Section 80TTA Deduction for Interest on Savings Account Deposits

Section 80TTA of the Income Tax Act: Deduction for Interest on Savings Account Deposits

1. Introduction
2. Applicability
3. Conditions to qualify
4. Quantum of deduction.
5. Other points
6. FAQs

Introduction:

Under the Income Tax Act some deductions are available on expenditure and some are available on income. The deduction under section 80TTA is a deduction available on income. Deduction under section 80TTA is available on the interest earned in the savings deposits account. The saving deposit maintained with the banks, post office, or co-operative society is eligible for such deduction.

Applicability:

This deduction under Section 80TTA is applicable to individuals (other than senior citizens covered under Section 80TTB) and Hindu Undivided Families (HUFs). This deduction can also be claimed by a non-resident who has an NRO account.

Conditions to Qualify:

The gross total income of the assessee should include income by way of interest on deposits (excluding time deposits) in a savings account with:

• A banking company i.e. Banks
• A co-operative society engaged in banking business, including co-operative land mortgage banks or co-operative land development banks.
• The Post Office.

Quantum of Deduction:

The deduction allowed is the minimum of the following:

1. The interest earned on such deposits in the savings account. Or
2. ₹10,000

In other words, If the amount of interest income is less than ₹ 10,000 then the entire income is eligible for the deduction. But if the interest income is more than ₹ 10,000 then a deduction of ₹ 10,000 will be allowed.

Further, it should be noted that this deduction is applicable for individuals. It means income from all the saving bank accounts in aggregate will be considered for eligibility for deduction.

Other Points:

The most important thing one should notice is that from the assessment year 2024-2025 the new tax regime under section 115BAC is the default tax regime and deduction under this section is not allowable as per the provision of the section.

In other words, a person paying tax as per section 115BAC i.e. default tax regime cannot take benefit of this section. To take the benefit one need to opt for the old tax regime.

As per Notification No. 32/2011 dated 03-06-2011, interest on Post Office Saving Bank is exempt under Section 10(15)(i) to the extent of ₹3,500 (for single accounts) and ₹7,000 (for joint accounts).

If the income is derived from a savings account deposit held by or on behalf of a firm, an association of persons, or a body of individuals, no deduction is allowed under this section for such income when calculating the total income of any partner of the firm, any member of the association, or any individual of the body.

Section 80TTA deduction encourages individuals and HUFs to save by providing a deduction for interest income earned from savings accounts. The deduction is capped at ₹10,000 or the actual interest income, whichever is lower, and can help reduce the tax liability of eligible taxpayers.

FAQs

Q1. Can NRI claim the deduction under section 80TTA?
Ans. Yes, NRI is eligible to claim the deduction.

Q2. Can this deduction limit be applicable to every saving bank account?
Ans. No, this deduction limit is applicable on an aggregate basis. Income from all saving deposit accounts will be aggregated.

Q3. Is interest from fixed deposit, or recurring deposit eligible for deduction?
Ans. No, Interest income earned from time deposit is not eligible for deduction. So deduction cannot be claimed on interest income earned on recurring deposits, fixed deposits, or any other time deposit.

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