Budget 2021 update :It has been proposed to exempt the senior citizens from filing income tax returns if pension income and interest income are their only annual income source. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age who have a pension and interest income from the bank.
This article is about claiming deduction on interest under Section 8oTTA. But first, what is 80TTA?
Section 80TTA provides a deduction of Rs 10,000 on interest income. This deduction is available to an Individual and HUF.
This deduction is allowed on interest earned
This deduction is NOT allowed on interest earned on time deposits
- 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
. Time deposits mean deposits repayable on expiry of fixed periods. It shall not be allowed for –
- Interest from fixed deposits
- Interest from recurring deposits
- Any other time deposits
– 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 where you have accounts).
How to claim the deduction
– First add your total interest income under the head ‘Income from Other Sources
’ in your Return. The deduction is shown under section 80 Deductions under section 80TTA.
Frequently Asked Questions
Am Obligated to disclose Interest earned on balance maintained in my Savings Bank account?
Yes, Income Tax Act,1961, requires that every person for whom filing of return is applicable, is expected to report all the incomes earned by that person during the period for which he is filing the return and pay the applicable taxes.
What will be the consequences of no reporting the Interest Income earned on balance maintained in Savings Bank account.
If any person fails to report the Income earned by him during a year, either intentionally or otherwise, when return of such Individual / HUF is picked for scrutiny then they shall be liable to penal provisions for such non compliance and be demanded to pay the tax due along with interest.
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Read about 80TTB here