Deduction of Interest from Savings Account Section 80TTA: Section 80TTA under the Income Tax Act, 1961 is introduced to an individual or an undivided Hindu family to provide deduction in respect of interest received on deposits (not being time deposits) in a savings account held with certain institutions.
- Who are eligible for deduction under section 80TTA?
- Amount for Deduction
- How to apply for deduction under section 80TTA?
Who is Eligible for Deduction Under Section 80TTA?
Deduction under section 80TTA applies to resident individual taxpayers and HUF only. Also, if the individual is a senior citizen, the deduction is allowed under Section 80TTB and not 80TTA from FY 2018-19.
Saving accounts with any of the following establishments will qualify under section 80TTA –
- Bank or banking company;
- Co-operative banks and other co-operative banking societies.
- Post office savings account.
However, this benefit is not available to a firm, an association of persons, LLP, a body of individuals, or a company assessee.
Amount for Deduction
The maximum amount possible for the deduction, along with the interests that are not eligible for the deduction, are discussed below.
- The deduction applicable is for interest received on eligible saving accounts or Rs. 10,000 (maximum amount), whichever is lower. The limit of Rs. 10,000 is held collectively for interest from all the saving accounts held by an individual.
- If the interest earned exceeds Rs. 10,000, then the balance amount will be taxable as before, i.e., considered income from other sources and taxed as per applicable slab rate.
- The interest earned on a saving bank interest is exempted from TDS as per section 194A of the Income Tax Act. So, no TDS is deducted on interest from a savings account, whatever the amount of interest may be.
- This deduction is not available for the interest received on fixed deposits (FDs) or time deposits, or term deposits (A term deposit is a deposit received by the bank for a fixed period and can be withdrawn only after the predefined fixed period is over).
How to Apply for Deduction under Section 80TTA?
Form ITR – 1
You need to fill your income from all other sources that include interests from saving accounts in point no. 4. The interest from the savings account is to be filled in Point no. 5(q).
Form ITR -2, 2A, 3, 4, 4S
You need to fill your income from all other sources, including interest from saving accounts in point no. 1(b) in sheet “OS”.
The interest from savings accounts is to be filled in point no. “o” of sheet VIA.
Note: The utility automatically calculates the amount allowed as a deduction if the amount exceeds Rs. 10,000 in both cases.