All you need to know about Section 80TTA of the Income Tax Act
“What is Section 80TTA under Income Tax?”, Deduction available under Section 80TTA of the Income Tax Act, and FAQs on Section 80TTA
Table of Content
Everyone has a savings account, but the majority of us are unaware that the interest earned is subject to taxation as “Income from other sources.” You can, however, avoid paying taxes on interest payments up to INR 10,000 under Section 80TTA. This article will emphasis on Section 80TTA under the Income Tax Act, Deduction available under Section 80TTA of the Income Tax Act, Entity that are eligible under Section 80TTA Deduction, and FAQs on Section 80TTA.
What is Section 80TTA under Income Tax?
Section 80TTA of the Income Tax Act, 1961 addresses the tax deductions for interest payments. Interest on savings accounts maintained by individuals (but not Senior Citizens) or Hindu Undivided Families (HUF) is subject to this deduction. 10,000 rupees is the maximum deduction that can be made for all savings accounts.
Types of institutions that are covered in the Section 80TTA of Income Tax Act
- Banks: Financial institutions established in accordance with the Banking Regulations Act of 1949. All banks and banking institutions established according to Section 51 of the Banking Regulations Act of 1949 fall under this category.
- Post Offices: All post offices run by the Indian government that offer the ability to open savings accounts.
- Cooperative Societies: Cooperative Societies that have been authorized by the government to operate their own banking system and are qualified to provide savings accounts.
Deduction available under Section 80TTA of the Income Tax Act
The Income Tax Act’s Section 80TTA is known as “Deduction in respect of interest on deposits in savings accounts.”
The key elements of this section are listed below:
- Up to INR 10,000 in interest payments on savings account deposits are exempt from taxation.
- The following financial institutions accept holdings of savings accounts:
- Cooperative society
- Postal Service
- If the combined balance of all your savings accounts is less than or equals to INR 10,000, you may request an exemption for interest on saving account.
Entities that are eligible under Section 80TTA Deduction
The organizations listed below are eligible to deduct interest on all of their savings bank and post office accounts under Section 80TTA.
- HUF (Hindu Undivided Family)
- Individuals (excluding senior citizens)
- NRIs (Non-Resident Indians)
Note: Only NRE and NRO accounts can be opened in India by NRIs. On NRE accounts, interest is not subject to tax and the 80TTA advantage is restricted to NRO savings accounts. Please be aware that NRO term deposits do not permit deductions.
Interest income that is not allowed under Section 80TTA
The following are prohibited from claiming the deduction under Section 80TTA:
- Dividends on fixed deposits
- From regular deposits, interest
- Additional time deposits (Time deposits are sums of money that must be repaid after a set amount of time.)
FAQs on Section 80TTA
1. Can 80 TTA be claimed if the assessee receives income from capital gains, rental income, and others?
Only if the assessee has received interest income from the savings account than under section 80 TTA it can be claimed.
2. How many bank accounts may I deduct from my income under section 80TTA?
Section 80TTA relates to the amount of interest, not the number of accounts you maintain. As a result, the tax benefit can be claimed for as many accounts interest payments totaling up-to INR 10,000.
3. Do I have to declare the interest I received on the money I kept in my savings account?
Yes, according to the Income Tax Act, any person for whom filing a return is applicable is required to disclose all of his income received during the reporting period and pay the related taxes.
4. What are the consequences of neglecting to report interest earned on a savings account balance?
Let’s imagine someone neglects to report their pay for an entire year, whether on purpose or accidentally. They will face sanctions for this non-compliance and be required to pay the tax due and interest if their return is chosen for review.
The Income Tax Act of 1961’s Section 80TTA addresses the tax deductions for interest payments. Interest on savings accounts maintained by individuals (excluding senior citizens) or Hindu Undivided Families is subject to this deduction. There is an INR 10,000 maximum deduction that can be made for all savings accounts.
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