Section 80TTA of the Income Tax Act, 1961 generally allows a deduction in respect of income from interest on deposits held in saving accounts with a Bank or a Co-operative society. However, the deduction is available only to an individual or a Hindu Undivided Family. Trusts and Companies are not eligible to claim this deduction under section 80TTA. It should be noted that the deduction is available only if the annual interest income from savings account does not exceed an amount of Rs 10,000. Moreover, the deduction is available to individuals and Hindu Undivided Family (HUF) only. It should be noted that for the purpose of section 80TTA, any deposits held by an HUF would be considered as one deposit, and the interest income would be calculated accordingly.
The deduction allowable under section 80TTA is limited to Rs 10,000. This means that if the interest income from savings accounts exceeds the limit of Rs 10,000, the excess amount is not eligible for deduction u/s 80TTA. Thus, no further reduction of taxable income is permissible on such excess interest income. The amount of deduction under Section 80TTA is equal to the actual interest amount earned on the savings account up to a maximum of Rs 10,000. In other words, the taxpayer can claim a deduction of up to Rs 10,000 on the total interest income from all the savings accounts.
Section 80TTA is only applicable to savings accounts held in Banks or Co-operative Societies. Other types of deposits such as fixed deposits, recurring deposits and term deposits are not eligible for deduction under section 80TTA. Similarly, deposits made in Post Office Savings accounts are also not eligible for deduction.
Moreover, only an individual or HUF can avail the benefit of section 80TTA. It should be noted that joint holders are eligible to claim deduction u/s 80TTA, but only to the extent of the share of the income that pertains to the individual or HUF.
In addition to this, the interest income should be credited in the taxpayer’s own name. In case of an HUF, the interest income should be credited to HUF itself. Moreover, if the taxpayer has multiple accounts, the interest income from each account should be credited in the taxpayer’s own name or HUF, as the case may be. Lastly, the deduction under section 80TTA will be available only if the interest income does not exceed an amount of Rs 10,000.
Section 80TTA of the Income Tax Act 1961 allows an Individual or an HUF to save tax by claiming a deduction on the interest income from savings account held in any Bank and/or Co-operative Society. The deduction is limited to a maximum of Rs 10,000 in a year and the excess amount is not eligible for deduction. Moreover, the interest income should be credited in the taxpayer’s own name or HUF, and any deposits held by an HUF would be considered as one deposit. Thus, the deduction under Section 80TTA provides an opportunity to individuals and HUFs to save tax.
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