What is Section 80TTA?
Interest earned on a savings bank account is chargeable to tax under the head Income from Other sources and deduction of interest is also allowed u/s 80TTA. This deduction is available only if you operate a savings account with a bank- either public, private or that managed by a co-operative society. This deduction is allowed to an individual and HUF (Hindu Undivided Family). In case of senior citizens being resident deduction can be claimed under separate section 80TTB. However in case of senior citizen being non resident 80TTB is not allowable and deduction can be claimed under section 80TTA.
Section 80TTA was introduced in 2013 as a part of the Finance Bill passed that year, and it became applicable from the financial year 2012-13 onwards and still holds good.
Amount of deduction under Section 80 TTA is amount of such interest or Rs. 10,000 whichever is lower. This means that the maximum amount of deduction that can be claimed under this section is Rs. 10,000.
Deduction under section 80TTA is over and above the 1.5 lakh limit of Section 80C.
Interest earned on savings account in a post office is also applicable for this benefit. Bank fixed deposits or deposits with non-banking financial companies do not qualify though.
Who is eligible?
If you are an individual or a Hindu Undivided family, you can claim deduction under section 80TTA, on the interest earned on all their savings bank, co-operative bank and post office accounts.
What documents are needed?
You just need to keep handy your bank statements for the savings account or interest certificate for the relevant financial year as issued by the bank, for the year for which you are filing your tax return. These will help you calculate the interest earned.
Following Institution’s Savings bank account are covered under section 80TTA
The savings accounts under the following institutions come under Section 80TTA:
- Banks: Banking companies formed as per the regulations of the Banking Regulations Act, 1949.
- Post Offices: All the Government of India post offices that have the facility of savings accounts.
- Cooperative Societies: Cooperative Societies registered by the government and eligible to have savings accounts as a feature of their banking system.
If the saving account is with following organization then such deduction cannot be claimed
- Deposits in Non-banking Finance Companies
- Interest on Fixed Deposits (FD)
- Interest from Recurring Deposits (RD)
How to avail the benefit?
First of all, calculate your interest income from saving accounts in different banks, if that’s the case. This amount will be classified as “income from other sources” when you are filing your taxes. Add up the total interest that you have earned. Now, this amount should be less than ₹10,000 for you to get the tax benefit from Section 80TTA.
In a scenario where the total interest earned on savings account per annum is higher than this specified limit, you can only claim tax deduction for ₹ 10,000. Any amount above this would be taxable.
Can my interest income be higher than ₹ 10,000 and yet I don’t have to pay tax?
Yes, this is when your Gross total income is less than the minimum taxable income, which is Rs 2.5 lakhs. In such a case, even though the interest earned by you on your savings account(s) is more than the advised limit, still it will not be chargeable to income tax as gross total income is less than the minimum income chargeable to Income Tax under the Income Tax Act, 1961.
Well, there you have it. That’s more or less everything you need to know about availing tax benefits on your savings account interest income. So, when filing your returns, simply check your eligibility, get your documents in order, and get cracking on availing those tax benefits!