Section 80TTA/80TTB: Deductions for Interest Income

Section 80TTA and Section 80TTB of the Income Tax Act of 1961 help all tax-paying individuals save money on their savings and interest earned. The deductions allow all taxpayers to significantly reduce taxable liability.

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Let's take a closer look at these deductions and their eligibility criteria.

Section 80TTA

  1. Deduction for Interest Income from Savings Account 

    Section 80TTA allows HUFs or individuals to claim a deduction of up to Rs. 10,000 on interest earned from a savings account. The deduction is available on the interest earned from a savings account held with a bank, post office, or cooperative society. The maximum deduction limit is Rs. 10,000 irrespective of the amount of interest earned.

  2. Limitation

    It is important to note that the deduction under Section 80TTA is not available on interest earned from fixed deposits, recurring deposits, and other term deposit schemes. Additionally, the deduction is not available to non-resident Indians (NRIs).

Section 80TTB

  1. Deduction for Interest Income for Senior Citizens

    Section 80TTB is a recent amendment that offers a deduction for senior citizens on interest earned from deposits. This section was introduced in the Finance Act 2018 and applies to individuals aged 60 years and above. Although higher than section 80TTA, the deduction under Section 80TTB has a limit of Rs. 50,000.

    Senior citizens can claim this deduction on interest earned from savings accounts, fixed deposits, recurring deposits, or any other term deposit. 

  2. Limitation

    It is important to note that the deduction under Section 80TTB is not available to HUFs or any other category of individuals except senior citizens. The maximum limit of total deduction under this section is Rs 50,000.

Eligibility

All individuals or HUFs can claim a deduction under Section 80TTA. Under section 80TTB, all senior citizens of age 60 years and above are eligible to claim a deduction.

Limitations

It is important to note that the interest income earned above the deduction limit will be taxed at the tax rate applicable to the individual. For example, if an individual earns an interest income of Rs. 12,000 from a savings account, the deduction under Section 80TTA will only be available on Rs. 10,000. The remaining Rs. 2,000 will be taxable.

The deduction under Section 80TTA and Section 80TTB is not available for interest income earned from sources other than savings accounts or deposits. For example, interest earned on bonds, shares, or mutual funds does not qualify for these deductions.

Furthermore, it is important to declare all the interest income earned from savings accounts or deposits while filing income tax returns. Failure to do so may result in a notice from the Income Tax Department and could lead to penalties.

Benefits of Claiming Section 80TTA and Section 80TTB

Some benefits of sections 80TTA and 80TTB are:

  • Claiming deductions under Section 80TTA and Section 80TTB can reduce the taxable income, which further reduces overall tax liability. 

  • The deductions can help individuals save a considerable amount, especially senior citizens who have limited sources of income. 

Documents Required to Claim Deductions

To claim deductions under Section 80TTA or Section 80TTB, individuals must provide the following documents: 

  • Bank statements

  • Interest certificates 

  • Proof of age 

  • Aadhaar card 

  • Any other government-issued ID

Deductions in Joint Accounts

In the case of joint accounts, the deduction under Section 80TTA or Section 80TTB can only be claimed by the first account holder. If the second account holder is a senior citizen, they can claim the deduction under Section 80TTB on the interest earned from their share of deposits. The tax deductions apply to each account holder individually as per the slab they fall in.

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How to Claim Deductions under Section 80TTA and Section 80TTB?

To claim the deduction under Section 80TTA or Section 80TTB, the individual or HUF must file their income tax return (ITR). Taxpayers can fill out ITR forms online or offline with appropriate details to claim deductions. This benefit is not available to people who do not claim it while filing ITR.

Individuals and HUFs should ensure that they keep a record of the interest earned and the deduction claimed for future reference.

In Conclusion

Section 80TTA and Section 80TTB are two useful deductions that help save taxes on interest income earned from savings accounts or deposits. These deductions are aimed at encouraging savings and investments among individuals/HUFs and senior citizens. It is important to ensure that all necessary documents and proofs are available while claiming these deductions. The taxpayers can also consult their advisors for further guidance.

FAQ's

  • Can I claim deductions under both – Section 80TTA and Section 80TTB? 

    No, an individual can claim deductions under either Section 80TTA or Section 80TTB, depending on their age and type of account.
  • Is the deduction limit of Section 80TTB applicable to each deposit or for the total interest income earned during the year? 

    The deduction limit of Rs. 50,000 under Section 80TTB applies to the total income earned from interest on deposits by the senior citizen during a financial year. The deduction is available irrespective of the number of accounts held by an individual.
  • Can I claim a deduction under Section 80TTA for interest earned from a current account? 

    No, deductions under Section 80TTA are only applicable to interest earned from a savings account. Interest earned from a current account is taxable as per the individual's tax slab.
  • Can a senior citizen claim a deduction under Section 80TTB if they have not attained the age of 60 years during the financial year? 

    No, only individuals aged 60 years and above can claim deductions under Section 80TTB. If a citizen has not attained the age of 60 years during the financial year, they are not eligible to claim this deduction.
  • Can HUFs claim deductions under Section 80TTB?

    No, deductions under Section 80TTB are only applicable to senior citizens and not HUFs or any other categories of individuals. However, HUFs can claim deductions under Section 80TTA for interest earned from a savings account.

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