Taxpayers in India can claim deductions on their income, investments, and various payments. For instance, do you know that the interest you earn from your savings account is eligible for tax deductions under Section 80TTA?
As every taxpayer in the country may have a savings bank account, Section 80TTA deserves your attention as it can help reduce your tax liabilities. Here’s everything you should know about Section 80TTA.
What is Section 80TTA of the IT Act?
Section 80TTA of the IT Act allows a deduction of up to ₹10,000 on the interest generated from savings account in a financial year. Individuals and HUFs (Hindu Undivided Families) can claim this deduction on the interest generated from a savings account in a bank, cooperative society that offers banking services, or post office.
However, the interest generated from Fixed Deposits (FDs), Recurring Deposits (RDs), or any other time-based deposits are not eligible for 80TTA deductions.
Can You Claim Interest Deductions from Multiple Savings Accounts?
It is not uncommon for people to have multiple savings accounts. Section 80TTA allows a tax deduction on the interest income irrespective of whether the interest is generated from a single or multiple savings account. So, you can claim deductions even if you earn interest from more than one savings account.
However, you can claim the deduction only up to ₹10,000 in a financial year.
If the interest generated from more than one savings account is under ₹10,000, you can claim full deduction on the interest amount. But if the interest income is higher than ₹10,000, the deduction can still be claimed only up to ₹10,000. The remaining interest will be taxable.
How to Claim Deduction Under Section 80TTA?
Any income tax exemption or deduction can be claimed while filing tax returns. For claiming a deduction on the interest income from savings bank account/s, taxpayers should disclose their interest earnings under the head ‘Income from Other Sources’ while filing tax returns.
For instance, Mr Shankar earns a salary of ₹6 lakhs in a financial year. He also earns an interest income of ₹12,500 from a savings account. Let us assume that he does not claim any other tax deductions or exemptions. So, the gross income for the financial year will be as follows:
|Particulars||Total Amount (in ₹)|
|Income from Other Sources
– Interest from the savings account
|Gross Total Income||₹6,12,500|
|Chapter VI-A Deduction
Important Points to Know About Section 80TTA
Here are some additional things you should know about Section 80TTA:
- Only taxpayers whose total income in a financial year is higher than the NIL tax slab can claim deductions under Section 80TTA
- Seniors or taxpayers above 60 years cannot claim 80TTA deductions; however, they can claim deductions under Section 80TTB
- NRIs with NRO savings account can also claim 80TTA deductions
Reducing Your Tax Liabilities with 80TTA Deductions
Interest income from a savings account is the most common income earned by almost all taxpayer. Under Section 80TTA, you can claim deductions on the interest income up to the prescribed limit to reduce your tax liabilities.
Taxpayers should take advantage of all the applicable tax provisions to legally save as much tax as possible. You can also consult with a professional tax advisor to boost your tax savings and invest confidently.