Most individuals are aware that the interest earned from a savings account is taxable under the head ‘Income from Other Sources’. However, not everyone knows that they can claim a tax deduction on this interest income up to Rs. 10,000 per year under Section 80TTA of the Income Tax Act. This deduction helps reduce your taxable income and, in turn, your overall tax liability. Let’s take a closer look at Section 80TTA and how it can benefit you.
Section 80TTA allows an individual or Hindu Undivided Family (HUF) to claim a tax deduction of up to Rs. 10,000 on interest earned from a savings bank account. This deduction applies to interest income from savings accounts held with banks, post offices, and cooperative societies. However, this section excludes interest from time deposits such as Fixed Deposits (FDs) and Recurring Deposits (RDs).
Section 80TTA was introduced through the Finance Bill of 2013 and became effective starting from the 2012-13 financial year. This means individuals can benefit from this deduction each financial year.
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To help taxpayers understand better, here’s a quick comparison of the interest income eligible and not eligible for deduction under Section 80TTA:
| Eligible Interest Incomes | Ineligible Interest Incomes |
| Interest from a savings account in a bank | Interest from Fixed Deposits (FD) |
| Interest from a savings account in a post office | Interest from Recurring Deposits (RD) |
| Interest from a cooperative society that is into banking | Interest from any other time deposits |
The maximum deduction under Section 80TTA is Rs. 10,000 per annum. If an individual has multiple savings accounts, whether with different banks or post offices, the total deduction cannot exceed Rs. 10,000. For example, if you have earned Rs. 5,000 interest from one account and Rs. 6,000 from another, you will only be eligible for a deduction of Rs. 10,000.
Section 80TTA is available for individuals and Hindu Undivided Families (HUFs). However, this deduction does not apply to senior citizens (those aged 60 years or above) because they are eligible for a different tax benefit under Section 80TTB, which provides a higher deduction limit of Rs. 50,000 on interest income from banks, post offices, and co-operative banks.
To claim the Section 80TTA deduction, follow these simple steps:
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Section 80TTA provides a valuable opportunity to save taxes on interest earned from savings accounts. By deducting up to Rs. 10,000 in interest income, individuals can reduce their taxable income and pay lower taxes. It’s a simple and effective way to make the most of the interest you earn on your savings.
No, interest earned from Fixed Deposits (FDs) or Recurring Deposits (RDs) is not eligible for a deduction under Section 80TTA. Only interest from savings accounts qualifies.
Yes, Section 80TTB is for senior citizens (60 years or above) and allows a higher deduction of Rs. 50,000 on interest income from savings accounts, fixed deposits, and post office schemes. Section 80TTA is for individuals and HUFs below 60 years, with a deduction limit of Rs. 10,000 on savings account interest.
Yes, if you have multiple savings accounts, the total deduction across all accounts is limited to Rs. 10,000. For example, if your total interest income is Rs. 15,000, you can only claim Rs. 10,000 as a deduction.
No, Section 80TTA does not require submitting additional documents during the filing process. However, you should maintain a record of the interest income received, which can be found in the bank or post office statements, in case of any scrutiny or audit.
If your interest income exceeds Rs. 10,000, you can only claim a deduction of Rs. 10,000 under Section 80TTA. The remaining interest income will be added to your total income and taxed accordingly.
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