTA deduction.
Important: The new regime is now the default, so you may only claim the Section 80TTA deduction if you choose to use the old one.
As an illustration:
If Mr. A has a salary of ₹ 5,00,000, his interest income for a bank savings account is ₹ 5,000, and his interest income for fixed deposits is ₹ 15,000 for the entire fiscal year. In addition, there is a ₹ 10,000 deduction that qualifies under Section 80C. Then, under the previous tax system, taxable income would be calculated as follows:-
| Particulars |
Amount (₹) |
Amount (₹) |
Income from Salary
Less: Standard Deduction
|
5,00,000
(50,000)
|
4,50,000 |
Income from other sources
-Interest on savings account
-Interest on fixed deposits
|
5,000
15,000
|
20,000 |
| Gross Total Income |
|
4,70,000 |
Less: Chapter VI-A deduction
-80C
-80TTA
|
10,000
5,000
|
(15,000) |
| Taxable Salary |
|
4,55,000 |
FAQs
No, tax deductions for fixed deposits are not permitted under Section 80TTA; however, interest on savings bank accounts are.
Yes, you are qualified for a tax deduction under Section 80TTA if you hold a savings bank account in a cooperative society that is registered.
The amount of interest generated is limited by Section 80TTA, not the number of accounts that must be kept open. Therefore, tax benefits are available for as many accounts as needed.
Yes, everyone for whom filing a return is appropriate is required by the Income Tax Act to declare all of their income received during the reporting period and to pay any applicable taxes.
By submitting your income tax return, you can claim a deduction under Section 80TTA. Prior to claiming the Section 80TTA deduction, the income must first be included in your income under the heading "Income from other sources.
Let's say someone, on purpose or not, does not disclose their salary for the entire year. If their return is chosen for examination, they will be subject to punitive measures for their non-compliance and will have to pay the tax owed plus interest.
No, you are unable to claim 80TTB and 80TTA at the same time.
