Section 80TTA of Income Tax Act (2023 Guide)
Many taxpayers are benefited from the inclusion of Section 80TTA in the Finance Bill. Section 80TTA of income tax act provides for tax deductions on income from interest savings. A few restrictions and limitations apply to the deduction. Learn more about eligibility, amount, and exclusions to help you claim deductions under Section 80 TTA.
What is section 80TTA?
Section 80TTA of Income Tax Act provides for deductions where the gross income of an individual or an undivided Hindu family includes all income in the form of interest on deposits (not time deposits) in savings accounts with:
Any banking company to which the Banking Regulation Act 1949 applies (including any bank or banking institution referred to in section 51 of that Act);
A co-operative society engaged in the business of banking (including a co-operative land mortgage bank or a co-operative land development bank) or
A post office within the meaning of section 2(k) of the Post Office Act of India, 1898.
What is section 80 TTB of income tax act?
As per Section 80TTB, a resident taxable senior over 60 years during a financial year can claim a tax credit of up to Rs 50,000. The 80TTB deduction for senior citizens offers seniors a way to save tax and protect themselves financially.
Below is the interest income for which seniors can claim the Section 80TTB deduction.
- Interest on deposits with banking institutions. Deposits can be either fixed deposits or bank savings accounts. The assessee must own an account. A bank company is an institution to which the Banking Regulation Act 1949 (10 October 1949) applies for purposes of Section 80TTB (including a bank or banking institution referred to in Section 51 of that Act).
- Interest in cooperative deposits. Section 80 TTB requires cooperatives to conduct banking operations (including cooperative mortgage banks or cooperative real estate development banks).
- Interest in postal savings. Section (k) of the Indian Post Offices Act 1898 defines Post Offices (June 1898).
Who is eligible to deduct under 80TTA?
The following persons can claim deductions under Section 80TTA:
- Taxpayers residing in India
- Group of individuals under HUF
- NRIs with NRO savings accounts
Below 60 years of age (Section 80 TTA does not apply to senior citizens. Section 80 TTB applies to senior citizens).
Section 80 TTA deductions apply to individuals whose total income exceeds the taxable slab.
For example, your income is ₹5,00,000 and your specific interest income is ₹60,000 for the fiscal year. If so, you are not eligible to apply for a Section 80TTA because your gross income is below the taxable slab.
What is the amount of deduction u/s 80TTA?
The maximum deductible amount is Rs. 10,000.
If the total amount of interest is less than Rs 10000, the actual interest is exempt.
If the total amount of interest exceeds Rs 10000, you can claim only Rs 10000 as a tax exemption.
The assessee must take into account their cumulative interest from all of their savings accounts.
How do I claim an 80TTA exemption?
First, you must enter your interest income under the heading Income from Other Sources. Then you must claim a Section 80 deduction under Section 80TTA tax deduction.
To understand the calculation better, let’s look at an example.
Ms. Manish is a resident individual. And during the financial year 2021–2022, earned the following income:
Interest earned from:
Federal Bank Savings Account: INR 20,000
Post Office FD: INR 14,000
Debentures: INR 5,800
Mr. Manish can only claim Section 80 TTA deductions on interest earned from a Federal savings account and she can claim the maximum eligible deduction of INR 10,000 available under Section 80 TTA.
When 80TTA deduction is not allowed?
The deduction under Section 80TTA of Income Tax Act are not permissible for –
- Deposits in Non-Banking Finance Companies
- Interest from Fixed Deposits (FD)
- Interest from Recurring Deposits (RD)
- Any other time deposits
Time deposits are deposits that are repayable on the expiry of fixed periods.
What is the difference between 80TTA and 80TTB?
- Section 80 TTA deductions are for individual taxpayers and Hindu undivided families (HUFs).
- Interest will only accrue when funds are credited to your savings account.
- The exemption limit for Section 80 TTA is Rs 10,000 per annum.
- Section 80TTB deductions are only for senior citizens over the age of 60.
- Interest is on savings accounts, fixed deposits, term deposits, and recurring deposits.
- The exemption limit under Section 80TTB is Rs.50,000 per year.
Frequently Asked Questions (FAQs)
Can 80TTA and 80TTB be claimed together?
Individuals may claim deductions under either Section 80TTA or Section 80TTB, but not both.
Is 80TTA applicable to all?
Section 80TTA applies only to the individual and HUF ( Hindu Undivided Family). There was no distinction between the elderly and those under the age of 60.
Is 80TTA applicable on FD interest?
Interest earned on savings accounts secured with a bank, co-op bank, or the post office is deductible under section 80TTA. Interest income from other sources such as fixed deposits, recurring deposits, and bonds is not deductible or tax-exempt under this section.
Is 80TTA only for senior citizens?
No, section 80TTB is for deduction in respect of interest on deposits for senior citizens.
Is a deduction of 80TTA allowed in the new tax regime?
No, the deduction for 80TTA (Deduction in respect of Interest on deposits in a savings account) is not allowed in the new tax regime.
Is 80ttb applicable in new tax regime for senior citizens?
If seniors choose an alternative tax regime that falls within Section 115BAC, the Section 80TTB deduction will no longer be available in the financial year 2022-23.
Section 80 TTA of the Income Tax Act 1961 deals with tax deductions on interest. This deduction is valid for interest on savings accounts by either individuals or Hindu Undivided Families (HUF). The total deduction allowed for all savings accounts is Rs.10,000. This deduction exceeds the Rs.1.5 lakh limit under Section 80C.
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