What Is Section 80TTA? Deduction on Savings Account Interest

Summary

• Section 80TTA provides a deduction of up to ₹10,000 on interest income earned from savings accounts with banks, post offices, or cooperative societies.
• This deduction is available only to individuals and Hindu Undivided Families (HUFs). It does not apply to interest from fixed deposits, recurring deposits, or other similar deposits.
• If the total interest from eligible accounts is ₹10,000 or less, the entire amount is deductible. Any interest exceeding ₹10,000 is taxable.
• The deduction is claimed while filing your ITR under 'Income from Other Sources'.

Introduction

Paying taxes can often feel overwhelming, but there are ways to reduce your tax liability through various deductions available under the Income Tax Act. One such deduction is under Section 80TTA, which provides relief for taxpayers earning interest on their savings. If you're looking to save on taxes, understanding Section 80TTA and how to claim the deduction can be a great way to reduce your taxable income.

What is Section 80TTA?

Section 80TTA of the Income Tax Act offers a deduction for individuals and Hindu Undivided Families (HUFs) on the interest income earned from savings accounts. This section allows taxpayers to claim a deduction of up to ₹10,000 per year on the interest earned from these accounts. The deduction is available for interest earned from savings accounts in banks, post offices, or cooperative banks.

It’s important to note that this deduction is only applicable to interest income earned on savings accounts and not on fixed deposits, recurring deposits, or other forms of interest-bearing instruments.

Eligibility for Section 80TTA

To be eligible for the 80TTA deduction, you must meet the following criteria:

• Individual or Hindu Undivided Family (HUF): The deduction under Section 80TTA is available only to individuals and HUFs. Companies, firms, or other entities are not eligible.
• Interest Income: The deduction applies only to the interest earned from savings accounts, whether it is a bank savings account, cooperative bank account, or post office savings account.
• Income Limit: The maximum deduction that can be claimed under Section 80TTA is ₹10,000 per year. If the total interest income from these savings accounts exceeds ₹10,000, the remaining interest will be subject to tax.
• No Deduction for Fixed Deposits: If the interest is earned on fixed deposits, recurring deposits, or other term-based deposits, it is not eligible for this deduction under Section 80TTA.
• Senior citizens cannot claim deduction under Section 80TTA. Instead, they are eligible for a higher deduction of up to ₹50,000 on interest income under Section 80TTB.

Accounts Covered Under Section 80TTA

Under Section 80TTA, the deduction applies to the interest earned from savings accounts in the following types of accounts:

• Savings Accounts in Banks: This includes any savings bank account held with a public or private sector bank. Interest earned from savings accounts held with banks in India, post offices, or cooperative banks is eligible for the deduction.
• Post Office Savings Accounts: Interest income from savings accounts held in post offices is also eligible under Section 80TTA.
• Cooperative Bank Savings Accounts: Savings accounts with cooperative banks are eligible for deduction under Section 80TTA, but interest from deposits with cooperative credit societies (other than cooperative banks) is not eligible.

It is important to note that fixed deposits and recurring deposits are not covered under Section 80TTA, though they may be eligible for tax benefits under other sections.

How to Calculate Deduction Under Section 80TTA

The 80TTA deduction allows you to claim a deduction of up to ₹10,000 from your total interest income earned during the financial year from eligible savings accounts. Here’s how to calculate it:

• Total Interest Earned: First, calculate the total interest income you have earned from savings accounts during the year.
• Check the Limit: The maximum deduction available under Section 80TTA is ₹10,000. Therefore, even if your total interest income from savings accounts is higher than ₹10,000, the deduction is capped at ₹10,000.
• Claim the Deduction: If your total interest income from eligible savings accounts is ₹10,000 or less, you can claim the entire amount as a deduction. However, if your interest income exceeds ₹10,000, only ₹10,000 can be claimed as a deduction, and the remaining interest income will be taxable.

For example, if you earned ₹8,000 interest from your savings account, you can claim the full ₹8,000 as a deduction. But if you earned ₹12,000, only ₹10,000 is eligible for the deduction, and the remaining ₹2,000 will be added to your taxable income.

How to Claim Deduction Under Section 80TTA

Claiming the 80TTA deduction is a straightforward process. Follow these steps to claim it:

• Report Your Interest Income: When filing your income tax return, you will need to report the interest income from your savings accounts in the appropriate section of the ITR form.

Also Read: ITR Full Form & Meaning: What is Income Tax Return?

• Claim the Deduction: Interest from savings accounts is reported under ‘Income from Other Sources’, and the deduction is claimed separately under Chapter VI-A (Section 80TTA) while filing the ITR. Once you fill in the income, the tax software or your tax advisor will automatically calculate and apply the deduction under Section 80TTA, reducing your taxable income.
• Documents Required: Ensure that you have the interest certificates or account statements from your bank, post office, or cooperative bank, which provide details of the interest earned during the year. These documents may be required for verification during the filing process.
• Tax Filing: You do not need to submit any separate forms to claim this deduction. The deduction is automatically applied when you file your tax return.

Conclusion

Section 80TTA provides a great opportunity for individuals and HUFs to reduce their tax liability by claiming deductions on interest income earned from savings accounts. The 80TTA deduction of up to ₹10,000 is available to those who earn interest from savings accounts in banks, cooperative banks, and post offices.

Make sure to review your total interest income from these accounts and claim the maximum possible deduction under Section 80TTA to save on taxes. If you have any doubts or need assistance with your tax filing, Bank of Baroda is here to guide you through the process.

Need help with tax filing or claiming deductions? Visit Bank of Baroda today for expert guidance on managing your finances and maximizing your tax savings.

Also Read: How Does 80CCD Deduction Work for Pension Contributions?