Section 80TTA
Section 80TTA: Tax Deduction on Savings Account Interest
In this post, we will discuss Section 80TTAof the Income Tax Act, which provides a tax deduction on interest earned from savings accounts in banks, cooperative societies, and post offices.
We’ll cover the following:
What is Section 80TTA?
Section 80TTA of the Income Tax Act of 1961 allows a deduction of up to Rs 10,000 for interest earned on savings accounts in banks, cooperative societies, and post offices. This Deduction does not include interest from fixed or recurring deposits.
Who Can Claim 80TTA Deduction?
Individuals and HUFs are both eligible for the Section 80TTA deduction. Yes, NRIs can claim a deduction under Section 80TTA. It is important to understand that NRIs can only open two types of accounts in India. NRE and NRO accounts. However, only NRO savings account holders can profit from Section 80TTA because interest generated on NRE accounts is tax-free.
Can NRIs claim a deduction under 80TTA?
Non-resident Indians (NRIs), like resident Indians, are eligible to claim a deduction under Section 80TTA.
NRIs can open both NRE and NRO accounts in India. Interest earned from NRE accounts is tax-free. As a result, the 80TTA benefit is only available through NRO savings accounts. There is no deduction for NRO term deposits (fixed deposits).
Deduction under Section 80TTA
In the Income Tax Act, Section 80TTA is titled ‘Deduction in respect of interest on deposits in savings accounts’.
- Here are the key features of this section:
- You can claim an exemption for up to Rs 10,000 in interest on savings account deposits.
- Savings accounts can be held at any of the following financial institutions:
- Bank
- Cooperative society.
- Post office
- You can claim an exemption for any number of savings accounts as long as the total value is less than Rs. 10,000.
Exceptions under Section 80TTA
In India, Section 80TTA of the Income Tax Act of 1961 makes some types of interest income ineligible for deduction. What is not permitted is as follows:
- Fixed Deposit (FD) Interest: Interest on fixed deposits, whether from banks or corporations, cannot be deducted. Fixed deposits are lump sum deposits with a financial institution that earns interest over time.
- Recurring Deposit (RD) Interest: Interest from recurring deposits, in which a fixed sum is deposited on a regular basis, is also not tax deductible.
- Corporate Bond Interest: Under this section, interest on corporate bonds, debentures, or other interest-bearing securities issued by firms is not deductible.
Maximum Deduction Allowed Under Section 80TTA
The maximum deduction amount is Rs 10,000. You can deduct the entire amount if your interest income falls below this threshold. If your interest income exceeds Rs 10,000, your Deduction will be capped at Rs 10,000. Remember to include the interest from all of your bank accounts.
How to Claim Deduction Under Section 80TTA
To claim a deduction under Section 80TTA of the Income Tax Act of 1961 for interest earned by savings accounts and cooperative societies, perform these steps:
- Check Eligibility: You must be either an individual or a Hindu Undivided Family (HUF). Companies, partnerships, and LLPs are ineligible.
- Calculate Interest Income: Add all the interest earned on savings accounts with banks, cooperative societies, or post offices, and interest on deposits with banking cooperatives.
- Determine Deduction Limit: You can take a maximum deduction of Rs. 10,000. Claim the entire amount if your interest income is Rs. 10,000 or less. You can only claim Rs. 10,000 if it exceeds Rs. 10,000 as a deduction.
- Include in Total Income: When computing tax, add the interest income to your total income because the deduction only applies to total income.
- File Your Return: When submitting your income tax return, include the interest under “Income from Other Sources” and deduct it under Section 80TTA. Make sure your information is correct, and maintain any appropriate documents.
We have reached the end of this post. Please post your questions in the comments section below.
FAQs
1. Can I get a tax deduction for interest on fixed deposits under Section 80TTA?
Ans: No, Section 80TTA does not provide a tax deduction for fixed deposits, but it allows for interest earned on savings bank accounts.
2. Am I eligible for a tax deduction under Section 80TTA if I have a savings bank account in a cooperative society?
Ans: Yes, a savings bank account with a recognized cooperative society is eligible for a tax deduction under Section 80TTA.
3.Will TDS be taken from my interest earnings?
Ans: The banks do not deduct TDS on savings bank interest.
4.Can an NRI claim 80TTA?
Ans: NRIs can claim Section 80TTA, like local Indians.
