Interest on savings account deposits are are taxable under the head “Income from other sources”. While filing tax return, you are required to declare these interests in addition to all other incomes to find out your total tax liability. However, after including it to your total income, you can claim tax deduction under section 80TTA on interest on savings account deposits.
Section 80TTA has been inserted with effect from the financial year 2012-13 (AY 2013-14). Provisions of this section is applicable to financial year 2022-23 (assessment year 2023-24) and financial year 2023-24 (assessment year 2024-25).
However, you can’t take benefits of section 80TTA if you are opting for alternate tax regime under section 115BAC. If you prefer to be in the old tax regime, then you can claim tax deduction for interest on savings account deposits under section 80TTA.
How much interest on savings account deposit is tax free
According to section 80TTA of the income tax act, 1961, tax deduction for interest on savings account deposits with a bank or banking companies (to which banking regulation act, 1999 applies), co-operative society (engaged in carrying on the business of banking), post offices can be claimed up to a maximum limit of Rs 10,000 per year.
This means, any interest on savings account deposits earned over and above the limit of Rs 10,000 will be taxable under the head income from other sources.
In addition to the above tax deduction, section 10(15)(i) exempt interest on post office savings account up to Rs 3,500 for an individual account and Rs 7,000 for a joint account (notification no:32/2011 dated 03-06-2011 read with notification number GSR 607 dated June 9,1989).
This means, if you have earned interest on post office saving bank, both exemption u/s 10(15(i) and deduction u/s 80TTA can be claimed.
Section 80TTA is not applicable to fixed deposit or recurring deposit or time deposit.
Tax deduction of Rs 10,000 is available on your total interest earned out of saving account deposits. This means, if you have more than one saving account then total interest earned from all of these saving account deposits will be eligible for a maximum tax deduction of Rs 10,000 under section 80TTA.
For instance, if interest earned out of your 5 savings account for the period starting from 1st April 2023 to 31st March 2024 is 28,000 rupees, then you can claim tax deduction of Rs 10,000 under section 80TTA for the financial year 2023-24 (assessment year 2024-25). Balance Rs 18,000 (28000-10000) will be taxable as income under the head “income from other sources” for the financial year 2023-24 (assessment year 2024-25).
Section 80TTA is applicable only to an individual or HUF.
If savings bank account is held in the name of a partnership firm, AOP or BOI, no tax deduction shall be allowed under section 80TTA in respect of the interest income, in computing the total income of any partner of the firm or member of AOP/BOI.
With effect from financial year 2018-19, section 80TTA is not applicable to those person who are eligible for taking benefits of section 80TTB. This means section 80TTA will not be applicable to a resident senior citizen with effect from financial year 2018-19 as the new section 80TTB has been introduced for it.
Frequently Asked Questions on Section 80TTA tax deduction
What will be the consequences for not reporting my interest income in tax return?
Interest is taxable under the head “Income from other sources”. If you fail to report for a year, either intentionally or otherwise, then you will be liable to penal provisions for such non-compliance.
Can I claim both section 80TTA and 80TTB benefits?
No, Section 80TTB is specifically applicable to senior citizens.
Section 80TTA is not applicable to a senior citizen.
This deduction is allowed to all individuals and HUFs other than senior citizens (those aged 60 or more ) because they have a separate deduction under Section 80TTB.
Can I claim tax deduction under section 80TTA for a fixed deposit?
No, Section 80TTA is not applicable in the case of fixed deposits. Its only allowed for interest on savings account.
Can NRIs claim section 80TTA benefits?
Yes, Section 80TTA is applicable to an individual irrespective of their residential status. Therefore, NRIs can take benefits of section 80TTA for interest on savings account.
For how many bank accounts can I claim tax deduction U/S 80TTA?
Section 80TTA tax deduction is on the aggregate amount of interest on savings account that you have earned for a financial year. You need to total your interest income from all the savings accounts, then apply section 80TTA limits.
Can Section 80TTA deduction be claimed if I opt for Alternative Tax Regime under section 115BAC?
No, the tax deduction for interest on savings account can’t be claimed under section 80TTA if you have opted for an alternative tax regime under section 115BAC.
Section 80TTA vs. 80TTB: What is the difference?
| Particulars | Section 80TTA | Section 80TTB |
| Applicable to | An individual and Hindu Undivided Family (HUF) | Senior citizens above the age of 60 years |
| Deduction allowed on | Interest on deposit with savings account only | Interest earned on deposit including interest from a savings account, fixed deposit, term deposit and recurring deposit |
| Deduction amount | 10,000 rupees or interest, whichever is lower | 50,000 rupees or interest, whichever is lower |
Is Section 80TTA tax deduction part of Section 80C limit
No, 80TTA is a different section under chapter VI-A. If you are taking benefit of section 80TTA, full benefit of section 80C can also be taken while calculating tax liability based on your eligibility. For the assessment year 2022-23 and 2023-24, maximum deduction allowed under section 80C is Rs 1,50,000. There is no restriction that one can only claim either of the two sections.
