Deduction in respect of interest on deposits in savings account.
Section 80TTA of Income Tax Act 1961 is introduced to provide deduction to an individual or a Hindu undivided family in respect of interest received on deposits in a savings account held with banks, cooperative banks and post office. Deduction under section 80TTA of Income Tax Act 1961 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.
The deduction under section 80TTA of Income Tax Act 1961 is restricted to Rs 10,000 or actual interest whichever is lower. If interest earned is more than Rs.10000 then balance amount will be taxable as Income from other sources and taxed as per slab rate applicable.
Non applicability of section 80TTA of Income Tax Act 1961
- Deduction under section 80TTA of Income Tax Act 1961 is not applicable to the interest received on fixed deposit/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Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.
- Deduction u/s 80TTA of Income Tax Act 1961 is not available to the senior citizen who is eligible to claim deduction u/s 80TTB of Income Tax Act 1961. Deduction under section 80TTB of Income Tax Act 1961 is available to resident senior citizen (i.e. 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 under section 80TTB of Income Tax Act 1961 is available from A.Y2019-20
- Deduction under section 80TTA of Income Tax Act 1961 is not available to a firm, an Association of Persons, a Body of Individuals, LLP or Company.
Saving accounts with any of following entities will qualify for claiming deduction under section 80TTA of Income Tax Act 1961:
- 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);
- 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
- Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898),
Note:
The interest earned on savings account is exempted from TDS provisions under Section 194A of Income Tax Act 1961 i.e. No TDS is deducted on interest from saving account.
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