- Section 80TTA deduction allows a maximum deduction of Rs. 10,000 on interest earned from savings accounts in banks, post offices, and cooperative societies.
- Available to individuals below 60 years and Hindu Undivided Families (HUFs).
- Deduction applies only to interest from savings accounts, not from fixed deposits, recurring deposits, or bonds.
Every individual at some point in their life opens a savings bank account. Through a savings amount anyone is allowed to deposit and store their money for as long as they want. This is a safe place to secure funds and also avail interest rate on the money annually. However, the interest rate differs from one financial institution to another.
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As per the Income Tax Department, the interest money you receive from your savings account is subject to tax payment. But did you know Section 80TTA of the Income Tax Act states that you can save money from the tax paid over interest of the savings account?
Let’s understand how one can deduct tax under Section 80TTA through this blog.
What is Section 80TTA of Income Tax Act
Section 80TTA in Income Tax Act gives deduction of up to Rs.10,000 on the income one earns from interest on savings accounts in banks, cooperative society or at post office. The maximum amount of deduction any account holder can claim is Rs.10,000. If the interest income is less than 10,000, in that case, the entire interest amount will be deducted. This section of the income tax act is only applicable on the interest of a savings account, no other interest earned is taken into consideration.
Eligibility criteria of Section 80TTA of Income Tax Act
Following are the entities eligible for deduction on income from interest on savings accounts under Section 80TTA of the Income Tax Act.
- Individuals (Below 60 years)
- HUFs
Note: If anyone is aged 60 or above 60 (Senior citizen), Section 80TTB is applicable for them instead of Section 80TTA.
Type of Interest Incomes Allowed Under Section 80TTA
The Income Tax Act clearly defines the type of interest income that is allowed to be considered under Section 80TTA in Income Tax Act. An individual can only claim for deduction if the interest income is earned through the following.
- Savings Account in a Bank
- Savings Account at a Post Office.
- Savings Account with any cooperative society that is into banking
Types of Interest Incomes Not Allowed Under Section 80TTA
Below is the list that indicates the interest income that is not considered under Section 80TTA. A deduction will not be applicable on interest from:
- Fixed Deposit (read here about tax deductions on FDs)
- Recurring Deposit
- Bonds & Debentures
How to Claim Section 80TTA in Income Tax Act: Example
To claim deduction of up to Rs. 10,000 under section 80TTA, make sure while filing an ITR, you fill in the total interest income under “Income from Other Sources”.
Let us take a look at a hypothetical condition to understand the concept better:
Mr X earned Rs. 12,000 as interest on their savings account in the year 2023-2024.
- Deduction Calculation
- Interest income – Total deduction limit
- 12,000 – 10,000
- Net Taxable Interest Income for MR. X is Rs. 2,000
Difference Between Section 80TTA and Section 80TTB
The clause 80TTA and 80TTB deal with the same aspect of the ITR, however its applicability differs. Let’s have a look at the key differences between Section 80TTA and Section 80TTB
| Criteria | Section 80TTA | Section 80TTB |
|---|---|---|
| Eligibility |
| Senior citizens (>60 years) |
| Applicable on interest from | Savings account only | All types of deposits |
| Max Deduction allowed | Rs. 10,000 | Rs. 50,000 |
