Indians love savings. Savings is the essential driver of our Indian economy. The savings spur investment which is the main driver of demand and thus leading to production which utlimately drives the Indian economy. Having recognised the vital role played by the savings, the Income Tax Department allows certain amount of interest on such savings as deduction from the Total Income while filing the Income Tax Return (ITR) through Section 80TTA. In this post we shall discuss the various provisions related to claiming deduction under section 80TTA.
Section 80TTA of the Income Tax Act is available w.e.f Assessment Year 2013-14 (FY 2012-13) for assessee who is either an individual or an HUF (Hindu Undivided Family). As per this section, a deduction up to ₹10,000/- can be calimed on the interest on deposits in a savings account with:
1. a banking company
2. a co-operative society engaged in the banking business
3. a post office
However please note that the following class of assessees cannot claim the deduction under Section 80TTA.
1. A company
2. A partnership firm
3. Association of persons or a body of individuals
4. Senior citizen who is eligible to claim deduction under Section 80TTB (from Assessment Year 2019-20)
In addition to the above, if you have a post office savings bank account and derive interest from such account, then there is a good news for you. Section 10(15)(i) of the Income Tax Act allows exemption up to ₹3500 in case of a single account and ₹7000 in case of a joint account. Please note that this is exemption and not deduction like 80TTA.
What if interest from savings are more than ₹10,000?
In this case you will have to declare your total interest accrued from Savings and claim deduction up to ₹10,000 . The interest received from savings bank over and above ₹10,000 will be taxed as ‘Income from other sources’.