Section 80TTA: Deduction of Interest on Bank savings deposit
A new section got its entity from Assessment Year 2013 – 14 via the Income Tax Act. This section is sequenced as 80TTA and the same is concerned with the taxability of Interest earned on saving bank deposit. Section 80TTA allows income from interest on saving bank as a deduction from calculation of Total Income of an assessee. Let us discuss applicability, limit and much more dealt within the section.
Introduction of Section 80TTA:
The section was introduced in Finance Bill 2013 and so it is applicable from 1st April, 2012 i.e. Financial Year 2012 – 13 and Assessment Year 2013-14 and is still applicable
Applicability of Section 80TTA:
The section applies to Individuals and Hindu Undivided Families (HUFs). It means that Section 80TTA is not applicable to other persons such as Firm, Association of Person (AOP), Body of Individuals (BOI), Company, Limited Liability Partnership (LLP) etc.
Interest Allowed as deduction:
The section allows interest earned on deposits held in saving bank accounts. The interest should be earned from the eligible saving account. Remember that it does not include Interest earned on Time Deposits, where, “time deposits” means the deposits repayable on expiry of fixed periods. We can call it Fixed Deposits in simple language.
Eligible Saving Accounts:
Interest earned from the deposit held in saving accounts with Bank or Banking Company, Co – operative Society that is engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank) and a Post Office will only be eligible for claiming deduction under section 80TTA. Thus saving accounts with Banks, Co – operative societies and post office are eligible accounts under this section.
Deduction allowed under section 80TTA / Limit of Deduction under section 80TTA:
Saving Bank Interest earned by the assessee will be allowed as deduction u/s 80TTA while calculating taxable income of the assessee to the extent Rs. 10,000. It means that if the amount of Saving Bank Interest earned by the assessee is less then Rs. 10,000 then the whole amount will be allowed as a deduction. In case where the amount of saving bank interest exceeds Rs. 10,000 then the amount exceeding Rs. 10,000 will be taxable under the head Income from Other Sources.
Comparison of deduction under section 80TTA and Section 10(15)(i):
Deduction of Interest on saving bank under section 80TTA includes saving bank interest received from Post Office. While the saving Bank Interest from Post Office is exempt to the extent Rs. 3500 in case of Individual Account and Rs. 7000 in case of Joint Account. Thus the assessee has to remember the effect of both the sections while claiming deduction of Saving Bank Interest while calculating Taxable Income.
Circumstance when Deduction of saving bank Interest not allowed under section 80TTA:
In case where the Saving Account is held by the partners or members of the Firm, AOP, BOI etc on behalf of the said bodies, and interest income is earned there on, the no such interest will be allowed as a deduction under section 80TTA even if the saving account is in the name of an individual.
Thus, Section 80TTA have proved of great help as the small amounts of saving bank interests are not to be added while calculating taxable income of the assessee and tax thereon. Even TDS provisions are also not applicable to saving bank interest as the same is exempt under section 19A which taxes interest earned by the assessee. It has also relieved Individuals and HUFs from paying tax on saving bank interest which was a taxable income before insertion of Section 80TTA.