Understanding the Benefits of Section 80TTA: Deductions on Savings Account Interest

• Section 80TTA allows you to enjoy tax benefits on the interest that you earn on the money kept in your bank account.

• You can enjoy Section 80TTA tax benefits if you have earned interest of up to ₹10,000.

• Regular Taxpayers, Hindu Undivided Family (HUF) and Non-resident Indians (NRIs) can enjoy these deductions.

Your interest earnings from savings accounts also attract taxes when they cross a certain limit. Fortunately, there’s a way to ease your tax implications – and any kind of tax relief is always welcome, isn’t it?

You can apply for a tax deduction while filing your income tax return as per the information below. However, if you have a recurring deposit or a fixed deposit, Section 80TTA deductions are not applicable to your earnings.

Section 80TTA deduction deals with the tax exemption you can get on the income you earn from your savings in a bank/post-office or co-operative society account. This section allows a tax benefit of ₹10,000 on the income. You can avail of this benefit if you are a general individual or a person from a Hindu Undivided Family (HUF). This benefit is applicable to NRE and NRO accounts in India also.

Savings account interest deductions under this section are applicable to three types of accounts:

• If you hold a bank savings account

• If you hold a co-operative society savings account

• If you hold a savings account with a post-office

You can claim 80TTA tax benefits of up to ₹10,000 under this section if you are:

• An individual or from a Hindu Undivided Family (HUF)

• If you have a savings account in a bank, post office or cooperative society

• If your taxable income includes interests earned from your savings account

• If you are an NRI having NRE or NRO accounts in India if your age lies below 60 years as senior citizens above 60 are not eligible for this benefit

In order to calculate your total savings interest deduction, you must assess the total income from other sources and check if this is applicable under 80TTA. The steps involved are:

1. Add your total interest income under the column ‘income from other sources’

2. Calculate your gross total income from all income heads

3. Show it as a deduction – simple!

Here’s an example. Ravi has a salary income of ₹5 lakh. He has interest earnings from savings of ₹5,000 and a fixed deposit earning of ₹15,000. He is also eligible for a deduction amount of ₹10,000 under 80C.

Now, after standard salary deductions, the amount comes to ₹4.50 lakh. Adding interest from the savings account and the FD, the total amount is ₹4.70 lakh. So, now Ravi is eligible for ₹10,000 deduction under 80C and an additional ₹5,000 deduction under 80TTA. So, the final taxable salary is ₹4.55 lakh.

You can enjoy tax exemption on the interest earned from your savings account under Section 80TTA, making your savings even more satisfying. However, there is a maximum limit to this benefit. Even if you have multiple bank accounts, the total interest earned across all of them is considered for this exemption. So, any amount beyond the savings interest tax exemption limit of ₹10,000 will not be eligible for exemption.

The first and foremost important step is to assess your eligibility for all deductibles you are about to claim in your ITR. The following steps need you to calculate your total income and properly file returns without missing important takeaways.

The final steps to claim tax exemption on savings interest income include:

1. Checking your eligibility: You can be an individual from HUF or an NRI, but not a company, partnership or LLP.

2. Assessing your interest income: Check all your bank, post-office or cooperative savings accounts to know how much interest you earned.

3. Noting if your total interest income is less than or equal to ₹10,000: You can claim the complete amount under this deduction.

4. Computing total income correctly: While calculating your taxes, do not forget to add your interest income with the total income.

5. File ITR: While completing the process, add the interest income under ‘income from other sources’ to get this 80TTA benefit.

The required documents to claim this benefit are:

• Age proof document

• Identity proof document

• Copies of bank statement

• Interest certificate

Some common mistakes people tend to make while filing ITR are not checking on form 26AS and ignoring income from other sources. You must avoid these small mistakes to avoid hassles and re-fil your taxes in a hurry.

Some common tips you can keep in mind to avoid mistakes when claiming 80TTA deductions include the following:

• Before submitting your ITR forms, ensure that all your personal and financial details are correct. This will help you avoid refiling taxes in light of any mistakes.

• Pay attention to the numbers and double-check them for accuracy. Even a single mistake in figures can make your application defective or completely invalid.

• Form 26AS provides insights on your total TDS, income and taxes. It is important to cross-check your financial information before filing and Form 26AS can help you do this easily.

• According to subsections of the IT Act, ‘Income from other sources’ determines interest income from your savings account. Missing out on this information can prevent you from getting tax benefits on interest earnings from savings.

• Another important step is to e-verify your tax return within 30 days of filing. If not completed, the IT department may reject processing your form and send you a notice.

• Since tax benefits from section 80TTA account for total income from all sources, you can open multiple bank accounts. This will help you to keep your interest limit under the total cap.

• Many banks offer high interest rates on some savings accounts. You must compare and opt for the one providing higher interest.

• Every financial year, you must be aware of your total income from other sources which includes section 80TTA. This will help you understand how much you can save on your interest earnings and claim deductions when filing ITR.

1. What is Section 80TTA and who is eligible for the deduction?

Section 80TTA provides a tax benefit of up to ₹10,000 to income earned from savings accounts. This benefit is applicable to general individuals, people from HUFs, NRIs, but not companies, partnerships or LLPs.

2. How much savings account interest can be claimed under Section 80TTA?

₹10,000 is the total cap for savings account interest that can be claimed under Section 80TTA of the Income Tax Act.

3. Can senior citizens claim deductions under Section 80TTA?

No. Senior citizens can only claim benefits arising from 80TTB and not 80TTA.

4. Are fixed deposit interests eligible under Section 80TTA?

No. Any fixed deposit interests earned from an account are not eligible under the Section 80TTA tax cap.

5. What documents are needed to claim Section 80TTA deductions?

Documents needed to claim Section 80TTA deductions include an ITR return form, bank statement showing interests, interest certificate, passbook entries and Form 26AS.

6. What is the tax exemption limit on savings interest under Section 80TTA?

The maximum tax exemption limit on savings interest under Section 80TTA is ₹10,000. This includes all savings accounts.

7. How to include a savings account interest deduction in my tax return?

If your total interest earned from all savings accounts is equal to or less than the limit of ₹10,000. You can claim a deduction benefit when filing ITR by mentioning this income under ‘income from other sources’.

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