Section 80TTA - Deductions, Features and Eligibility

When the time comes to calculate our taxable income this tax season, the first thing we do is calculate our deductions that help us reduce our income tax outgo. For example, Section 80C of the Income Tax act allows for deduction of upto Rs. 1.5 lakh for certain investments. But in this article, we’ll be looking at an allowed deduction for income earned via interest. According to section 80TTA, a deduction of Rs. 10,000 is allowed for interest income for individuals and HUF.

If you hold a savings bank account in a post office or bank, naturally you’ll be earning interest on your savings. But like many other income sources, the income you earn in the form of interest from a savings account is also taxable and has to be included in your taxable income. However, the government wants to encourage investments via savings accounts and hence they’ve allowed for a deduction for this income. You can apply for a deduction of up to Rs. 10,000 on this interest income when filing your taxes.

Let us look at the type of interest incomes allowed under Section 80TTA

• Interest earned from savings account in a bank
• Interest earned from savings accounts in a co-operative society carrying on the business of banking.
• Interest earned from savings accounts in a post office.

• The total allowed deduction can be upto Rs. 10,000 only
• The tax deduction can be claimed on any number of savings accounts as long as the total interest income is less than Rs. 10,000.
• If interest income is less than Rs. 10,000, then the entire interest income will be deducted. If it’s more than Rs. 10,000 then only Rs. 10,000 will be deducted.

The following income sources are not eligible for the deduction under Section 80TTA:

• Interest income from fixed deposits
• Interest income from recurring deposits
• Any other type of time deposits, which are nothing but deposits for a specific period of time.

The RBI has now allowed banks to fix higher interest rates if they wish to, as opposed to earlier when RBI had fixed interest at 4%. Now banks may be offering upto 6% interest. Hence it may be likely that you’re receiving greater interest than before, which makes you eligible for deductions under this provision.

Deductions under Section 80TTA can be claimed by an Individual taxpayer or Hindu Undivided Family (HUF).

You can easily claim deduction under Section 80TTA when filing your income tax returns . Under the heading ‘Income from Other Sources’, you need to mention your interest income. Under Section 80 deductions, you can select Section 80TTA deduction to claim deductions of upto Rs. 10,000.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.