Section 80TTA Of The Income Tax Act: Eligibility, Tax Benefits And Deductions
Section 80TTA of Income Tax offers a tax deduction for earning interest income. This tax benefit is applicable with some conditions and limitations. Do you want to know how to avail a tax deduction against interest received? Keep reading!
Kinds of Interests Eligible for Tax Deduction
The following incomes qualify for deductions u/s 80TTA:
- Interest earned through a savings bank account
- Interest earned from a post office savings account
- Interest earned through a savings account of a co-operative society (functioning as a bank)
This provision considers a bank notified under the Banking Regulation Act, 1949 and a post office specified in the Indian Post Office Act, 1898.
Also read: Section 206 of the Income Tax Act
Types of Interests Not Eligible for Tax Deduction
Deductions are not available for the following:
- Fixed deposit interests
- Recurring deposit interest
- Other similar time deposits
Applicable Deduction Amount
The maximum deduction limit is Rs. 10,000. When interest earned is below Rs. 10,000, the total interest income is your tax deduction. When interest earned is above Rs. 10,000, the tax deduction will be Rs. 10,000. Individuals must calculate interest income from all their bank accounts.
Claiming Tax Benefit in Section 80TTA of Income Tax Act
Your entire interest amount will come under the head ‘Income from other sources of the IT return. Section 80 highlights the deductions under this provision.
Here’s an example showing the calculation of taxable income after taking into account certain deductions, including Section 80TTA of the Income Tax Act:
In a fiscal year, Meena’s annual salary is Rs. 4,00,000, savings account interest is Rs. 4,000, and fixed deposit interest is Rs. 13,000. Deduction applicable u/s 80C is Rs. 9,000. So, you can calculate taxable income in the following way:
| Income | Amount (Rs.) | Amount (Rs.) |
| Salary income | 4,00,000 | |
| Earnings from some other sources: Savings account interest, Fixed deposit interest | 4,00013,000 | 17,000 |
| Gross income | 4,17,000 | |
| Deduction under Chapter VI-A80TTA80C | 4,0009,000 | 13,000 |
| Taxable Income | 4,04,000 |
So, the taxable salary of Meena amounts to Rs. 4,04,000.
Taxpayers Eligible for Deduction
The following assessees can claim tax deductions under Section 80TTA of the Income Tax Act:
- HUF (Hindu Undivided Family) and individuals
- An organisation having savings account at co-operative societies, post offices and banks
- Non-resident individuals having NRO savings deposits
- Resident individuals
Taxpayers Not Eligible for Deduction
The following assessees do not qualify for 80TTA deductions:
- Body of individuals
- Association of individuals
- Firm
- Senior citizens
This means that a member of an association or a partner in a firm cannot claim deductions under Section 80TTA of the Income Tax Act.
Also read: Section 16 of the Income Tax Act
Final Word
The Income Tax Department aims to reduce the tax burden of the citizens by offering deductions under various sections of ITA. A taxpayer must know the details of the deductions applicable under different Sections. 80TTA allows a deduction of up to Rs. 10,000 on the interest amount. The residual interest income (if any) gets added to the total income and is taxable.
Frequently Asked Questions
Ans: Section 80TTB is applicable when a taxpayer’s gross income covers any interest from deposits. This provision allows a tax deduction on such an interest amount. However, the taxpayer must be a senior citizen and an Indian resident. A senior citizen is aged 60 years and above during a relevant preceding year.
Ans: In a fiscal year, Section 80TTB offers a deduction of up to Rs. 50,000. If the interest amount is below Rs. 50,000, the total interest gets deducted. However, if the interest income is above Rs. 50,000, then the maximum deduction limit (Rs. 50,000) gets deducted.
The interest income u/s 80TTB must be from a deposit in any of the following:
> Post office
> Registered bank
> Co-operative society
Ans: As per the Income Tax Act, every person having a taxable income needs to file income tax return for a financial year. If a taxpayer doesn’t report the year’s earnings (unknowingly or intentionally), he/she will be penalized for non-compliance. The person will have to pay the tax due with interest.
Ans: The tax department considers a category of income for ‘business and profession’. The earning from profession and business includes income earned by contractors, freelancers, businesses and self-employed people. Additionally, it covers the incomes of lawyers, doctors, chartered accountants, insurance agents and tuition teachers.
Ans: Bank details, a record of tax-saving payments, Form 16-A, Form 26-AS and Form 16 are some of the important documents required for ITR filing. Furthermore, your income source will determine the type of details you require.
Disclaimer
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
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