Individuals are obligated to pay tax on their earnings under the Income Tax Act of India.. Certain parts of the legislation, however, allow taxpayers to claim deductions and exemptions in order to decrease their tax payment.
Section 80TTA of the Income Tax Act is one such provision that enables people to deduct interest income from savings bank accounts. In this blog, we will discuss Section 80TTA in detail and understand how it can help taxpayers save tax on their interest income.
Section 80TTA: An Overview
Section 80TTA of the Income Tax Act was introduced in 2012 and applies to individuals and HUFs (Hindu Undivided Families). Individuals may claim up to Rs. 10,000 on interest income received from savings bank accounts under this provision. The deduction is allowed to taxpayers irrespective of their income level and is available only for interest income earned from savings bank accounts.
It is crucial to remember, however, that this deduction does not apply to interest income collected on fixed deposits, recurring deposits, or any other sort of deposit. Furthermore, the deduction is exclusively available to individual and HUFs and not to any other form of taxpayer.
Who is Eligible for Deduction under Section 80TTA?
As per the Income Tax Act, any individual or HUF who earns interest income from a savings bank account is eligible to claim a deduction under Section 80TTA. Only interest income totaling Rs. 10,000 or more can be deducted in a given fiscal year. For instance, if a person receives Rs. 12,000 in interest income from a savings account during a fiscal year, they may deduct Rs. 10,000 under Section 80TTA; the remaining Rs. 2,000, however, will be subject to tax at the applicable rate.
How to Claim Deduction under Section 80TTA?
To claim a deduction under Section 80TTA, taxpayers need to report their interest income in the income tax return (ITR) and claim the deduction in the appropriate section of the ITR form. It should be noted that people can only claim the deduction if they have interest income from a savings bank account.
The deduction can be claimed by individuals and HUFs, irrespective of their income level. However, if the interest income earned by the taxpayer exceeds Rs. 10,000 in a financial year, they will have to pay tax on the excess amount as per the applicable tax rate.
You may be eligible for respective ITR based on your source of income.
ITR-1
- Insert the amount of interest generated under “From Savings Bank” in the “OS – Income from Other Sources” schedule of the form.
- The Section 80TTA deduction ought to be computed automatically.
- Confirm that the deduction amount listed on “Schedule VI-A” is accurate.
ITR-2
- Insert the amount of interest generated under “From Savings Bank” in the “OS – Income from Other Sources” schedule of the form.
- The Section 80TTA deduction ought to be computed automatically.
- Confirm that the deduction amount listed on “Schedule VI-A” is accurate
Impact of Section 80TTA on Tax Liability
Taxpayers may deduct up to Rs. 10,000 for interest income from savings bank accounts under Section 80TTA. This deduction helps reduce the tax liability of taxpayers and can result in significant tax savings.
For example, let us consider a scenario where an individual earns an interest income of Rs. 15,000 from a savings bank account in a financial year. If they do not claim a deduction under Section 80TTA, they will have to pay tax on the entire interest income of Rs. 15,000. However, if they claim a deduction of Rs. 10,000 under Section 80TTA, they will have to pay tax only on the remaining Rs. 5,000, resulting in significant tax savings.
Conclusin
Section 80TTA of the Income Tax Act is a useful provision that allows taxpayers to claim a deduction on interest income earned from savings bank accounts. The deduction is available to individuals and HUFs, irrespective of their income level, and can help reduce the tax liability of taxpayers. However, it is important to note that the deduction is available only for interest income earned from savings bank accounts and not for any other type of deposit. Additionally, taxpayers must report their interest income and claim the deduction in the appropriate section of the ITR form to avail of the benefits of Section 80TTA.
It is important for taxpayers to keep track of their interest income from savings bank accounts and claim the deduction under Section 80TTA to reduce their tax liability. E-filing experts can help taxpayers with the process of claiming deductions and ensure that they file their income tax returns correctly.
Taxpayers can save significant tax on their interest income by claiming deductions under Section 80TTA of the Income Tax Act. The provision allows for a deduction of up to Rs. 10,000 for individuals and HUFs on interest income received from savings bank accounts. However, taxpayers must ensure that they report their interest income and claim the deduction in the appropriate section of the ITR form to avail of the benefits of this provision. E-filing experts can provide guidance and assistance to taxpayers in this regard and ensure that they file their income tax returns correctly.
For easy reference, taxpayer can also refer to Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) which encloses the total interest received from saving bank(s) for the given assessment year