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Section 80TTA Deduction- Interest on Bank savings deposit

Section 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.

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?

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 Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.27 tips to save Income Tax in India for salaried & business person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)

Categories: Income Tax

View Comments (119)

  • I have 20 no FDs in SBI .I got total interest is around 1.2 lacks.TDS is deducted. my salary is in 30% slot. when we submitting the ITR this FD income come in 30% slot.

    • Your question is wrong you want to know that what is tax rate on FD income? the answer is that it is not specified Tax rate on FD income

      Now tax to be computed on Normal slab basis. and tax to be charged on Net Taxable Income after claiming Deduction.
      Journal Tax Slab are as follows

      0-250000 No Tax
      250001 to 500000 @ 5%
      500001 to 1000000@20%
      Above 1000000@30%

  • The above rule specifies of exemption of Rs 3500/- on interest in savings a/c of PO and then Rs 10000 for interest earned in all saving accounts which also includes PO. Let us say we have accounts in various banks & PO with data as under:
    1. Interest earned in PO Savings a/c Rs 4500/-
    2. Interest on savings accounts in all other banks Rs 9000/- (Total interest received = Rs 13500/-
    Then whether Rs 10000/- exemption will be on Rs 13500/- or on Rs 10000/- (4500-3500 + 9000)

    • first of all u understand difference between Exemption and Deduction.

      Exemption says No income and deduction says first income then deduction as specified.

      Now Your Interest Income Will be as follow:
      PO Income 4500-3500= 1000 and
      Bank Interest 9000

      Total Taxable Income as Interest = 10000
      Less Deduction as per 80TTA maximum Limit 10000

  • I have purchased a ready to move flat in a residential complex of 49 flats in sodepur,west bengal on december 2017.The promoter claims service tax@4.5%.It is legal or not?

  • Can charges debited by bank can be adjusted against bank interest received for calculating deduction under sec 80tta

  • 1. I have claimed rebate of Rs 150000 under Sec 80C and additional Rs 10000 under Sec 80TTA for AY 2017-18.

    2. IT Dept has has disallowed Rs 10000 under Sec 80 TTA and restricted the same to Rs 150000 under Sec VI A . This seems odd as they have raised a demand for Rs 3490.

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