CA Sandeep Kanoi

CA Sandeep KanoiSection 80TTA is  introduced with effect from April 01, 2013 and will apply from AY 2013-14 and onwards. Section is introduced to provide deduction to an individual or a Hindu undivided family in respect of interest received on deposits (not being time deposits) in a savings account held with banks, cooperative banks and post office. The deduction is restricted to Rs 10,000 or actual interest whichever is lower.

It is also provided that where the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body.

80TTA

Analysis of Section 80TTA

Who can claim deduction u/s 80TTA?

Deduction u/s 80TTA is applicable to individual taxpayers and HUF only. This benefit is not available to a firm, an Association of Persons, a Body of Individuals, LLP or Company Assessee.

Eligible savings account for claiming deduction

Saving accounts with any of following entities will qualify:

  •  Bank or banking company;
  •  Co-operative society engaged in carrying on the banking business and as specified.
  •  Post office savings account.

Section 80TTA deduction not available on FD Interest

This deduction is NOT applicable to the interest you received on your FDs/time deposit or term deposit. Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.

Maximum Deduction

  • The deduction allowed is  interest received on eligible saving accounts or Rs. 10,000 whichever is lower.
  • If interest earned is more than 10,000 then balance amount will be taxable as before i.e considered as Income from Sources and taxed as per your slab rate.
  • The deduction is in addition to deduction of Rs. 1.50 Lakh of section 80C of the Income Tax Act-1961.

Applicable from A.Y. 2013-14 Onwards

The section is applicable from April 01, 2012 and will apply from AY 2013-14 and onwards.

TDS Provisions not applicable on Saving Bank Interest

The interest earned on savings account is exempted from TDS under Section 194A of Income Tax Act i.e No TDS is deducted on interest from saving account.

Post office savings bank interest exemption under section 10(15)(i)
Post office savings bank interest is exempt up to Rs. 3500 (in an individual account) and Rs. 7000 (in a joint account) under section 10(15)(i) by virtue of Notification No. 32/2011, dated June 3rd 2011 read with Notification No. GSR 607, dated June 9, 1989. The cumulative impact of section 10(15)(i) and 80TTA as follows:
Up to the Asessment year 2011-12 Rs.For the Assessment year 2012-13 Rs.From the Assessment Year 2013-14 Rs.
Interest on Post Office saving Bank (exemption under section 10(15)(i)Full Exemption, nothing is taxableExemption up to Rs. 3500 in a single account and Rs. 7000 in a joint accountExemption up to Rs. 3500 in a single account and Rs. 7000 in a joint account
Interest on savings account with a bank, co-operative bank and Post office (deduction under section 80TTA)No deductionNo deductionDeduction up to Rs. 10000

The insertion of this new section has been a relief to individual or Hindu undivided family as interest on saving bank account was always a taxable income with no corresponding tax benefits. It would also help in avoiding inclusion of small savings bank interest in the taxable income, which was required to be done after deletion of section 80L.

Extract of Section 80TTA

Deduction in respect of interest on deposits in savings account.

80TTA. (1) Where the gross total income of an assessee, being an individual or a Hindu undivided family, includes any income by way of interest on deposits (not being time deposits) in a savings account with—

(a) a banking company to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act);

(b) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or

(c) a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee a deduction as specified hereunder, namely:—

(i) in a case where the amount of such income does not exceed in the aggregate ten thousand rupees, the whole of such amount; and

(ii) in any other case, ten thousand rupees.

(2) Where the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body.

Explanation.—For the purposes of this section, “time deposits” means the deposits repayable on expiry of fixed periods.’.

(Updated on 26.01.2015)

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  • abhinav

    Is 80(TTA) is part of 150000 under 80-C or it is in addition to this? if it is in addition then why is it not allowed?

  • bineet mehra

    Hello

    In form 26 for interest on FD/Savings account, section 194A, Total amount shown under “total amountpaid/credited” comprises of interest from both FD+savings interest ? or is it from FD only ?

    Thanks

  • rahul

    no

  • rahul

    NO

  • Vipan

    I have received more than 10,000 as interest in my saving accounts (collectively). Do I need to pay income tax on the interest….complete interest or partial interest….?
    If so, how to calculate & pay the tax..?

    • Venkataraman V

      Hi Vipan you will have to pay for only the amount which exceeds 10000.

  • Ramkishore Agrawal

    i have three saving bank accounts in different banks and FDs in a bank. The total interest earned in AY16-17 is Rs. 15000.00 and in FD Rs. 180000/- I am in Tax bracket of 30%. Please advice me what is the amount of TAX to be paid for income for Bank interest.

    • Venkataraman V

      Hi Ramkishore, Your Savings Interest is 15000 which you have to show as Other Income while filling Returns. And in Exemptions under section 80TTA please enter 10000. So technically now your extra income is 5000. 180000 which you received as interest for this year form FD though is completely taxable. So your total income from other sources is 185000, if you had given 15G/15H Bank would not had deducted anything. If Bank had already deducted which they would had done assuming you are in 20% slab should already show up in ‘Taxes Paid’ section if it is not present you have to make manual entry.

  • suresh shah

    I have Saving Bank Interest of Rs.7,000/- and there is Negative Interest Income in respect of Interest paid which i had claim under section 57 then total of other income will be negative then my question is can i claim deduction of Rs.7,000/- under section 80TTA with reason…..????

  • ravi nambiar

    Sir I have savings account in SBI. SBI auto sweep some amount and pay interest on it and has deducted TDS on it. May you please suggest me whether this interest will be treated as interest on savings account or FD as per Income Tax Rule. Whether I can deducted Rs 10000/- on the above interest as per savings interest rule.

  • Venkataraman V

    Hi Mukesh, this looks like a glitch or someone has done a mistake. 10000 on 80TTA is over and above 1.5 Lac under 80C.

  • Rasika Sinha

    I just came to know about this section 80 TTA, and have never availed benefit from it. I have already filed my ITR for this year wherein i showed my whole salary account’s interest value under income from other sources, hence my tax got increased. Is there any way that i can show 10000 under 80 TTA section to reduce my tax now ?
    Thanks in advance!

    • Sanjay Patole

      You may submit the revised ITR and claim refund.

  • satya

    Sir,

    We are a organization, we have closed on Fixed deposit before maturity of the FD and we have received some amount excess than Actual FD. Now i want to know that, how can account the excess part(Interest on FD) and which type of Income it is?

    regards,
    satya

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