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Section 80TTA of Income Tax Act – All about Claiming Deduction on Interest

Updated on: Jul 11th, 2024

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2 min read

Your savings bank interest is taxable! 

Ever wondered how savings bank interest is taxed and if you could save the income tax on it?

We all have a savings bank account but most of us are not aware that the interest received is taxable under the head ‘Income from other sources'. However, you can save taxes on interest received up to Rs 10,000. Section 80TTA of the Income Tax Act, 1961 provides a deduction of Rs 10,000 on such interest income. This article delves deeper into the details of Section 80TTA.

What is Section 80TTA?

Section 80TTA of the Income Tax Act, 1961 provides a deduction of up to Rs 10,000 on the income earned from interest on savings made in a bank, co-operative society or post office. There is no deduction for interest earned from fixed deposits an recurring deposits.

Who can Claim 80TTA Deduction? Can NRIs Avail of a Deduction under 80TTA?

Section 80TTA deduction is available to an Individual and HUF. 

Yes, NRIs can also avail a deduction under Section 80TTA. It is pertinent to note that NRIs are allowed to open only two types of accounts in India. i.e. NRE and NRO accounts. However, only the NRO savings account holders can claim the benefit of Section 80TTA as interest earned on NRE accounts are tax-free.

Note: This section is not applicable to senior citizens aged 60 years or more as Section 80TTB applies to them.

Which Type of Interest Incomes are Allowed as Deduction Under Section 80TTA

You can claim a deduction for interest income earned from the following:

  • From a savings account with a bank
  • From a savings account with a co-operative society carrying on the business of banking
  • From a savings account with a post office

Interest Income Not Allowed as Deduction Under Section 80TTA

The deduction under Section 80TTA shall not be allowed for –

  • Interest from fixed deposits
  • Interest from recurring deposits
  • Time deposits mean deposits repayable on the expiry of fixed periods.
  • Interest  earned on corporate bonds and debentures. 
  • Interest from Provident fund deposits
  • Interest from lending business

Maximum Deduction Allowed Under Section 80TTA

The maximum deduction is limited to Rs 10,000. If your interest income is less than Rs 10,000, the entire interest income will be your deduction. If your interest income is more than Rs 10,000, your deduction shall be limited to Rs 10,000. (You have to consider your total interest income from all banks in case you have multiple accounts).

How to Claim Deduction Under Section 80TTA

First, add your total interest income under the head ‘Income from Other Sources’ in your return. Calculate your gross total income for the financial year from all the income heads and then show it as a deduction under Section 80TTA.

Important: You can claim Section 80TTA deduction only if you opt for the old regime as new regime is default from now.

For Example:

If Mr A earns a salary income of Rs 5,00,000, interest on savings account with a bank is Rs 5,000 and on fixed deposits is Rs 15,000 in a financial year. Also, an eligible amount for deduction of Rs 10,000 under Section 80C. Then, taxable income will be computed under the old tax regime as below:-

ParticularsAmount (in Rs)Amount (in Rs)
Income from Salary
Less: Standard Deduction
5,00,000
(50,000)


4,50,000
Income from other sources
-Interest on savings account
-Interest on fixed deposits
 

5,000
15,000



20,000
Gross Total Income  4,70,000
Less: Chapter VI-A deduction
-80C
-80TTA

10,000
5,000



(15,000)
Taxable Salary 4,55,000

Read about 80TTB here

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Frequently Asked Questions

Am I eligible to claim a Tax deduction for interest on fixed deposits under Section 80TTA?

No, Section 80TTA does not allow for tax deduction on fixed deposits, but it does allow for interest earned on savings bank accounts.

Am I eligible for Tax deduction under section 80TTA if I maintain a savings bank account in a Cooperative Society?

Yes, If you have a Savings Bank account in a registered Cooperative Society, you are eligible for  tax Deduction under Section 80TTA.

Is there a restriction on the number of bank accounts for which I can claim a deduction under Section 80TTA?, is so what is the limit?

Section 80TTA imposes a limit for the amount of interest earned, not on the number of accounts maintained. Hence Tax benefits can be claimed for any number of accounts.

Am I obligated to disclose interest earned on the balance maintained in my savings bank account?

Yes, the Income Tax Act requires every person for whom return filing is applicable to report all his income earned during the period for which he is filing the return and pay the applicable taxes thereon.

How can I claim a deduction under Section 80TTA?

You can claim a deduction under Section 80TTA by filing your income tax return. First, the income should be included in your income under the head ‘Income from other sources’, and then claim Section 80TTA deduction.

What will be the consequences of not reporting the interest income earned on the balance maintained in a savings bank account?

Suppose any person fails to report his income during a year, either intentionally or otherwise. In that case, they shall be liable to penal provisions for such non-compliance and pay the tax due and interest when their return is picked for scrutiny.

Can we claim both 80TTA and 80TTB?

No, you cannot claim both 80TTA and 80TTB simultaneously.

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Quick Summary

Savings bank interest is taxable under Section 80TTA, allowing a deduction of Rs 10,000. NRIs can claim the benefit under 80TTA with restrictions. Only specific interest incomes are eligible for deduction, excluding fixed deposits. Maximum deduction is Rs 10,000, applicable for savings accounts in banks, co-operative societies, or post offices.

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