Section 80TTA: How to Claim Deductions on Interest Earned from Savings Accounts

The Union Government introduced this section as part of the Finance Bill in 2013. You can enjoy tax relief on interest earned from a savings account under Section 80TTA of the Income Tax Act. 

 

It allows you to claim a deduction of up to ₹10,000 on the interest earned. However, you need to meet certain terms and conditions to qualify for this deduction.

This provision of the Income Tax Act essentially adds more money to your savings account. However, to claim Section 80TTA deductions, you need to fulfil these requirements:

• You must be either an individual or a Hindu Undivided Family (HUF)

• You can claim this exemption only on interest earned on a savings account held with a specified institution 

This section allows you to claim tax deductions only on interest income from a specified savings account. Here is an overview of the types of savings accounts that fall under this category.
The specific account must be:

• With a banking company established under the Banking Regulations Act of 1949

• In a post office as defined under Section 2 of the Indian Post Office Act of 1898

• With a cooperative society performing banking functions

You must know when these deductions do not apply to file your returns accurately. Below mentioned are a few exclusions of Section 80TTA:

• If the account is held by or on behalf of a firm, body of individuals, or an association of persons

• It does not apply if the gross total income is below the taxable limit

• Senior citizens are not eligible to claim deductions under this section

• It also does not apply to interest earned from the following: 

  • Term deposits (repayable on expiry of fixed periods)

  • Fixed deposits 

  • Recurring deposits

  • Deposits from Non-banking Financial Companies (NBFCs) 

  • Non-resident External (NRE) accounts

Tax exemptions can significantly reduce your tax liabilities and help you save more. Here is how you can calculate deductions under this section:

1.Compute Eligible Deduction

Determine the total interest from all your savings accounts during the financial year. If your interest income is less than ₹10,000, you can claim the entire amount as a deduction. If it is more than ₹10,000, you can only claim a deduction up to ₹10,000.

2.Keep Relevant Documents Handy

Keep all relevant documents related to your savings account and the interest earned. These documents can include bank statements, passbooks, and interest certificates.

3.File Income Tax Return

Report your total interest income under the head ‘Income from Other Sources’ when filing your income tax return.

4.Submit Proof if Required

The income tax department may ask for proof of interest income and the deduction claimed. Keep the supporting documents handy for a seamless process.

5.Verify and Submit

Review your income tax return for accuracy and completeness. Once satisfied, submit it to the income tax department. If you are filing the return online, you will need to e-verify it. You can do this using Aadhaar OTP, net banking, or other available methods.

As mentioned earlier, Section 80TTA does not apply to senior citizens. However, they can claim a deduction u/s 80TTB. Here are some of the differences between the provisions of these two sections: