Section 80TTA of the Income Tax Act, 1961 provides for a deduction in respect of interest on deposits in savings account. This deduction is available to individuals and Hindu Undivided Families (HUFs). However, senior citizens are not eligible for this deduction as they have a separate deduction under Section 80TTB for interest on deposits in savings account.
To avail the benefits of Section 80TTA, individuals and HUFs must meet the following criteria:
- The deduction is only applicable to individuals and HUFs and not to any other category of taxpayers.
- The taxpayer must have a savings account with a bank, co-operative society, or post office.
- To claim the deduction under Section 80TTA, you must file a return of income with the Income Tax Department. The return must include the details of your interest income from savings accounts. You must also submit Form 16A from the bank or post office where you have your savings account.
Maximum Deduction Limit
The Maximum Deduction allowed under Section 80TTA is Rs. 10,000.
This means that if the total interest earned from all savings accounts is less than or equal to Rs. 10,000, the entire amount can be claimed as a deduction. However, if the interest exceeds Rs. 10,000, only Rs. 10,000 can be claimed as a deduction.
Taxability of Interest
The interest earned from savings accounts is taxable under the head ‘Income from Other Sources’. However, with the introduction of Section 80TTA, individuals and HUFs can now reduce their tax liability by claiming a deduction on the interest earned.
Procedure to Claim Deduction
To claim the deduction under Section 80TTA, individuals and HUFs need to follow these steps:
- Calculate the total interest earned from all savings accounts.
- Include the interest amount in the ‘Income from Other Sources’ while filing the income tax return.
- Claim the deduction by mentioning the interest amount under Section 80TTA.
Here is an example of how to calculate the deduction under Section 80TTA:
– An individual earns a total of Rs. 12,000 in interest from his savings accounts in a financial year.
– The individual is eligible for a deduction of Rs. 10,000 under Section 80TTA.
– The individual’s taxable income is Rs. 2,000 (Rs. 12,000 – Rs. 10,000).
– The individual will have to pay tax on Rs. 2,000.
Points to be Note :
- Please note that the deduction under Section 80TTA is only available for interest income earned from savings accounts. Interest income earned from fixed deposits or other time deposits is not eligible for the deduction.
- The deduction under Section 80TTA is not available to senior citizens, as they are entitled to a higher deduction under Section 80TTB.