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Section 80TTA – Tax deduction for Interest on Savings Bank Account upto Rs 10000

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As per Section 80TTA of Income Tax Act 1961, Individuals & HUF can claim deduction upto Rs 10000 for Interest earned on their Savings Bank Accounts.

Summary of Section 80TTA of Income tax Act 1961

Through Finance Act, 2012, section 80TTA under Income Tax Act, 1961 is introduced to give additional income tax deduction upto Rs 10000 for Interest on Saving Account with Bank, Co-operative Bank or Post Office.

The section is applicable with effect from April 01, 2013 and will apply from AY 2013-14 and onwards.

Only Individual and HUF are eligible to claim deduction under this section.  As, nowhere in the section mentioned that this benefit is available for Residents Only.  So, it is assumed that even NRI can claim this benefit. (on their NRO Interest)

Points to Note

1.  Interest earned from Savings Bank, Fixed Deposit, Sweep-in FD is fully TAXABLE.  You need to show such Income under “Income from other sources”

Once you shown this income, you can claim deduction upto Rs 10000 u/s 80TTA for Interest on Saving Bank Account.  Note that you CANNOT claim deduction for Interest on FD or sweepin FD.

2. This deduction is not applicable for FD Interest or Interest received in Sweepin FD accounts.

3. You can claim maximum of Rs 10000 under this section. So if Interest from your Savings bank is SR 15000, you can only claim deduction for Rs 10000.

4. Some Banks are offering 6-7% in their Savings Account. You can keep approx Rs 1.40 lakhs in such savings account and earn a tax free income of Rs 10000

5. TDS is not deducted on Interest from Savings Bank. However, TDS @10% is applicable when Interest on FD exceeds Rs 10000 in a year.

6. If you have Salary Income & Interest income (even more than Rs 5000), you may file ITR 1  , as this Rs 10000 is deduction & not EXEMPT Income.  You need to file ITR 2, if your exempt income is more than Rs 5000.

If you have any tax related queries, please enter the comments below or ask in our forum

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