Rishab Parakh
What is Section 80TTA?
Many taxpayers are not aware about section 80TTA under Income Tax Act’1961 which was introduced through Finance Act, 2012. Section 80TTA provides a deduction of Rs10,000 on your income from interest on saving bank accounts.
Who can claim deduction u/s 80TTA?
Deduction u/s 80TTA is applicable to individual taxpayers and HUF only. This benefit is not available to a firm, an association of persons or a body of individuals.
Eligible savings account for claiming deduction!
Saving accounts with any of the following entities will qualify:
n Bank or banking company
n Co-operative society engaged in carrying on the banking business and as specified
n Post office saving account
How does it work?
Interest earned on your savings account or FDs has always been taxable under the head “Income from Other Sources”. In order to claim deduction, you have to first include interest income in your total income and then claim deduction u/s 80TTA.
For example, if you have received an interest of Rs18,000 from your savings bank account then you have to pay a tax on Rs8,000 only i.e. (18,000-10,000) thus Rs10,000 can be claimed as a deduction u/s 80TTA. But if total interest income from all your savings accounts is Rs9,000 only, then you don’t need to pay tax at all and the entire amount would be deductible u/s 80TTA.
Is section 80TTA applicable to FD Interest?
No, this deduction is NOT applicable to the interest you received on your FDs/time deposit or term deposit. Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.
For example if you make a 365 days FD for an amount of Rs. 50000 at an interest rate of say 8%, your entire interest income of Rs. 4000 (Rs50000 *8%) would be subject to tax as per your applicable tax slab. You cannot claim deduction of Rs. 4000 available u/s 80TTA and you need to pay tax on it.
Does no “TDS” means “no need to pay Tax”?
Income Tax Act allows certain deposits & accounts on which no tax is required to be deducted irrespective of any limit for the amount of such interest. Hence there is no TDS on your saving account interest. Regarding FDs, banks deduct tax only if your total interest income is more than Rs10,000.
In any case, you have to pay tax on FD or saving account interest as per your tax slab. And as mentioned above you can claim deduction up to Rs10,000 with respect to your savings account interest. For example, if your bank is deducting 10 pc tax on your FD interest and you fall under the higher slab of say 20 or 30 pc, then you need to pay the balance tax.
(Rishabh Parakh is a chartered accountant and a founder director of Money Plant Consulting, a leading investment & tax advisory service provider in Pune. You may mail your queries to him at
rishabhca@gmail.com)
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