This post deals with the argument of interest deduction under Section 8oTTA. But before that, let’s know what is Section 80TTA?
This section offers a deduction of ₹10,000 on interest income. This deduction is applicable to both the individual and the HUF.
This deduction is provided on interest received from –
- Bank deposit account.
- Savings account with a mutual corporation involved in the banking business.
- A savings account with a postal service.
This deduction is NOT permitted for interest gained on time deposits. Term deposits indicate deposits which are repayable at the end of fixed terms. It is not permitted to do so.
- The interest of FD.
- Interest in recurring deposits.
- Any other time deposits.
Highest possible deduction – The maximum deduction is restricted to ₹10,000. If your income generated from interest is below ₹10,000, the full interest income would be your deduction. If your income generated from interest is much more than ₹10,000, your deduction is restricted to ₹10,000. (You must take into account your overall interest income from all banks in which you have accounts).
How to claim the deduction – Initially, calculate your overall interest income underneath the heading ‘Income from Other Sources’ in your Return. The deduction can be seen in section 80 of the Deductions u/s 80TTA.
Deduction under Section 80TTA
The terms & conditions relevant to the tax deductions referred to in Section 80TTA as set out below.
- Up to ₹10,000 is deductible each year on interest received in savings accounts.
- Deductions could be asserted by individuals and by the Hindu Undivided Family (HUFs).
- When a person seems to have more than one savings account with different institutions, the cumulative interest revenue from both accounts must be deductible under ₹10,000.
- In the event that the total interest income in the above-mentioned case reaches the cap of ₹10,000, the tax deduction will be asserted for ₹10,000 and the residual amount must be charged.
Exceptions under Section 80TTA
- If the gross total income of an organization or individual is lower than the minimum taxable income slab, a tax deduction under Section 80TTA may not be sought.
- Senior citizens cannot benefit from the tax exemption provided for in Section 80TTA.
- The 80TTA tax deductible does not extend on the foregoing.
– Term Deposits
– Fixed Deposits
– Recurring Deposits
– Non-Banking Finance Companies Deposits
- NRIs with such an NRE account cannot assert a tax exemption u/s 80TTA as NRE accounts are excluded from taxes.