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Section 80TTA Deduction

Section 80TTA is a facility available in the Income Tax Act that provides deductions income from bank deposits. The section has been introduced with effect from 01.04.2012. The maximum deduction which can be claimed under this section is ten thousand rupees. Corporate assessees cannot claim any deduction under this section. The deduction under the section is available only for individuals and Hindu Undivided Families (HUFs). The purpose of the section is to encourage citizens to make small savings with banks and post offices. In this article, we look at Section 80TTA in a detailed manner.

Eligibility for Deductions

The deduction under this section will be allowed exclusively if the specified conditions are satisfied. The specified conditions should be satisfied cumulatively. In other words, all the conditions should be satisfied at the same time. The specified conditions are the following:

• The deduction can be claimed for interest income which has been earned during the financial year 2012-13 and in subsequent financial years.
• The maximum permissible deduction will be ten thousand rupees.
• The assessee should be an individual or HUF.
• The deduction is available only on the interest income from savings account.
• The savings account should be maintained with a bank or post office.
• An assessee who is claiming deduction under this section is not allowed to again claim deduction under the Act for the same income.
• The deduction cannot be claimed if the deposit is made in the name of an association.
• The deduction will be available in the case of an assessee whose interest income attracts an exemption under Section 10(15) of the Act. The section offers an exemption for interest income earned from post office savings schemes. The amount of exemption shall be Rs.3500 for a single account and Rs.7000 for a joint account.
• The deduction can be given effect to for the purpose of determining the tax liability, prior to making a payment of advance tax.

Deductions NOT Eligible under Section 80TTA

Section 80TTA deduction is not available for time deposits or fixed deposits. Time deposits mean deposits repayable on expiry of fixed periods. Hence, deduction under Section 80TTA is not allowed for:

• Interest from fixed deposits
• Interest from recurring deposits
• Any other deposits which are repayable at the end of a fixed period

NRI Eligibility for Section 80TTA Deduction

Like resident Indians, NRIs can also claim deductions on income from interest on a savings bank account. Since NRIs can only hold NRE or NRO savings account, and given the fact that interest earned on NRE saving account is tax-free, this section effectively applies to only interest earned on the NRO savings account. Thus, this tax deduction is only applicable to savings account deposit and not on NRO term deposit which is subject to TDS at the rate of 30.9%.

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