Income Tax on Cashback

Cashback is a reward for a customer on the purchase of goods or services. The calculation is a percentage of the purchase amount. Cashback is different from Discount. While the discount is a deduction from the purchase amount, cashback is a reward as a percentage of the purchase amount which the customer can utilize on the next transaction. Under this article, you can read about Income Tax on Cashback in different situations.

Types of Cashback

  • Instant Cashback

Instant cashback is a cashback offered immediately once the customer pays for the transaction. For example, if you book a movie ticket on an online app under an offer of 10% instant cashback. If the movie ticket is for INR 500, You are liable to pay INR 450 only (500 – 10% cashback).

  • Deferred Cashback

Deferred cashback is a cashback that the customer can utilize on the next transaction. For example, if you book a movie ticket on an online app under the referral offer and you refer the app to a friend, you will receive a cashback. You can utilize this cashback on your next transaction.

Income Tax on Cashback – Business Expense

Cashback is a reward or benefit that a customer receives on the purchase of goods or services. It is also a discount since it reduces the cash outgo on the same or next purchase of the customer. Thus, it is considered as an income and is taxable. Let us understand when such cashback is treated as an income and the taxes on cashback.

Revenue Expense for Business

If a business purchases goods or services (not a capital good) and earns a cashback, it can claim the purchase amount reduced by cashback as a revenue expense. Alternatively, the business can claim the purchase amount as an expense and report cashback as an income.

Example

ABC Enterprises purchased online stationery worth INR 5,000 and received an instant cashback of INR 1,000. They can claim net amount of INR 4,000 as an expense. Alternatively, they can book INR 5,000 as an expense and INR 1,000 as an income.

Capital Expense for Business

If a business purchases goods or services (capital good) and earns a cashback, it can treat the purchase amount reduced by cashback as an asset (capital expense) and claim depreciation on the same. Alternatively, the business can claim the entire purchase amount as an asset, report cashback as an income, and pay tax on it.

Example

ABC Enterprises purchased a laptop worth INR 50,000 and received an instant cashback of INR 5,000. They can claim the net amount of INR 45,000 as an asset and claim depreciation expense on the same. Alternatively, they can report INR 50,000 as an asset, report INR 5,000 as an income and pay tax on it.

Income Tax on Cashback – Personal Expense

If an individual purchases goods or services for personal use and earns a cashback, it is as a gift as per Section 56(2) of the Income Tax Act. As per Section 56(2), if a taxpayer receives any sum of money without any consideration that exceeds INR 50,000, it is taxable at slab rates.

Therefore, if the aggregate cashback during a financial year is up to INR 50,000, it is an Exempt Income. The taxpayer should report such cashback as an Exempt Income in the ITR filed on the Income Tax Website.

If the aggregate cashback during a financial year exceeds INR 50,000, it is a taxable income under the head Income From Other Sources and taxable at slab rates. The taxpayer should report such cashback as IFOS income in the ITR.

If the taxpayer has received aggregate cashback and has other gifts during the financial year, the aggregate amount of gifts and cashback exceed INR 50,000, cashback would be taxable.

Example

Mr Mehta recieved a gift from his distant relative on his birthday worth INR 35,000 and over the financial year he had an aggregrate cashback of INR 18,000. The total being INR 53,000 which is above the limit of INR 50,000, the enire amount will be taxable in the hands on Mr Mehta under income from other sources.

FAQs

How is Cashback different from Discount?

Discount is a deduction from the purchase amount and the customer pays the net amount only. Under cashback, the customer pays the full amount and then receives a cashback. Discount is offered instantly and cashback may be offered instantly or after a specified time period.

Should I report Cashback in my Income Tax Return?

Yes. It is advisable to report cashback income in the Income Tax Return. If the aggregate cashback during the financial year exceeds INR 50,000, taxpayer should report it as Income From Other Sources (IFOS) and pay tax at slab rates. However, if the aggregate cashback is up to INR 50,000, taxpayer should report it as Exempt Income in the ITR.

Is Cashback received on Credit Card / Debit Card Offers taxable?

Taxation of cashback on credit card/debit card offers is similar to any other cashback. If the taxpayer receives cashback on a personal expense, it is taxable if aggregate cashback exceeds INR 50,000 during the financial year. If the taxpayer receives cashback on a business expense, he/she should claim an expense for the net amount (purchase – cashback).

Income Tax on winning lottery, crossword puzzles, game shows, horse race

Income from winning awards and prizes such as lottery, puzzles, online gaming or TV game shows, card games etc are considered as income from other sources under the head IFOS of Income Tax. The winner may receive such income in cash or kind. The tax rate is flat 30% as per Section 115BB of the Income Tax Act.

  • Winning from Lottery
  • Crossword Puzzle
  • Races including Horse Race
  • Card Games
  • Gambling
  • Betting
  • Game Shows
  • Any other income of similar nature

Income Tax on Awards & Prizes

Such incomes may be earned in form of cash or kind in forms of awards or prizes. The tax treatment depends on multiple factors.

  • Awards
    • If the Award of public interest is approved by the Government, it is exempt from tax. Awards such as National awards, Nobel prize, Arjuna award, Bharat Ratna award, etc notified by the government under Sec 10(17A) is exempt from tax in the hands of the receiver.
      Awards such as filmfare, ICC Cricket awards, etc are taxed as IFOS income since they are not approved by the Government
  • Prizes
    • Prizes earned are taxable in the hands of the winner as Income from Other Sources income (IFOS) as per Sec 56(2) of the Income Tax Act. Income from betting, gambling, sports events, horse race etc are all taxable incomes

Tax Rate on winning lottery, puzzle, game show, horse race

Tax on lottery winning, crossword puzzles, card games, etc is at flat rate of 30%. After adding the health & education cess of 4%, the effective tax rate is 31.2%. The income would be taxed at flat 30% without considering tax slab rates. If the prize is received in kind, tax is calculated at the market value of the item received.

Example

Divya won a lottery and received INR 5 lakh in cash and a diamond ring worth INR 1 lakh. She also has Fixed Deposit Interest income of INR 1 lakh. She has invested INR 1.5 lakhs in Section 80C and also paid INR 25,000 as medi-claim. Calculate the tax liability.

Particulars Amount (INR)
Income from Other Sources  
Fixed Deposit Interest  1,00,000
Winning from Lottery 6,00,000
Gross Total Income 7,00,000 
Deductions under Chapter VI-A (1,00,000)
Total Income 6,00,000
Tax at slab rate NIL
Tax at special rate (30%) 1,80,000
Total Income Tax 1,80,000
Health & Education Cess @4% 7,200
Total Tax Liability 1,87,200

TDS on prizes & winnings

TDS under Section 194B is applicable on income from lottery, betting, gambling etc. If the income exceeds INR 10,000 during the financial year, the prize distributor is liable to deduct TDS at 31.2% at the time of making the payment.

TDS under Section 194BB is applicable on income from activity of owning and maintaining horse races. If the income exceeds INR 10,000 during the financial year, the horse race organiser is liable to deduct TDS at 31.2% at the time of making the payment.

ITR Form & Due Date

  • ITR Form: Winnings from lottery, puzzles, betting etc is treated as Income from Other Sources. The taxpayer should file ITR-1 (if income is upto INR 50 lacs) or ITR-2 (if income exceeds INR 50 lacs) on the Income Tax Website.
  • Due Date – 31st July of the Assessment Year. For eg: Due Date to file ITR of FY 2020-21 (AY 2021-22) is 31st July 2021.

Special Provisions for tax on winning lottery, puzzle, game show, horse race

If a taxpayer has income from winning a lottery, puzzle, card game, gambling, etc, here are important provisions applicable:

  • The taxpayer cannot claim deductions under chapter VI-A such as Sec 80C, 80D, 80G etc for such income
  • The taxpayer cannot claim any expenses against such income
  • Income Tax on such income is at a flat rate of 31.2% and thus the taxpayer cannot claim benefit of basic exemption limit and slab rates
  • The taxpayer cannot claim any refund of the TDS deducted on such income
  • Loss from owning and maintaining horse race cannot be set-off against any income except horse race income. Taxpayer can carry foward the remaining loss for 4 years

FAQs

I have won a lottery. Should I pay taxes on lottery income?

Income from winning a lottery, card game, competition, betting, gambling etc is a special rate income. Tax rate on such income is 31.2% as per Section 115BB of Income Tax Act. Taxpayer cannot claim benefit of slab rates or the basic exemption limit. The prize distributor would have deducted TDS at 30% before making the payment to winner.

If the prize is paid in cash or kind, how should tax be calculated?

Income Tax on winning lottery, puzzles, card games, etc should be calculated at 31.2% (30% plus 4% cess) of the total prize money. If the prize is paid in kind such as car, jewellery, holiday trip, etc the tax should be calculated on the market value of the prize.

Do I have to pay tax if I withdraw my winnings on Dream11?

Income on Dream 11 is considered as a betting income. Dream 11 tax is calculated at 31.2% (30% plus 4% cess). If your net winning from a contest exceeds INR 10,000, they would deduct TDS at 30% and credit the remaining amount to your account. You can then withdraw the funds without paying any additional tax.

ITR Documents : Income from other sources

Income from other source (IFOS) includes any income which is not taxed under the following Income heads:

  1. Salary Income
  2. Business and Profession income
  3. Capital gain Income
  4. House property Income

The Income From Other Source includes Bank Interests, Investment Interests, Dividend Income, Family Pension, Gifts, Royalty, etc.

ITR for Income from Other Sources (IFOS)
CA Assisted Income Tax Return filing for individuals having interest, provident fund and other income covered under the head IFOS.
[Rated 4.8 stars by customers like you]
ITR for Income from Other Sources (IFOS)
CA Assisted Income Tax Return filing for individuals having interest, provident fund and other income covered under the head IFOS.
[Rated 4.8 stars by customers like you]

Document Checklist for Income From Other Source

PAN

Income Tax Department (ITD) issues Permanent Account Number (PAN). It is an alphanumeric ID of a taxpayer who is liable to pay taxes. PAN enables the department to link all transactions of the “Person” with his “Income”. Hence it is the most essential document while filing ITR.

Aadhaar

Aadhaar (Aadhaar Card) a 12 digit unique identification number issued by the UIDAI (Unique Identification Authority of India). It is mandatory for Resident Individuals to provide details of Aadhaar while filing ITR.

Form 26AS

Form 26AS is a consolidated Tax Credit Statement. It has the following details:

  • ​Details of TDS from the taxpayer’s income.
  • ​Details of TCS from taxpayer’s payments.
  • Advance Tax, Self Assessment Tax paid by the taxpayers.
  • Details of the Refund received during the year.
  • Details of any high-value transactions (for eg. Shares, Mutual Funds, etc.).

It is very important to check Form 26AS before e-filing the ITR. Since it has details of TDS deducted on Interest and Other Income by deductors.

31st July
ITR filing Due Date for taxpayers having Income From Other Source.
31st July
ITR filing Due Date for taxpayers having Income From Other Source.

Investment proofs

A taxpayer can claim the deduction of certain Investments and expenses while filing ITR. Investments proofs, Donation Receipts, Fixed Deposit Statement, etc are required to claim Chapter VI-A deductions. These investments reduce the net taxable income of a taxpayer.

Bank Statements

Bank Statement with IFOS transactions is an essential document to prepare ITR. It is important to look at bank statements to derive total income earned in the form of Interest, Dividend, Gift, etc.

FAQs

What is Income from other sources?

Income from other sources is a residual income that cannot be taxed under other heads. It includes income from a savings bank account, Fixed deposits, Post office savings, Family pension, etc. It also includes any monetary/non-monetary gifts received by an individual.

What is the tax treatment of dividends received from a foreign company?

Dividend received from an Indian company is exempt from tax. However, Dividend received from a foreign company is taxable as “Income from other sources”. And you need to pay taxes at rates based on the income slab you fall under.

I have won a lottery of Rs 2 lakhs. Is this taxable?

Yes. When any individual receives any kind of lottery or price money it is taxable. It is converted under IFOS.

I have received Rs. 1,00,000 in cash from my father as a wedding gift. Is it taxable?

No. Gifts received on a wedding occasion is exempt from tax. Hence Rs, 1,00,000 will be exempted from tax. However, you should report the same while filing ITR.

What are the documents required to file ITR?

Following are the documents required to file ITR:
-PAN
-Aadhaar
-Form 26AS
-Bank Account Details
-Tax Payment Challan
-Original Return (if filed)

Section 80TTB: Interest Deduction on Deposits for Senior Citizens

Budget 2018 introduced a new section 80TTB under the Income Tax Act which allows resident senior citizens to claim a deduction on interest income up to INR 50,000. This section is applicable from FY 2018-19 (AY 2019-20) onwards. For earlier years deduction was allowed under section 80TTA.

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

Who can Claim Deduction Under Section 80TTB?

Section 80TTB was introduced to give more benefits to senior citizens of India. Any resident individual who has attained the age of 60 years or more during FY 2018-19 can claim deduction under section 80TTB . An NRI senior citizen cannot claim deduction u/s 80TTB.

Residential Status Calculator
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
Explore
Residential Status Calculator
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
Explore

Deduction Limit Under Section 80TTB

A resident senior citizen will be able to claim deduction up to INR 50,000 under this section. If the interest earned from the specific deposit is less than INR 50,000 the same would be allowed as deduction u/s 80TTB. But if the interest earned from the specific deposit is more than INR 50,000 then maximum INR 50,000 is allowed as a deduction.

Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
Explore
Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
Explore

Which Interests are Eligible for Deduction Under Section 80TTB?

The deduction is allowed on interest earned from following deposits:

  • Interest earned on Bank Deposits i.e, saving account interest, fixed deposits, recurring deposits
  • Any interest earned on deposits with Co-operative Society engaged in banking
  • Interest earned from Post Office Deposits i.e, Saving Account Interest, NSC, Senior Citizens Savings Scheme Accounts, Time Deposits, 5-year recurring deposits, and monthly income schemes

Exceptions to Section 80TTB

Deduction under section 80TTB can only be claimed on the interest received on saving accounts held with a bank, co-operative society or post office. The interest received on below-mentioned earnings cannot be claimed u/s 80TTB:

  • Interest earned from Company FD
  • Interest earned on Bonds and Debentures

Furthermore, the following entities cannot claim section 80TTB deduction:

  • Non-Resident Indians
  • Residential Individuals and HUF’s other than senior citizens
  • Entities such as Associate of Persons, a body of individuals or firms are exempt from claiming the interest earned by them on the saving accounts

How is the Deduction Calculated Under Section 80TTB?

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

Mr Inder is a resident senior citizen. And he has earned the following income during the FY 2018-19:

  • Interest earned from Bank FD: INR 26,000
  • Interest earned from Senior Citizens Savings Scheme (SCSS): INR 32,000
  • Interest earned on Debentures: INR 3,500

Deduction under section 80TTB is available only on interest from Bank FD and SCSS. And eligible deduction under section 80TTB is INR 50,000.

File Your Tax Return

On Time , Online on Quicko.com

Open Your Account Today

File Your Tax Return

On Time , Online on Quicko.com

Open Your Account Today

How to Claim Deduction Under Section 80TTB?

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

ITR for Pensioners
CA Assisted Income Tax Return filing for individual senior citizens receiving pension income.
[Rated 4.8 stars by customers like you]
ITR for Pensioners
CA Assisted Income Tax Return filing for individual senior citizens receiving pension income.
[Rated 4.8 stars by customers like you]

ITR Form Applicable for Section 80TTB

The taxpayer can claim deductions u/s 80TTB 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.
Tip
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

This tax deduction is accessible by all HUFs and individuals. The document required apart from the common documents such as Form 16, is the savings account bank statement is enough to calculate your interest in income and tax deductions on incomes.

FAQs

Can an NRI senior citizen claim deduction under section 80TTB?

No, an NRI senior citizen can not claim deduction under this section. However, they can claim a deduction on interest from savings account under section 80TTA.

Can a senior citizen claim deduction under section 80TTA?

No. From FY 2018-19 onwards, resident senior citizens can only claim a deduction on interest under 80TTB. However, for earlier financial years deduction on interest income can be claimed under section 80TTA.

Are FDs and RDs covered under 80TTB?

Yes, you can claim a deduction for interest earned from RD and FD and some more specific deposits up to INR 50,000 per annum.

Is the deduction that is availabe under section 80TTB over and above the deduction availabe under section 80C?

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

Tax on Gift: Rules and Exemptions As per Income Tax Act in India

What is Gift as per Income tax Act?

Gift as per Income tax act means property (both movable and immovable) and money (cash, cheque, draft, etc) received without consideration or against inadequate consideration. Let’s understand what movable and immovable property include on which income tax provisions apply:

  • Immovable property: Land or building or both (it does not include agricultural land in rural areas)
  • Movable property: Shares, securities, jewellery, archaeological collection, drawing, painting, any work of art, bullion, vehicles, etc.

When are Gifts taxable?

  • Gifts received are taxable if the monetary value of all gifts received without consideration by the recipient exceeds INR 50,000. The whole amount would be taxable. For Example, Rohan received Gifts of monetary value INR 7000 from each of his 10 friends, the whole INR 70,000 will be taxable since the monetary value of all gifts received exceed INR 50,000.
  • However, when a gift is received against inadequate consideration, it will be taxable when the shortfall of the consideration received, exceeds INR 50,000. In such a case, the whole amount of shortfall will be taxable. For Example, Nisha received INR 10,000 each from her 10 friends. She contributed back INR 1000 to each of her friends. In this case, the shortfall of INR 70,000 will be taxable in the hands of Nisha.
  • The gift would be taxable if it is in the nature of capital assets in the hands of the recipient. Any gifts in the nature of stock, raw materials, or consumables that can be used by the recipient in his/her business operation, will not be considered as a capital asset and thus will not be taxable.
  • The gift would be chargeable to tax under the head “Income from other sources” and at normal slab rates.

When Gifts received are exempt from tax?

Under the following situations, gifts received are non-taxable in hands of recipient irrespective of monetary value:

  • Gift received :
    • from relatives*
    • On occasion of the marriage,
    • Under will/by way of inheritance.
    • In contemplation of death of the payer.
    • From local authority.
    • A fund, foundation, university, other educational institution, or other medical institution, hospitals, or any trust or institution defined in Section 10(23C), any trust or institution registered under section 12AA.

Relative*

  • Spouse of the individual
  • Brother and sister (including their respective spouses) of both individual and his/her spouse
  • Brother and Sister (including their respective spouse) of an individual’s father and mother
  • any lineal ascendant or descendant (including their respective spouses) of the individual
  • any lineal ascendant or descendant (including their respective spouses) of the spouse of the individual

Here is the summary of all the scenarios for better understanding:

Gift Consideration Amount taxable
Money (cash, cheque, draft) Nil If money > 50,000; whole amount taxable
Immovable property Nil If Stamp duty value > 50,000; Stamp duty value would be taxable
Immovable property (as defined above) Received which is less than stamp duty value by an amount exceeding Rs 50,000 [Stamp duty value – consideration] would be taxable
Agricultural land in rural area Nil/received Nil
Movable property (as defined above) Nil Fair market value > 50,000; Fair market value would be taxable
Movable property (as defined above) Received which is less than Fair market value by an amount exceeding Rs 50,000 Fair market value – consideration > 50,000 Fair market value would be taxable
Property/money on the occasion of marriage Nil/received Completely exempt irrespective of value
Any gifts not included in definition above Nil/received Completely exempt irrespective of value

Provision Relating to Stamp Duty for Gift Tax

In order to calculate gift tax for immovable property, stamp duty value must be considered. There is a possibility that the stamp duty can be higher for reasons like time gap between the agreement fixing the consideration and date of registration. Hence, for calculating gift tax stamp duty value as on the date of agreement fixing the consideration must be taken into consideration if the following conditions are satisfied:

  • If the consideration is paid either fully or partially via account payee cheque, bank draft or digital mode on or before the date of agreement for the transfer
  • Date of the agreement and the date of registration is different
Earned Income from Other Sources
Let our Experts help you file your ITR
[Rated 4.8 stars by customers like you]
Earned Income from Other Sources
Let our Experts help you file your ITR
[Rated 4.8 stars by customers like you]

FAQs

Are monetary gifts received from friends liable to tax?

Gifts received from relatives are not charged to tax.
Friend is not a relative as defined in the list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).​

Is gift in cash taxable?

Gift of money: Aggregate value of cash gifts received without consideration during a financial year would be taxable as Income from Other Sources in the hands of the recipient. However, if the aggregate value of such gifts is less than Rs 50,000, then it would be exempt from tax

Section 80TTA: Deduction for Interest Earned on Savings Account

What is Deduction under 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
Tip
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.

ITR for Pensioners
CA Assisted Income Tax Return filing for individual senior citizens receiving pension income.
[Rated 4.8 stars by customers like you]
ITR for Pensioners
CA Assisted Income Tax Return filing for individual senior citizens receiving pension income.
[Rated 4.8 stars by customers like you]

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.

Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
Explore
Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
Explore

Which Interests are Eligible for Deduction Under Section 80TTA?

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

  • Interest earned from Saving Account with Bank,
  • Any interest earned from Saving Account with Co-operative Society,
  • Interest earned from Saving Account with Post Office.

Following interests are not eligible for deduction under this section:

  • Interest earned from fixed deposits,
  • Any interest earned from recurring deposits,
  • Interest earned from any other time deposits.

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.

CA Review (ITR)
Need some answers for tax filing? You can contact our experts and get answers to all your tax-related queries!
[Rated 4.8 stars by customers like you]
CA Review (ITR)
Need some answers for tax filing? You can contact our experts and get answers to all your tax-related queries!
[Rated 4.8 stars by customers like you]

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:

  • Interest earned from Union Bank Savings Account: INR 16,000
  • Interest earned from Post Office FD: INR 24,000
  • Interest earned on Debentures: INR 3,500

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.

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.

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.