The Section 80TTA of Income Tax Act is concerned with providing deduction of a maximum of Rs. 10,000 on earnings generated in the form of interest. Ideally, such deductions are made available to HUFs and individuals.
Being a provision of the Income Tax Act, 1961, it requires entities to be aware of several aspects to claim the applicable tax deductions successfully. Consequently, it becomes crucial for entities to find out more about the inclusions and exclusions of the said tax provision in detail.
Who Can Claim Deductions Under Section 80TTA?
As per Section 80TTA of Income Tax Act, only these following entities can claim deductions –
- Taxpayers who come under the category of HUF or individuals.
- Indian residents.
- NRIs who have an NRO savings account.
- Entities with savings accounts at banking institutions, co-operative societies, post offices, etc.
However, no such tax benefits are passed down to companies, partnership firms, AOP, LLP, etc. Also, individuals who belong to the senior citizen category can avail tax benefits, but the same has to be claimed under Section 80TTB from the assessment year of 2018-2019.
Tax Deduction Limit Under Section 80TTA
One must note that under Sec 80TTA, individuals can claim a deduction of maximum Rs. 10000. Also, such a deduction is claimed over and above the limit of Rs. 1.5 lakh under Section 80C. Individuals must make it a point to list their interest earnings accrued on a savings account as income from other sources while filing their income tax.
Taxpaying entities are obligated to disclose the amount of interest they earn from their savings account balance while filing tax returns. In case one fails to do so, the HUF or individual in question will be subject to penalty along with the due tax.
What are the Deductions Under Section 80TTA?
Under this tax provision, eligible entities are permitted to claim deductions on their interest earnings. Ideally, such deductions are allowed on the interest earned on these sources –
- Interest accrued on savings accounts held with a bank.
- Interest accumulated on the post office savings account.
- Savings account held with a co-operative society that carries out the banking business.
What are the Exceptions Under Section 80TTA?
These pointers below highlight the exceptions under this particular Income tax provision –
- In case the total gross income of an entity is lower than the minimum taxable slab, it cannot claim deductions under this ITA section.
- Senior citizens are barred from availing tax deductions under this section.
- NRIs who have an NRE account cannot claim deductions as such an account is exempted from taxes altogether.
Other than these, tax deductions provided under this section are not available on deposits like – term deposits, fixed deposits, recurring deposits and deposits from NBFCs.
Salient Features of Section 80TTA
These pointers enumerate the salient features of this tax provision –
- An individual can hold multiple savings accounts with different financial institutions. However, their cumulative interest earnings should not be more than Rs. 10000 to avail tax deduction under Section 80TTA.
- If at any time the cumulative interest earnings from a savings account are more than Rs. 10000, an individual can claim a deduction of only up to Rs. 10000. The remaining sum will be subject to taxation.
- No tax is deducted at source on savings accounts that are held by HUFs and individuals.
- Section 88TTA will not be applicable even if the total interest earnings from a savings account is more than Rs. 10000, given, the total income of the individual does not come under the taxable slab.
For example, suppose Sumit’s income is Rs. 2,00,000, and his earnings in the form of interest are Rs. 50,000 in a given financial year. Since his total income does not qualify for taxation as per the tax slab, there is no scope of applying Section 88TTA, as well.
Ways to Avail Deductions Under Section 80TTA in ITR
These pointers below highlight how entities can avail tax deductions under this provision through different ITR.
- In case of ITR -1
Step 1 – Provide information about income from source and make sure that it includes interest accrued on savings accounts.
Step 2 – The amount allowed as a deduction will be auto-calculated.
- In case of ITR – 2, 2A, 3, 4 and 4S
Step 1 – Provide income generated from all sources along with interest accrued on savings account in ‘OS.’
Step 2 – In sheet VIA of point number ‘o’, enter details of interest earned on savings accounts.
Step 3 – The amount that will be allowed as a deduction will be calculated and displayed automatically.
Entities who are liable for tax deductions under Section 80TTA of Income Tax Act should make it a point to gather more information about how to claim the same accurately. Doing so, they will be able to avoid the hassle that accompanies when a tax refund is filed inaccurately. In turn, it will streamline the process and avail tax deductions easily.
While at it, they should also become familiar with the basic differences between Section 80TTA and 80TTB as many times, taxpaying entities tend to confuse the two.
Differences between 80TTA and 80TTB
This table below enumerates the fundamental differences between 80TTA and 80TTB –
|Parameters||Section 80TTA||Section 80TTB|
|Beneficiary||The deductions under 80TTA are availed by HUFs and individuals who are not categorised as senior citizens.||Senior citizens avail the deductions under 80TTB.|
|Qualifying source of earnings||Fixed deposit accounts do not qualify for the deductions under this section.||Fixed deposit accounts, recurring deposits and savings accounts qualify for deductions under this section.|
|Exemption limit||The exemption limit is Rs. 10000 each annum.||The exemption limit is Rs. 50000 annually.|
|Eligibility of non-residentials||Both NRIs and NROs are eligible under Sec 80TTA.||NRIs are not eligible under 80TTA.|
|Applicable w.e.f.||The assessment year of 2013-2014||The assessment year of 2019-2020|
|Mode of claim||Entities can claim deductions under Sec 80TTA by filing ITR.||Entities can claim ITR and TDS.|
Notably, Section 80TTA of Income Tax Act provides relief to investors as they do not have to track negligible interest amount and include them into the tedious tax computation. Furthermore, this provision allows entities to avoid paying tax on small savings and income generated through it, thus facilitating better financial management.