Section 80TTA Deduction on Interest on Savings Bank Account

Section 80TTA

The Finance Bill 2012 has proposed to insert a new section 80TTA in the Income Tax Act – 1961 which will provide deduction up to Rs. 10,000/- to an Individual/ HUF from Gross Total Income towards Interest on saving bank A/c (not being time deposits) maintained with a bank / society / post office. The deduction admissible shall be interest received or Rs. 10,000/- whichever is lower.

It is also proposed to provide that where the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body.

The section is applicable with effect from April 01, 2013 and will apply from AY 2013-14 and onwards.

Explanation—For the purposes of this section

  • “time deposits” means the deposits repayable on expiry of fixed periods.
  • banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);
  • co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or
  • Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898),

Few Clarifications on 80TTA (Amendments)

With above basic coverage on the provision proposed to be incorporated, few FAQ’s are as under:

  1. The deduction towards interest on all saving accounts taken together cannot exceed Rs. 10,000/-. If the interest on saving bank account received is Rs. 12,500/-, then effectively only Rs. 2,500/- will be taxable.
  2. The deduction is in addition to deduction of Rs. 1 Lacs admissible u/s 80C of the Income Tax Act-1961.
  3. As already mentioned, the maximum amount of deduction admissible u/s 80TTA can not exceed Rs. 10,000/-. If you will be receiving Rs. 31,850/- from three saving accounts, you will be entitled for Rs. 10,000/- only as deduction u/s 80TTA & the balance amount of Rs. 21,850/- will be taxable.
  4. The filing of income tax return would not be mandatory if your Gross Total Income is below the applicable basic exemption limit even though interest on saving accounts exceeds Rs. 10,000/-.
  5. The interest to be offered for taxation depends upon the method of accounting regularly followed by the assessee in recognizing the income.

If Assessee is following cash (Receipt) system of accounting then the interest income has to be offered at the end of FD Tenure i.e., at the time of maturity of FD. If Assessee is following mercantile (Accrual) system of accounting then interest income is required to be offered for taxation every year on due basis as income of that year only.

In view of the Circular No. 371 dated 21.11.1983 issued by the Central Board of Direct Taxes (CBDT), we advise the readers to offer the interest on Bank FDR on accrual (due) basis only.

Analysis/Conclusion

The insertion of this new section has been a relief to individual or Hindu undivided family as interest on saving bank account was always a taxable income with no corresponding tax benefits. It would also help in avoiding inclusion of small savings bank interest in the taxable income, which was required to be done after deletion of section 80L.

28 Responses to “Section 80TTA Deduction on Interest on Savings Bank Account”
  1. valentine sayings

    This website truly has all the information I wanted about this subject and didn’t know who to ask.

  2. Tarsem Lal

    I am a senior citizen and my income from pension is 2.0 lac. I also have earned interest on my savings Rs.72000.00 during the FY 2013-14. How much income tax I am due after exemption U/S 80TTA.

    • thesanyamjain

      You taxable income stands at Rs.62,000 and tax will be Rs.6200 plus surcharge.

  3. shankarguru

    My mom is senior citizen and her first taxable bracket is Rs.2,50,000 as per current laws. She does not have income over and beyond Rs.2,50,000, however, has SB interest exceeding Rs.10,000 in the current FY. Will sec 80TTA still apply in this case?

  4. letusdoitstart

    sir

    if the interest on saving is less then Rs 100 then should i enter in ITR?
    as i mention(about 4month ago) on your other post about error in itr of AY2012-13 in which by lack of knowledge i only enter commission income on which tds deducted and leave the agriculture income to show and

    in current AY2013-14 if i shows agriculture income (Rs6000per annum) and commission income(Rs56000) and use ITR2 then their is any problem ? and use of ITR2 for showing aricutlure income is correct or not?

    thanks and kind regards

    • thesanyamjain

      You should show every income irrespective of the amount. There is no problem in using ITR-2 in your case and showing agriculture income in ITR-2 is correct.

  5. Manoj

    If i receive a gift from a non relative of say 20000 in a financial year, do we have to reflect the figures in the exempt income as Other Sources or do we not show it anywhere?

    also, if a minor receives a gift of 30000 and his parent receives 30000, is it clubbed as 60000 with the parent and the entire income taxed or is it considered as below 50000 for each and is considered exempt?

    • thesanyamjain

      Answer to your first query is yes, you have to show the same under exempt income schedule in Tax Return.

      Gift received by minor shall be assessed in the hands of guardian and shall be treated as income not as gift. So it will be added in the income of guardian and exemption of Rs.1500 shall be taken. Thus there is no question of clubbing arises.

  6. Manoj

    Regarding Section 80 TTA, suppose my savings account interest is 8000, and my minor child has a savings account interest of 2500, do i club in his bank interest with mine and make the balance 500 exempt income as it is below 1500? or do i keep my bank interest at 8000 and add 1000 more to my income being in excess of 1500 exempt income for minor? Please revert.

    • thesanyamjain

      Do as follows:

      Your income: Rs.8,000
      You son’s income: Rs.2500

      Total: Rs.10,500

      Less: Section 10(32): Rs.1500
      Less: Section 80TTA: Rs.9000

      Taxable Income: NIL

  7. arnova10tab

    Hi,

    I have a question, I don’t have any sources of income other than my salary and I receive interest on the salary deposited, should the interest on the salary deposited be declared as income from other sources? Can I go ahead and put the interest under 80tta without declaring the interest as income from other sources?. Thanks in advance

    • thesanyamjain

      You will have to show the amount of bank interest earned under income from other sources before claiming deduction u/s 80TTA. But remember that deduction u/s 80TTA is available for savings account only.

  8. G K Dangua

    In case of autosweep accounts, the bank credits interest at the end of every quarter. Whether, the interest credited for a particular deposit has to be shown for tax calculation purposes in the same financial year in which it is credited or in the financial year in which the deposit matures.

    • thesanyamjain

      You have to take the amount shown in your passbook means in the same fy in which it is credited.

  9. GSR

    What about the interest earned from the Recurring Deposits? Is that taxable or can we show that under section 80TTA?

    • thesanyamjain

      Section 80TTA is applicable for interest on savings account not on interest from recurring deposits. Full interest from recurring deposits is taxable.

  10. paul

    Hi,
    can you please clarify if my understanding is correct?

    a) the interest (<= Rs 10000) that is credited by my bank is exempt from being included in my tax computations. This would be for all bank accounts put together. That is if Bank A, B and C credit 78000/- into my three accounts i can only claim Rs 10000 as exempt from inclusion in my tax computations.
    b) Will the above be separately applicable in my wife's case too?
    c) Apart from the above if one also has term/Fixed deposits with Banks separately, what is the exemption limit on the income from these sources?

    Thanks

    Paul

    • thesanyamjain

      1. Yes, the limit of exemption is for every individual, you and your wife are two separate individuals and thus eligible for separate exemption.

      2. This does not apply on fixed or term deposit. Section 80TTA is only for interest earned from savings account.

  11. n.viswanathan

    If the section is applicable only from 1/4/2013 then the AY for which it can be applied will be 2014-2015

    • thesanyamjain

      The date of applicability denotes the date from which you can enjoy the benefit.

  12. nelson

    I have income from interests from savings acc. totaling 50 000, out of which bank has deducted TDS@10% ie 5000. while IT return filing where should i mention this income.

    • thesanyamjain

      It should be under the head “Income from other sources” in ITR-1 and in schedule “Income from other sources” in ITR-2.

  13. Vivek Gutka

    Is Interest on Flexi Accounts or Sweeping accounts or like accounts offered by the bank also exempt upto Rs 10000 under this deduction?

    • thesanyamjain

      Since both Flexi and Sweeping Account is kind of time deposit or fixed deposit so deduction under section 80TTA is not allowed.

  14. Ravi Kesarkar

    I Think, This section is applicable with effect from April 01, 2013 and will apply from AY 2013-14 and onwards.

  15. Prashant

    the article says the provision is applicable with effect from 01 Apr 13 and AY 213-14.. they seem to be contradictory… with effect from 01 Apr 13 means Fin Year 2013-14 and AY 2014-15.. if it is AY 2013-14 then Fin Year will be 2012-13 and in such case it has be applicable from 01 Apr 2012 and not 01 Apr 2013…

    • thesanyamjain

      It does means that the deduction can be taken from AY 2013-14 on the interest earned in FY 2012-13.

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