You earn interest in your bank’s Savings Account every quarter, which is taxable income. Yes, this interest income needs to be added to “Income from Other Sources” head while filing ITR (Income Tax Return) to pay taxes accordingly. But, Section 80TTA helps you to claim this interest amount to some extent. You can claim up to Rs. 10,000 in a financial year with old tax regime for savings account interest amount under Section 80TTA. For senior citizens, this limit is Rs. 50,000 under Section 80TTB.
- What is Section 80TTA?
- Deductions allowed in Section 80TTA
- What Deductions are not allowed in Section 80TTA?
- What is the limit of Section 80TTA?
- Who can claim Section 80TTA Deduction?
- How to calculate Section 80TTA Deduction Amount?
- Frequently Asked Questions
What is Section 80TTA?
Section 80TTA of Income Tax Act, 1961 allows us to claim deduction related to Savings Account Interest Amount that we earn every quarter. Since this is one of the component of “Income from other sources” while filing ITR (Income Tax Return), we need to pay tax on this income.
But we also get the relief while paying income tax on this interest amount – we can claim maximum Rs. 10,000 in a financial year with old tax regime, if your age is below 60 years.
For Senior Citizens, we have separate deduction – Section 80TTB that allows maximum of Rs. 50,000 to be claimed in a financial year.
Deductions allowed in Section 80TTA
There are certain deductions allowed with Section 80TTA listed below:
- Deduction of Savings Account Interest earned in Bank
- Deduction of Savings Account Interest earned in co operative society
- Also, post office savings account interest can be claimed with 80TTA
Note that if you have multiple accounts in above mentioned sources or in bank, the interest earned from all such accounts need to be added and considered for deduction purpose
ALSO READ: Section 80C Deductions List
What Deductions are not allowed in Section 80TTA?
Even though you are allowed to claim deduction with Savings Account Interest amount, there are certain interest incomes that cannot be claimed under this section:
- Interest earned from Fixed Deposits cannot be claimed in this Section
- Recurring Deposits interest is also not allowed to be claimed
- Any other time deposit interest amount is also not allowed to be claimed under 80TTA
What is the limit of Section 80TTA?
You can claim maximum of Rs. 10,000 as deduction of Savings Account Interest amount under Section 80TTA.
It is important to note that this deduction is only available with old tax regime. New Tax regime under Section 115BAC does not allow you to claim this deduction as it has reduced tax slab rates.
Senior Citizens can claim up to Rs. 50,000 of interest income with Section 80TTB.
Use Savings Account Interest Calculator
Who can claim Section 80TTA Deduction?
Any individual and HUF (Hindu Undivided Family) can claim deduction under Section 80TTA, if they have Savings Account can claim deduction under Section 80TTA with old tax regime.
Even NRI can claim this deduction if they have NRO Savings Account. If NRI have NRE account, than interest earned is tax free only in NRE account for which they cannot claim this deduction.
How to calculate Section 80TTA Deduction Amount?
- If you have only 1 savings account, add the interest amount earned in entire financial year (April to march)
- Include this total interest amount under Income from other sources
- Mention this interest amount under Section 80TTA – capped at Rs. 10,000 with old tax regime
- If you have multiple savings account than interest from all savings account will be considered for deduction purpose
Let’s say you have Rs. 2,00,000 in your savings account and you have earned Rs. 15,000 as interest income in financial year.
You need to include Rs. 15,000 under “Income from other sources”, and claim maximum Rs. 10,000 as deduction under Section 80TTA.
Note that Fixed deposit and recurring deposit interest amounts will not be considered while claiming this deduction, but will be added in “Income from other Sources”, since they are taxable in hand.
Savings Account Interest Calculation Video
So Section 80TTA helps us to claim maximum of Rs. 10,000 as deduction for savings account interest income in a financial year with old tax regime. If you belong to 30% tax bracket than you can save approximately Rs. 3000 (excluding cess) on this interest income just by claiming it under 80TTA.
For senior citizens, this limit is Rs. 50,000 with Section 80TTB with old tax regime.
It is important to note that if you opt for new tax regime, you cannot claim this deduction as new tax regime has reduced tax slab rates.
Some more Reading:
Frequently Asked Questions
Can NRI claim 80TTA Deduction?
Yes NRI can claim 80TTA deduction if they have NRO account. NRI with NRE savings account cannot claim this deduction since their interest income is tax free.
How to Claim Deduction under Section 80TTA?
Interest income from all savings accounts need to be added and included in “Income from other sources”. Than maximum of Rs. 10,000 can be claimed under 80TTA while filing Income Tax Return (ITR).
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