What is Section 80TTA of Income Tax Act?

Section 80TTA of the IT Act provides tax deduction on income coming from the interest of personal savings. To help you claim deductions under the provision of Section 80TTA of Income Tax Act, we will discuss in detail its eligibility, limit, inclusions and exclusions.

What Is Section 80TTA Deduction?

Section 80TTA deduction was laid in 1961, and it provides a deduction of up to ₹ 10,000. This act is applicable to individual savings in banks and groups of individual savings under HUF (Hindu Undivided Family). However, it is ineffective on income coming as interest from fixed deposits or time deposits.

Interest Income Eligible for Deductions Under Section 80TTA

Income coming from savings with the following institutions is applicable for tax deduction under section 80TTA of income tax act -

Bank
Cooperative society executing the banking business
Post office

What Is the Maximum Deduction Acceptable Under Section 80TTA?

The maximum 80TTA deduction applicability is ₹ 10,000 p.a., i.e., any excess amount coming as earning from savings will be subject to taxation. Here the calculation is done on the cumulative interest amount coming from one or many savings accounts with different banks.

The interest income is counted as income from other sources. Taxpayers can claim a maximum deduction of ₹10,000 from their gross total income and arrive at the taxable income. The applicable tax percentage will then be calculated on the taxable income of the taxpayers.

What Type of Interest Is Not Allowed for Deduction Under Section 80TTA?

Interests from the following sources are not allowed under this section -

Fixed deposit.
Recurring account.
Time deposit.
Savings with non-banking finance companies.

Companies, LLP, partnership firms are not allowed to get benefits on interest under section 80TTA.

Who Is Eligible to Claim Tax Deductions Under Section 80TTA?

The most important factors for Section 80TTA eligibility are -

Taxpayer residing in India
Group of individuals under HUF
NRI with an NRO savings account
Age below 60 years (there is no applicability of section 80TTA for senior citizens, they can apply for section 80TTB)

Deduction under section 80TTA is applicable for individuals whose total income is above the taxable slab. For example, if your income is ₹ 2,00,000 and specific earning from interest is ₹ 50,000 in a fiscal year. Then you are not eligible to apply for section 80TTA as total income is below the taxable slab.

How Much Tax Will It Save?

This is a viable question on the internet, what is 80TTA in income tax and how much you can save on it? The maximum tax amount that can be saved via 80TTA depends on the tax slab that a taxpayer falls under.

In case your total income falls under 20% tax slab, the maximum tax amount that can be saved is ₹2,000 against the deduction of ₹10,000 under 80TTA. Likewise, if you qualify under 30% tax slab, the maximum amount you can save will be ₹3,000.

Section 80TTA of Income Tax Act aims to facilitate better financial management. Thus, it helps people avoid paying tax on income generated through small savings and big investors by not bothering them to include negligible interest amounts in the tax return filing process.

Frequently Asked Questions

✓ How to claim deductions under section 80TTA?

To claim deduction under section 80TTA, you have to show the income from savings interest as income from other sources in your ITR file. You have to mention this in both heads under other sources and deduction heads.

✓ How is Section 80TTA different from 80TTB?

Both these acts are under section 80 of Income Tax. Section 80TTA is for a tax deduction on income from savings of individuals and HUFS below 60 years, whereas; 80TTB is applicable for the tax deduction of senior citizens.

Moreover, 80TTA excludes savings from the fixed deposit, whereas 80TTB considers savings from all sources.