The last filing date for the tax return (ITR) for the 2022-23 tax year or the 2021-22 financial year is July 31, 2022. Taxpayers filing their tax returns under the former tax system, are eligible for multiple tax deductions and exemptions. Did you know that you can claim an income tax deduction of up to Rs 10,000 for interest received from your savings bank accounts? Let’s see how it works
Explanation of Section 80TTA deduction
Section 80TTA of the Income Tax Act 1961 allows taxpayers to claim a deduction for interest earned on the savings account. The maximum deduction allowed under this Section 80TTA is Rs 10,000.
Taxpayers are eligible to claim the deduction if interest income received from the following – a) From a savings account with a bank, b) From a savings account with a cooperative society or of a bank, c) Postal savings schemes. Moreover, the tax benefit can be claimed for any number of accounts up to the total interest amount of Rs 10,000.
The deduction under Section 80TTA is above the Rs 1.5 lakh limit of Section 80C.
What interest income is not allowed as a deduction under Section 80TTA?
It should be noted that the deduction under Section 80TTA is not allowed for interest income from fixed deposits or recurring deposits or any other term deposits. Interest received from deposits in non-bank financial corporations (NBCS) will not be eligible for tax benefits under Section 80TTA.
Who can claim a deduction under Section 80TTA?
Individual taxpayers residing in India and Hindu Undivided Families (HUF) can claim deductions under Section 80TTA. Non-Resident Indians (NRIs) may receive tax benefits for their Non-Resident Regular or NRO Savings Accounts under Section 80TTA. NRIs can only hold External Non-Resident Savings Accounts (NRE) and NRO in India. As the NRE Savings Account is already tax-exempt, Section 80TTA only applies to interest earned on the NRO Savings Account.
It is important to note that persons over the age of 60 are not eligible to claim deductions under Section 80TTA as they may claim deductions under Section 80TTB.
Those who opt for the new tax regime under Article 115BAC, cannot claim tax benefits under Article 80TTA.
How to Claim a Section 80 TTA Deduction
Taxpayers should note that this is a deduction, not an exemption. Thus, when filing a tax return, individuals must first add their total interest income under the heading “Income from other sources”. Then they can calculate the total gross income of the income heads for the fiscal year and then show it as a deduction under section 80TTA.
Individuals must report all income earned during a fiscal year, when filing an ITR. Failure to do so may result in a penalty for non-compliance.
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