Section 80TTA: Deduction for Interest Earned on Savings Account

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Hiral Vakil

Chapter VI-A
HUF
IFOS
Section 80TTA

Every quarter bank credits interest to your savings account. This savings interest is considered as your taxable income under the head “Income From Other Source.” Section 80TTA of the Income Tax Act was introduced in order to allow a deduction of up to INR 10,000 on such interest.

Deduction under section 80EEA is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime
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Deduction under section 80EEA is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime

Who can Claim Savings Interest Deduction Under Section 80TTA?

80TTA deduction was introduced to encourage taxpayers to generate more savings. It is available to individuals and HUFs other than senior citizens. Section 80TTB is applicable in the case of a senior citizen.

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What is the Deduction Limit Under Section 80TTA?

The maximum deduction allowed under section 80TTA of Income Tax Act is INR 10,000 for FY 2018-19 (AY 2019-20). If interest income from all the saving accounts is less then INR 10,000 then the entire amount is deductible. If total interest from saving accounts exceeds INR 10,000 then the maximum of INR 10,000 will be deductible and the remaining amount will be taxable.

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Which Interests are Eligible for Deduction Under Section 80TTA?

Following interests are eligible for a savings interest deduction under this section:

Following interests are not eligible for deduction under this section:

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How to Claim Savings Interest Deduction Under Section 80TTA?

You can claim a deduction by filing your ITR. First, you need to add total saving interest as income under the head “Income From Other Source”, and then enter the same amount as a deduction under Chapter VI-A.

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How is the Deduction Calculated Under Section 80TTA?

In-order to understand the calculations better, let us take an example;

Ms Desai is a resident individual. And has earned the following income during the FY 2019-20:

Ms Desai will be able to claim deduction under section 80TTA only on the interest earned from Union Bank Savings Account and the eligible deduction that is available u/s 80TTA that she can claim is INR 10,000.

Comparison between Section 80TTB and 80TTA

Parameters Section 80TTB Section 80TTA
Eligibility Only senior citizens Individuals and HUFs can also claim deductions
Exemption Limit Maximum INR 50,000 a year Maximum INR 10,000 a year
Specified Income Deduction on interest from all kind of deposits Deduction on interest from the savings account only
Applicability for NRI’s NRI’s are not eligible to claim deductions under 80TTB NRI and NRO’s who have a savings account can claim deduction u/s 80TTA

ITR Form Applicable for Section 80TTA

The taxpayer can claim deductions under this section while filing ITR if all the above-mentioned conditions are full-filled. Individuals/HUFs can claim 80TTA in any of the ITR forms, i.e, ITR 1ITR 2ITR 3, and ITR 4 depending upon their income sources. The due date for filing ITR is 31st July of the next FY if the tax audit is not applicable.

For FY 2019-20, due to COVID-19 the due date for filing ITR has been extended to 10th January 2021 for all taxpayer.
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For FY 2019-20, due to COVID-19 the due date for filing ITR has been extended to 10th January 2021 for all taxpayer.

Supporting Documents

In the case of Section 80TTA, along with the common documents such as Form 16, you only need to show present your bank statements showing your transactions of savings account for calculating the interest earned and the deductions.

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FAQs

Is TDS applicable on saving bank account interest?

No. TDS is not applicable on saving bank account interest. However, if it is NRO account then TDS is applicable.

Can an NRI claim a deduction u/s 80TTA?

Yes, an NRI can claim a deduction on saving bank account interest under section 80TTA.

What documents are required to claim deduction u/s 80TTA?

The bank account statement is required to calculate and claim deduction under section 80TTA.

For how many bank accounts can I claim a deduction u/s 80TTA?

There is no limit on the number of accounts or the interest that is earned via these accounts. One has to note that the maximum deduction that is available u/s 80TTA is INR 10,000 irrespective of the number of accounts.

Can a senior citizen claim deduction u/s 80TTA?

No, a senior citizen can claim deduction under section 80TTB and not section 80TTA

Is the deduction that is available under section 80TTA over and above the deduction available under section 80C?

Yes, the deduction of INR 10,000 under section 80TTA is available over and above the deduction of INR 1,50,000 availabe under section 80C.

  • Peep says:

    Hi, can I avail this 80TTA deduction of 10,000 even if I use the savings account interest to set off my F&O trading business loss?

    For example, suppose my F&O trading loss is 2 lakh and I have savings account bank interest of 20,000. In this case, I guess I can carry forward loss of only 2 lakh – 20,000 = 1.8 lakh. Right? So, in this case, can I claim a deduction of 10,000 under 80TTA?

    I guess the answer should be yes, because otherwise its a double whammy for me – reducing my carry forward loss amount and not getting the 10k exemption the govt. is already giving to every taxpayer.

    Can you please shed some light on this?

    Thanks a lot.

    • Aakash Lalchandani says:

      Hey Peep,

      As per the Income Tax Act, losses are set off against incomes first. And then income specific Chapter VI-A deductions are given if any income is available after the set-off of loss.
      Hence, in your case, you can not claim deduction u/s 80TTA on savings interest since after set-off of loss no income is available.
      Note: Even if someone files ITR and claims 80TTA in the above case, the taxman invariably rejects the 80TTA claims and recalculates the tax liability of the taxpayer.

      Hope this helps 🙂

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