Section 80TTA: Deduction for Interest on Bank savings deposits
Introduction:
Section 80TTA has been introduced with effect from April 1st, 2013 and became applicable for Assessment Year 2013-14 and onwards. This section was introduced with an intention to provide relief to the taxpayers towards their interest income on saving deposits. Section 80TTA of the Income Tax Act, 1961 provides for a deduction in respect of interest income on saving deposits with banks/post office/ co-operative society for a maximum amount upto Rs. 10,000. Any individual or HUF can claim deduction under this section however no deduction shall be allowed in respect of interest of fixed deposits. In this article, we shall discuss the provisions of section 80TTA and answer all the questions related thereto:
Who is entitled for deduction under section 80TTA?
Only Individual taxpayers and HUF assessees are eligible to claim deduction under section 80TTA. The benefit of section 80TTA is not allowed to any other category of taxpayers namely firm, AOP, BOI, LLP or company.
Which incomes are eligible for deduction under section 80TTA?
Interest income on saving accounts kept with the following entities are eligible for deduction under section 80TTA:
- Bank or Banking Company
- Co-operative societies engaged in carrying on the banking business
- Post Office Savings Account
Which incomes are not eligible for deduction under section 80TTA?
Following incomes are not eligible for deduction under section 80TTA:
- Interest on Fixed deposits
- Interest on Recurring Deposits
- Interest on deposits with Non-Banking Finance Companies (NBFC)
What is the maximum amount of deduction under section 80TTA?
- Maximum deduction allowable under section 80TTA is Rs. 10,000 in respect of interest earned on saving deposits.
- If actual interest income is less than Rs. 10,000, then the deduction shall be restricted to such actual interest income. For example: If you have earned saving interest of Rs. 7,000, then deduction allowed u/s 80TTA shall be Rs. 7,000.
- It is also to be noted that if you have more than one saving accounts with same bank or different banks, then the deduction limit of Rs. 10,000 applies to all such accounts cumulatively. You cannot claim separate deduction of Rs. 10,000 for each such bank accounts.
- Further, deduction under this section is in addition to deduction of Rs. 1,50,000 allowed under section 80C.
Can NRI also claim deduction under section 80TTA?
There is no bar on NRIs under section 80TTA for claiming deduction in respect of the interest earned by them on saving deposits. Thus, NRIs can also claim deduction u/s 80TTA. However, following points are noteworthy:
- NRIs can open either NRE or NRO account in any bank in India.
- Interest earned on NRE account is exempted from tax under the Income Tax Act. Therefore, there is no need of claiming deduction u/s 80TTA against such interest income.
- NRIs thus, are eligible to claim deduction u/s 80TTA in respect of interest earned on NRO saving accounts.
Are senior citizens eligible for deduction u/s 80TTA?
Deduction under section 80TTA is not available for the senior citizens as they are eligible for more beneficial deduction under section 80TTB. Following points are to be noted:
- Senior citizen means any individual with at least 60 years of age at any time during the year.
- Deduction under section 80TTB is available to senior citizens in respect of interest on any deposits (saving/fixed/recurring) with banks or co-operative societies or post office.
- Maximum deduction allowed under section 80TTB is Rs. 50,000.
Is it necessary to claim deduction under section 80TTA while filing ITR?
Yes, deductions under Chapter VIA of the Income Tax Act are allowed only if these are claimed by the taxpayer. Therefore, if you want to take benefit of deduction under section 80TTA, you will have to claim such deduction while filing ITR.
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