Section 80TTA Deduction for Interest on Savings Deposits: Limit, Eligibility under Income Tax

Section 80TTA Deduction for Interest on Savings Deposits: Limit, Eligibility under Income Tax

Section 80TTA of Income Tax Act, 1961 provides for a deduction of upto Rs. 10,000 in respect of interest income earned from savings deposits maintained with a Bank or Post Office, during the relevant previous year. However, from FY 2018-19/ AY 2019-20, the Senior Citizens (i.e. individuals who are resident in India and are of the age of sixty years or more at any time during the relevant previous year) can not claim deduction under Section 80TTA as they shall be allowed a higher deduction of Rs. 50,000 under the newly inserted Section 80TTB.

80TTA Deduction Limit (maximum Rs. 10,000)

80TTA deduction can be availed upto a maximum of Rs. 10,000, i.e. Interest Income on Savings Deposits during the relevant Previous Year or Rs. 10,000 whichever is minimum.

In any case the deduction under Section 80TTA is over and above the deduction limit specified in Section 80C (i.e. Rs. 150,000).

80TTA Deduction for Interest on Savings Deposits (not Term/ Fixed Deposits)

80TTA deduction is available only in respect of interest income on savings deposits maintained with any Bank/ Banking Company, Co-operative Bank or Post Office. However, it may be noted that interest income from time-deposits, term-deposits or fixed deposits is not eligible for this deduction.

Eligible Persons for Claiming 80TTA Deduction

80TTA deduction is applicable for persons in the Individual or HUF category only. All other persons, like Firms, Companies, etc. are not allowed/ eligible to claim this deduction.

Text of Section 80TTA of Income Tax Act, 1961 falling under CHAPTER VIA (Deductions to be made in computing total income)

Section 80TTA: Deduction in respect of interest on deposits in savings account

(1) Where the gross total income of an assessee*, being an individual or a Hindu undivided family, includes any income by way of interest on deposits (not being time deposits) in a savings account with:-

(a) a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);

(b) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or

(c) a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898),

there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee a deduction as specified here-under, namely:-

(i) in a case where the amount of such income does not exceed in the aggregate ten thousand rupees, the whole of such amount; and

(ii) in any other case, ten thousand rupees.

(2) Where the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body.

Explanation: For the purposes of this section, “time deposits” means the deposits repayable on expiry of fixed periods.

* The word ‘assessee’ substituted by Finance Act, 2018 with text ‘assessee (other than the assessee referred to in section 80TTB)’, applicable w.e.f. 1 April 2019.

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