Section 80TTA was introduced to the Income tax act, 1961, with effect from the assessment year 2013-14. As per Section 80TTA of the Income tax act, 1961, an individual can claim tax deduction up to 10,000 rupees in aggregate in respect of any income incurred by way of interest on deposits in a savings account.
As the section is silent on the residential status of the individual, NRIs can also avail a tax deduction under Section 80TTA.
A hindu undivided family can also take benefits of section 80TTA.
Section 80TTA tax deduction can be claimed for the financial year 2022-23 (assessment year 2023-24) and financial year 2023-24 (assessment year 2024-25) only if you have opted for the old tax regime. In case you have opted for an alternative tax regime under section 115BAC, then this section benefits are not allowed.
We have a few more conditions specified to claim tax deduction under section 80TTA. Let’s discuss these to know how to get tax deduction on interest on deposits in a savings account.
As per section 80TTA, the savings account should be with-
- a banking company;
- a co-operative bank; or
- a post office
Therefore, Section 80TTA is not applicable to deposits made with corporations and Non-Banking Financial Companies (NBFCs).
When tax deduction under section 80TTA is not allowed
Section 80TTA tax deduction is not allowed for interest on time deposits. Which means, interest from fixed deposits, recurring deposits and any other type of time deposits are not eligible for tax deduction under section 80TTA. The term “time deposits” mean deposits which are repayable on the expiry of fixed periods.
With the introduction of section 80TTB, a senior citizen who is eligible to claim tax deduction under section 80TTB is not allowed to take benefits of section 80TTA. A senior citizen can claim higher tax deduction under section 80TTB for interest on all types of deposits including time deposit.
If interest income is derived from any deposit in a savings account held by, or on behalf of a firm, an AOP or a BOI, no tax deduction is allowed in respect of such income in computing the total income of any partner of the firm or any member of the association or BOI.
Exemption for interest on deposits in post office saving account
As per section 10(15)(i) of the Income tax act, 1961, a taxpayer is eligible to get exemption up to 3,500 rupees on post office savings bank interest. In case of a joint account, the exemption amount is 7,000 rupees.
Please note, for interest on deposits in a post office savings account, you can take benefits of section 10(15)(i) and section 80TTA.
How to claim tax deduction for interest on deposits in a savings account-Section 80TTA
Before claiming tax deduction, you need to include savings bank interest income to your total income under the heading “income from other sources” as its taxable.
You should make sure that you have taken all your interest income into the tax return. Don’t forget to check form 26AS and AIS before filing your Income tax return.
Under chapter VI-A deductions list, you need to enter your eligible amount as tax deduction under section 80TTA.
Please note, to claim tax deduction, you must file your income tax return as the process is not automatic. If you don’t file, your tax deduction will not be considered.
