Section 80TTA offers a deduction of INR 10,000 on income earned through interest. Individual or HUF can claim this deduction under Section 80TTA of the Income Tax Act.
The Income Tax Act in India provides with various deductions that can be claimed by an assessee in order to reduce his or her income tax liability. Such deductions could be in the form of income-based deduction, profit-linked deductions, investment based deductions or payment based deductions.
Chapter VI A of the Income Tax Act consists the above deduction in brief. One of the deductions under this chapter is Section 80TTA. Deduction under Section 80TTA of Chapter VI A can be claimed against interest income earned from savings bank account, thereby it is an income-based deduction.
Every year as the Budget is proposed, the lawmakers ensure that the changing trends and increased income of the Indian citizens are factored in the Proposed Budget. However, no changes have been made in Section 80TTA under Union Budget 2018.
We are all aware of the fact that the current government under its regime has encouraged Indian citizens to open savings bank account with least deposit amount. But do we all know that the interest we receive on these saving bank accounts is actually taxable?
However, the government has provided us with some tax benefits on the same.
Being an “aam aadmi”, the common man of the nation; the most basic thought of the individual is to save taxes. Here Sec 80TTA plays a crucial role in easing the tax burden of the small earnings income group.
Let us have a bird’s eye view of the provisions of the above-mentioned Section of the Income Tax Act, 1961.
In the Income Tax Act, Section 80TTA is titled as ‘Deduction in respect of interest on deposits in savings account’. Section 80TTA is applicable only to Individuals & HUF (The Hindu Undivided Family). No differentiation has been made in respect of senior citizens and individuals under the age of 60. It is important to note that deduction shall not be availed in case of Interest from Fixed Deposits. It is further pertinent to note that where the Savings Bank Account is held in the name of a Partnership Firm, Association of Persons or Body of Individuals, the partner of the Firm or member of the Association of Persons or Body of Individuals, it shall not be eligible to claim any deduction in respect of such income earned.
The savings account can be held in any of the following institutions:
The amount to be claimed as a deduction shall the least of the following:
Example: If an individual earns interest of INR 12,000/- from his savings bank account then he or she shall be eligible for a deduction of INR 10,000/- against his interest income and therefore the taxable income shall be INR 2,000/-. This INR 2,000/- shall be included in his total income for income tax calculation. Deduction under this section can be claimed on any number of savings bank accounts as long as the income earned from such accounts does not exceed INR 10,000/-
Also, no difference has been made between a Non-Resident or resident Individual or Hindu Undivided Family to claim deduction under Section 80TTA. That is, any individual be a non-resident or a resident can claim the above-mentioned deduction.
Deduction under section 80TTA shall not be allowed for the interest earned on fixed deposit. Hence it is taxable as per the normal slab rates of the individual assessee. Moreover, TDS provisions shall also be applicable if interest earned from fixed deposits exceeds INR 10,000/-. As deduction for income earned on fixed deposit is not allowed in the same way, deduction under this section cannot be claimed against interest earned from recurring deposits.
The only two classes of taxpayer that are allowed to claim deduction are Individuals and Hindu Undivided Family. Any other person such as Firm, Artificial Juridical Person, Association of Person, Body of Individuals, Company whether domestic or foreign is not allowed to claim a deduction as stated in this section.
Can deduction under section 80TTA be claimed on bank fixed deposits & recurring deposits?
No. Deduction under section 80TTA can be claimed only on the savings bank account.
Are savings bank accounts liable to TDS provision?
Immunity is provided to Savings bank accounts from TDS provisions of section 194A. They do not attract any TDS provisions except if it is a Non-Resident Ordinary (NRO) savings account; it is liable for a tax deduction as per the applicable rate (i.e. 30.9%)
Can deduction be claimed on multiple savings accounts, if interest is earned from them?
Yes, an assessee can claim a maximum of INR. 10,000 on the total amount of interest earned from all the savings accounts.
For example: Suppose Mr. Soured has 5 savings bank accounts. The interest he earned from each account is INR. 6,000, INR. 8,000, INR. 12,000, INR. 5,000 & INR. 2,000 respectively. Mr. Sourav earns INR 33,000/- as his interest income in totality. Against such an income, a deduction of INR 10,000/- shall be claimed. This deduction is a single deduction against all such amounts earned. In other words, deduction of INR 10,000/- shall not be available for each saving bank account.
Can a Non Resident claim deduction under this section?
Yes, a Non-resident Individual and Hindu Undivided Family can claim deduction under this section.
What is the maximum amount that can be claimed as a deduction under this section?
INR 10,000/- is the maximum amount that can be claimed under this section.
Are NRO accounts eligible for deduction under this section?
Normal saving accounts of Non-Resident Indians (NRIs) is designated to Non-Resident Ordinary (NRO) savings account and hence, the deduction u/s 80TTA shall be eligible for NRO savings accounts too.
Are NRE accounts eligible for deduction under this section?
No. Deduction cannot be claimed in respect of interest earned from NRE account u/s 80TTA as interest earned from NRE accounts is exempt from tax.
Are individuals above the age of 60 eligible for this deduction?
Yes, individuals above the age of 60 are also eligible for the same as differentiation on the basis of age groups is not considered.
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