Section 80TTA Deduction- Interest on Bank savings deposit
Section
80TTA is introduced with effect from April 01, 2013 and will apply from AY
2013-14 and onwards. Section is introduced to provide deduction to an individual or a Hindu undivided
family in respect of interest received on deposits (not being time deposits) in
a savings account held with
banks, cooperative banks and post office. The deduction is restricted to Rs
10,000 or actual interest whichever is lower.
It is also provided 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.
Analysis of Section 80TTA
Who can claim deduction u/s 80TTA?
Deduction u/s 80TTA is applicable to
individual taxpayers and HUF only. This benefit is not available to a firm, an
Association of Persons, a Body of Individuals, LLP or Company Assessee.
Eligible savings account for
claiming deduction
Saving accounts with any of
following entities will qualify:
- Bank or banking company;
- Co-operative society engaged in carrying on the banking
business and as specified.
- Post office savings account.
Section 80TTA deduction not
available on FD Interest
This
deduction is NOT applicable to the interest you received on your FDs/time
deposit or term deposit. Term deposit means a deposit received by the bank for
a fixed period and can be withdrawn only after the expiry of the predefined
fixed period.
Maximum Deduction
- The deduction allowed is interest received on eligible
saving accounts or Rs. 10,000 whichever is lower.
- If interest earned is more than 10,000 then balance
amount will be taxable as before i.e considered as Income from Sources and
taxed as per your slab rate.
- The deduction is in addition to deduction of Rs.
1.50 Lakh of section 80C of the Income Tax Act-1961.
Applicable from A.Y. 2013-14 Onwards
The section is applicable from April
01, 2012 and will apply from AY 2013-14 and onwards.
TDS Provisions not applicable on
Saving Bank Interest
The interest earned on savings
account is exempted from TDS under Section 194A of Income Tax Act i.e No TDS is
deducted on interest from saving account.
Post office savings
bank interest exemption under section 10(15)(i)
Post office savings bank interest is
exempt up to Rs. 3500 (in an individual account) and Rs. 7000 (in a joint
account) under section 10(15)(i) by virtue of Notification
No. 32/2011, dated June 3rd 2011 read with Notification No. GSR 607, dated June 9, 1989. The
cumulative impact of section 10(15)(i) and 80TTA as follows:
Up to the Asessment year 2011-12
Rs.
|
For the Assessment year 2012-13
Rs.
|
From the Assessment Year 2013-14
Rs.
|
|
Interest on Post Office saving
Bank (exemption under section 10(15)(i)
|
Full Exemption, nothing is taxable
|
Exemption up to Rs. 3500 in a single
account and Rs. 7000 in a joint account
|
Exemption up to Rs. 3500 in a
single account and Rs. 7000 in a joint account
|
Interest on savings account with a
bank, co-operative bank and Post office (deduction under section 80TTA)
|
No deduction
|
No deduction
|
Deduction up to Rs. 10000
|
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.
Extract of Section
80TTA
Deduction in respect of interest on
deposits in savings account.
80TTA. (1) Where the gross total income of an assessee, being an
individual or a Hindu undivided family, includes any income by way of interest
on deposits (not being time deposits) in a savings account with—
(a) a banking company to which the
Banking Regulation Act, 1949, applies (including any bank or banking
institution referred to in section 51 of that Act);
(b) a 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
(c) a Post Office as defined in
clause (k) of section 2 of the Indian Post Office Act, 1898, there shall, in accordance
with and subject to the provisions of this section, be allowed, in computing
the total income of the assessee a deduction as specified hereunder, namely:—
(i) in a case where the amount of
such income does not exceed in the aggregate ten thousand rupees, the whole of
such amount; and
(ii) in any other case, ten thousand
rupees.
(2) 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.
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