Deduction of interest on saving account under section 80TTA
- What is deduction under section 80TTA of Income Tax Act:
Section 80TTA has been inserted with effect from the assessment year 2013-14. It provides deduction up to Rs. 10,000 in aggregate to an assessee in respect of any income by way of interest on deposits (not being fixed / recurring deposits) in a Saving Bank Account.
- Salient features of section 80TTA of Income Tax Act:
– The said deduction is available to Individual or a Hindu Undivided Family
– The deduction is available in respect of any income by way of interest on deposits (not being fixed / recurring deposits) in a savings account with :
– A banking company;
– 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 A post office
- Important point to note:
– No deduction shall be allowed in respect of income arising from any deposits in a saving bank account in computing the total income of any partner of the firm or any member of association or body of individuals, where the savings account is held by a firm, an association of person or body of individual.
– This deduction is not applicable in respect of interest received on Fixed Deposits / Term Deposits. Fixed Deposits / Term deposits are the fixed amount of money deposited with bank for the fixed period, and can be withdrawn only after the expiry of that fixed period. The interest rate is also fixed in case of fixed deposits. Whereas in savings account we can deposit or withdraw amount at any time as per our convenience.
Post office savings bank interest is exempt up to Rs. 3,500 (in an individual account) and Rs. 7,000 (in a joint account) u/s 10(15) (i) by virtue of Notification No. 32/2011, dated June 3, 2011, read with Notification No. GSR 607, dated June 9, 1989. The impact of section 10(15) (i) and 80TTA is as follows:
the assessment year 2011-12
the assessment year 2012-13
the assessment year 2013-14
|Interest on Post Office Savings Bank [exemption u/s 10(15)(i)]||Full exemption, nothing is taxable.||Exemption up to Rs. 3,500 in single account and Rs. 7,000 in a joint account.||Exemption up to Rs. 3,500 in single account and Rs. 7,000 in a joint account.|
|Interest on savings account with a bank, co-operative bank and Post Office (deduction
|No deduction||No deduction||Deduction up to Rs. 10,000.|
Whether an individual having fixed deposits with bank can claim deduction u/s 80TTA?
No. As deduction under section 80TTA is not applicable to the income by way interest on fixed deposits or term deposits. The interest earned on fixed deposits is fully taxable.