What is Section 80TTA of Income Tax Act? Deductions Under Section 80TTA

Did you know that the interest on your savings bank is taxed or how it is taxed? Everyone has a savings bank account but not many people are aware of the fact that the interest that they receive is liable for taxation as it is considered as income from other sources. However, there is a way to avoid the taxation of interest that is received up to Rs. 10000. This is possible under the Section 80 TTA. But don't worry, we are here for your rescue. Through this blog we will learn about the taxation of your savings bank interest and the relation to deductions under Section 80 TTA.

Under Section 80 TTA of the Income Tax Act, a deduction of a maximum amount of Rs. 10000 is availed on the income that an individual earns from interests on a savings bank account, post office or a co-operative society. But, no deductions are allowed for the interests that an individual earns from fixed deposits.

Who is eligible to claim a Deduction under 80 TTA?

Any individual and an HUF are eligible to claim a deduction under  Section 80 TTA. Also, Non-Resident Indians (NRIs) are also eligible to claim a deduction under Section 80TTA. It is essential to note that NRIs are permitted to open only the following two types of account either a NRE account or a NRO account. But, only the NRO account holders can claim deductions under Section 80 TTA. This is because the NRE accounts are free from all sorts of taxes.

Which interest incomes can claim deduction under Section 80 TTA?

An individual can claim a deduction under Section 80 TTA if he has the following sources of earning interest incomes:

• From a savings bank account
• From a savings bank account that is associated with a co-operative society which performs the business of banking
• From a savings account that is associated with a post-office.

Which interest incomes can not claim a deduction under Section 80 TTA?

The deduction permitted under Section 80 TTA can not be claimed by the following interest incomes:

• The interest that is earned from Fixed deposits
• The interest that is earned by the Recurring deposits
• The interests that are earned by any other type of Time deposits

Maximum Deductions that can be claimed under Section 80 TTA

The maximum amount of deduction that can be claimed by an individual under Section 80 TTA is Rs. 10000. In case an individual has an interest income that is less than Rs. 10000, then the whole income will be the deduction. But, if your interest income is more than Rs. 10000, then the deduction will only be limited to Rs. 10000 and the rest of the income is liable for taxation.

How can deductions under Section 80 TTA be claimed?

If an individual wants to claim his deductions under Section 80 TTA, then, firstly he needs to calculate his total interest income under “Income from other sources.” Then, he should calculate his gross total income for the particular financial year and then show a deduction under Section 80 TTA. This can be easily understood with the help of an instance. Suppose Ram earns a salaried income of Rs. 500000 and the interest on savings account is Rs. 5000 and the interest on fixed deposits is Rs. 15000 in a financial year. And, he is also eligible to claim a deduction of Rs. 10000 under the Section 80 C. Then, according to the old tax regime, the taxable income will be calculated as follows: