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Section 80TTA Deduction


Section 80TTA Deduction

Section 80TTA is a facility in the Income Tax Act that provides deductions for income from bank deposits. The section has been introduced with effect from 01.04.2012. The maximum deduction 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 simultaneously. The specified conditions are the following:

  • The deduction can be claimed for interest income earned during 2012-13 and 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 the savings account.
  • The savings account should be maintained with a bank or post office.
  • An assessee claiming a deduction under this section cannot claim a deduction under the Act for the same income again.
  • The deduction cannot be claimed if the deposit is made in the name of an association.
  • The deduction will be available for an assessee whose interest income attracts an exemption under Section 10(15) of the Act. This section offers an exemption for interest income earned from post office savings schemes. The exemption amount shall be Rs.3500 for a single account and Rs.7000 for a joint account.
  • The deduction can be applied to determine the tax liability prior to making an advance tax payment.

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 accounts, and since interest earned on an NRE savings account is tax-free, this section effectively applies to only interest earned on the NRO savings account. Thus, this tax deduction only applies to savings account deposits and not to NRO term deposits, which are subject to TDS at 30.9%.

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