Section 80TTA - Tax on Savings Bank Interest

Interest earned from savings bank accounts is considered taxable income under the head "Income from Other Sources." This means that the interest you earn from your savings accounts must be included in your total income and taxed according to your applicable income tax slab.

What is Section 80TTA?

Section 80TTA of the Income Tax Act, introduced in the Finance Bill of 2013, offers a deduction of up to ₹10,000 per financial year on interest earned from savings accounts held with banks, post offices, or cooperative societies engaged in banking. This deduction is available to individual taxpayers (below 60 years of age) and Hindu Undivided Families (HUFs).

Eligibility Criteria

The deduction under Section 80TTA is available to:

• Individual taxpayers below 60 years of age
• Hindu Undivided Families (HUFs)

Senior citizens (aged 60 years or more) are not eligible for this deduction. Instead, they can avail benefits under Section 80TTB, which offers a higher deduction limit.

Applicable Interest Incomes

Under Section 80TTA, the following interest incomes are eligible for deduction:

• Interest earned from savings accounts held with banks
• Interest earned from savings accounts held with post offices
• Interest earned from savings accounts held with cooperative societies engaged in banking activities

It's important to note that interest earned from fixed deposits, recurring deposits, or any other time deposits is not eligible for deduction under this section.

Deduction Limit

The maximum deduction allowed under Section 80TTA is ₹10,000 per financial year. If the total interest earned from all eligible savings accounts is less than ₹10,000, the actual interest amount can be claimed as a deduction. If the interest exceeds ₹10,000, only ₹10,000 can be claimed as a deduction, and the remaining amount will be taxable as per the individual's applicable tax slab.\

How to Claim the Deduction

To claim the deduction under Section 80TTA:

Calculate Total Interest: Sum up the interest earned from all eligible savings accounts during the financial year.

Report Interest Income: Declare the total interest income under the head "Income from Other Sources" in your Income Tax Return (ITR).

Claim Deduction: In the deductions section of the ITR, claim the deduction under Section 80TTA for the eligible amount, up to ₹10,000.

Important Considerations

Multiple Accounts: The ₹10,000 limit is cumulative across all eligible savings accounts.

Joint Accounts: Interest income from joint accounts should be apportioned based on ownership and reported accordingly.

No TDS: Banks do not deduct Tax Deducted at Source (TDS) on savings account interest. However, it's the taxpayer's responsibility to declare this interest income and pay the applicable tax while filing their ITR.

Conclusion

Section 80TTA provides a valuable tax benefit for individuals and HUFs by allowing deductions on interest earned from savings accounts. By understanding the eligibility criteria and the process to claim this deduction, taxpayers can effectively reduce their taxable income and optimize their tax liabilities.