Section 80TTA of Income Tax Act - Meaning, Deduction Limit, Claim Process
Section 80TTA of Income Tax Act - Meaning, Deduction Limit, Claim Process
Almost every individual has a savings account in India. However, most people don't know that interest earned on a savings account is taxable. This interest is taxable under the "Income from other sources” when filing income tax returns.
However, individuals can claim a few deductions under the new tax regime. Whereas, the old tax regime offers multiple deductions and exemptions. Section 80TTA (under the old tax regime) allows tax deductions up to ₹10,000 on the interest income of a savings bank account. In this guide, we will explore all about the Section 80TTA and 80tta deduction limit.
What is Section 80TTA of the Income Tax Act?
Section 80TTA is the Income Tax Act section that allows tax relief to individuals on their savings bank interest earned. The section was included in the 2013 Finance bill. Under Sec 80TTA, a deduction of up to ₹10,000 is applicable on saving account interest for a year.
This provision is introduced to encourage the saving culture in society. However, there are specific eligibility criteria for claiming section 80TTA deduction for AY 2023-24.
Who Are Allowed to Claim Deduction Under Sec 80 TTA?
The section 80TTA deduction is applicable to:
Individuals
Hindu Undivided families(HUFs)
Non-residents of India are also eligible for Section 80TTA deduction but with some consideration. The key consideration is that only the holder of a Non-Resident Ordinary account can claim a tax deduction under Section 80TTA.
The interest earned on a Non-Resident External account is exempt from tax. However, individuals over 60 cannot claim this tax deduction, as they can claim the benefits under section 80 TTB.
Type of Interest Income That Are Allowed Section 80 TTA Deduction Limit
Only certain types of interest income are allowed for 80TTA deduction. These interest income include:
An interest income from a savings account with a bank.
An interest income from a savings account with the post office.
An interest income from a savings account with a cooperative society that offers banking services.
Type of Interest Income That Are Not Allowed Section 80 TTA Deduction Limit
The interest income that is not allowed under Section 80TTA deduction are:
Interest income earned from the fixed deposit with the bank.
Interest income earned from the recurring deposit with the bank.
Further, any interest income earned from the term deposits.
Any deposits from Non-banking Financial Companies.
Interest earned from corporate debentures and bonds.
Maximum Deduction Under 80TTA
The maximum Section 80TTA deduction limit for the interest income of a savings account per year is ₹10,000. This means that if the individual's interest income is ₹10,000 in a financial year, then the entire amount will be applicable for a tax deduction as per section 80TTA.
This limit also applies when individuals have multiple savings accounts with different banks. However, if in case, individual interest income goes beyond the ₹10,000 limit then the tax deduction will be capped at ₹10,000.
How to Claim Section 80TTA Deduction?
Individuals need to follow the proper procedure to claim Section 80TTA deduction for AY 2023-24. The steps include:
Step 1: Determine the Sec 80TTA Eligibility
The first step in claiming the deduction under Sec 80TTA is to determine the eligibility criteria. Only individuals and members of Hindu undivided families can claim the deduction. It is not applicable to partnership firms, LLPs, etc.
Step 2: Calculate the Interest Income
The next step for eligible individuals is to calculate the interest income earned from the bank, post office or cooperative society bank during the financial year. Proper documentation needs to be maintained for the interest income.
Step 3: Add Total Income
Further, after calculating the deduction amount, individuals need to add the interest income in total Income. This is crucial as individual tax liability is calculated from the total Income.
Step 4: Evaluate the Deduction Amount
Next, determine the deduction amount, which is up to ₹10,000 for an interest income. If the individual's interest income is ₹10,000 or below, they can claim a full deduction. However, if it is beyond ₹10,000, a deduction up to a limit of ₹10,000 can be claimed.
**Step 5: File Income Tax Returns
The next step is to file the income tax return for a year. However, while filing a return, make sure that the interest income is listed under "Income from Other Sources" for a claim deduction. Further, provide supporting documentation if needed.
**Step 6: Maintain the Documentation
The tax authorities may need supporting documentation like bank statements, passbook entries and more for a claim made under Sec 80TTA. The documentation is needed for auditing and verification procedures by the income tax authorities.
Documentation Needed for Applying for Claim Section 80TTA
The tax authorities need the following list of documents:
Document to prove age.
Document to support identity.
Bank statement copies.
Interest certificate(if issued)
Conclusion
Section 80TTA is one of the crucial sections of the Income Tax Act. It allows deductions on interest income and helps improve the financial management of HUFs and individuals.
However, before claiming a tax deduction under Section 80TTA, ensure that the eligibility criteria are met. Also, while filing a claim, make sure to keep all the necessary documentation handy.
How Health Insurance Helps in Saving Taxes?
Besides this, individuals can also save tax or reduce tax liability by investing in a medical insurance plan. Section 80D of the Income Tax Act of 1961 allows individuals to save tax deductions up to ₹25,000 on premiums paid for health insurance policies for a financial year.
Besides saving tax, the health insurance policy also offers financial security to individuals in case of a medical emergency. The plan will cover medical expenses incurred as per the medical insurance policy condition for tenure.
Tata AIG is a renowned insurance provider that offers various health insurance plans catered to individual needs.
From family health insurance to individual health policies, we have plans for everyone. Visit the website to learn more about health insurance plans.
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.
Related Articles
Who is eligible for an 80TTA deduction?
Who is eligible for an 80TTA deduction?
All taxpayers, individuals and HUFs are eligible for section 80TTA deduction.
What are 80 TTA and 80 TTB?
These are both sections of the Income Tax Act. Section 80TTA applies to individuals and HUFs who claim a deduction on interest income from a bank, cooperative society, or post office. Section 80 TTB is for individuals above 60 years of age.
Is 80TTA applicable in the new tax regime?
Section 80TTA is not applicable in the new tax regime.
How do I claim saving bank interest in ITR?
While filing an income tax return, individuals need to mention the savings account interest income under Income from other sources for claiming applicable deductions.
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