Section 80TTA of the Income Tax Act

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We know that almost every individual owns a savings bank account. We also know that the interest earned on your savings accumulated in a savings account is taxed under the ‘income from other sources’ category. But do you know that you can save taxes on the interest earned from your savings account for up to INR 10,000 under section 80TTA of the IT Act?

Let’s understand 80TTA in income tax in detail in this post!

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What does Section 80TTA of the Income Tax Act Suggest?

As per the Income Tax 80TTA section, a taxpayer can avail of an exemption of up to INR 10,000 per year on the savings account interest. Irrespective of the fact that the savings account is with a bank, a post office, or a cooperative society, the deduction is available to every individual and Hindu Undivided Families except for senior citizens (who enjoy deductions under section 80TTB)

However, you may note that there is no deduction when it comes to interest earned from a fixed deposit (FD) account.

Who is Eligible to Claim Deductions Under Section 80TTA Income Tax Act?

Individuals and HUF can claim a deduction u/s 80TTA of the Income Tax Act on the interest earned on their savings accounts.

This deduction under 80TTA is also available for NRIs. NRIs are eligible to open NRE and NRO accounts in India. However, they can claim the 80TTA deduction only on the NRO account as the interest obtained on NRE accounts is tax-free.

What is the Maximum Limit of Deduction Under 80TTA

The maximum 80TTA deduction limit a taxpayer can avail of is INR 10,000. If the savings bank interest earned by an individual is less than INR 10,000, the entire interest income comes under deduction criteria. However, if the interest earned from your savings account is beyond INR 10,000, you can only claim a deduction up to INR 10,000.

What all Interest Incomes Come Under the Purview of Section 80TTA Deductions?

Below are the various interest incomes for which taxpayers can claim a deduction under section 80TTA:

  • Your savings account opened with a bank
  • Your savings account opened with a cooperative society
  • Your savings account opened with a post office

Which Interest Incomes are Excluded from the Purview of Section 80TTA Deductions?

The 80TTA deductions cannot be claimed for interest earned from fixed deposits or FDs. You may also not claim a deduction on interest earned from recurring deposits. Similarly, you will not get a deduction on the interest earned on any other time deposit accounts. Time deposits are the deposits that need to be repaid once the FD expires.

The Process to Claim 80TTA Deductions

To claim 80TTA deductions, you need to first check your eligibility to claim the deduction. Once you are eligible for exemption under 80TTA, you can calculate the total interest you earned under ‘Income from Other Sources’ (savings accounts).

As you know, you can claim a maximum deduction of INR 10,000 under 80TTA. So, if the total interest income earned by an individual is less than INR 10,000, the individual can claim a deduction on the entire amount.

The taxpayer can add the interest earned to their total income and calculate tax. Finally, you can file the ITR by adding interest earned under ‘Income from Other Sources’ to claim an 80TTA deduction.

You may also note that the 80TTA deduction cannot be claimed if the taxpayer opts for the new tax regime under Section 115BAC.

Let’s understand the claiming process of 80TTA with an example;

Suppose, you earn a salary of INR 5,00,000. The interest you earn on your bank savings account is INR 5,000, while that of your FD account is INR 15,000 per annum. You are also eligible for an 80C deduction of INR 10,000.

In the above scenario, the calculation of your taxable income under the old tax regime is shown in the table below:

Income

Amount (INR)

Amount (INR)

Salary 

Standard deduction available

INR 5,00,000

Minus INR 50,000

4,50,000

Income from Other Sources

Savings account 

Fixed Deposit

INR 5,000

INR 15,000

INR 20,000

Gross Income (total)

INR 4,70,000

Deductions 

80C

80TTA

INR 10,000

INR 5,000

INR 15,000

Taxable Income

4,55,000

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To Sum Up

Section 80TTA of the Income Tax Act 1961 discusses the tax deductions offered on savings account interests, which can be availed by HUFs and individual taxpayers. INR 10,000 is the maximum deduction to be claimed under this section for all savings accounts you hold. This deduction is available over and above the INR 1.5 lakh tax exemption available under Section 80C.
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FAQs: What is Section 80TTA of the Income Tax Act

What is the 80TTA Limit

You can claim up to INR 10,000 under section 80TTA.

What is 80TTA in income tax?

80TTA is a section in the Income Tax Act of India that allows taxpayers a deduction of up to INR 10,000 on the interest earned on a savings account in banks, post offices, or cooperative societies.

What are the 80TTA eligibility criteria?

An individual or HUFs getting income in the form of interest from a savings account can claim deductions under 80TTA.

Who can avail of a deduction under 80TTA?

Individuals and HUFs or Hindu Undivided Families can claim a deduction u/s 80TTA on the interest earned on savings accounts.

Is it mandatory for a taxpayer to disclose the interest income earned on a savings bank account?

Yes, every individual must file an income tax return (if applicable) as per the Income Tax Act of India to report all his/her income earned during an FY for which the ITR is filed and pay the taxes as applicable.

What happens if a taxpayer does not report the interest income earned in a savings bank account?

If a person fails to report his/her income during a financial year, the person will be liable to get penalized for non-compliance, and he/she must pay the tax due on his/her interest income.

Can NRIs claim a deduction under 80TTA?

Yes, NRIs can claim deductions under NRO savings accounts. Note that NRIs can open savings accounts of two types: NRO and NRE. The interest on the NRE accounts is tax-free. Hence, the 80TTA deductions are available only on NRO savings accounts.

What section allows senior citizens to claim deductions - 80TTA or 80TTB?

Section 80TTB allows senior citizens to claim deductions since 80TTA is only meant for individuals and HUFs.

Are 80TTA deductions available under the new tax regime?

Deductions under 80TTA and 80TTB are not applicable in the new tax regime. They are available under the old tax regime.

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Feb 02, 2024
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