Section 80TTA is introduced with effect from April 01, 2013 and will apply from AY 2013-14 and onwards. Section 80TTA 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 section 80TTA 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. Section 80TTB: Rs. 50000 deduction on interest income to senior citizen
Analysis of Section 80TTA
Who can claim deduction under section 80TTA?
- Who can claim deduction under section 80TTA?
- Eligible savings account for claiming deduction under section 80TTA
- Section 80TTA deduction not available on FD Interest
- Maximum Deduction under section 80TTA
- TDS Provisions not applicable on Saving Bank Interest
- Post office savings bank interest exemption under section 10(15)(i)
- Extract of Section 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 under section 80TTA
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 Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.27 tips to save Income Tax in India for salaried & business person
Maximum Deduction under section 80TTA
- 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 taxable||Exemption up to Rs. 3500 in a single account and Rs. 7000 in a joint account||Exemption 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 deduction||No deduction||Deduction 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.
However, Deduction u/s 80TTA is not available to the senior citizen who is eligible to claim deduction u/s 80TTB. Deduction u/s 80TTB is available to resident senior citizen( i,.e atleast 60 years of age at any time during the previous year.). This deduction is available in respect of interest on deposits with a bank/cooperative bank/post office (interest includes interest on fixed deposit/savings account/any other interest). The quantum of deduction shall be the amount of interest or Rs 50,000 whichever is less.Deduction u/s 80TTB is available wef A.y 2019-20
Extract of Section 80TTA
Deduction in respect of interest on deposits in savings account.
80TTA. (1) Where the gross total income of an assessee [(other than the assessee referred to in section 80TTB)], 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 (10 of 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 (6 of 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.
(Republished with Amendments)