Deduction from gross total income of an individual or HUF, upto a maximum of Rs. 10,000/-, in respect of interest on deposits in savings account (not time deposits) with a bank, co-operative society or post office, is allowable w.e.f. 1st April 2012 (A.Y. 2013-14). This deduction is not valid for time deposits like FD and RD. If the savings account is held on behalf of a firm, association of persons or body of individuals this deduction is not applicable. Maximum deduction Up to Rs. 10,000 as savings deposit interest can be claimed as exemption u/s 80TTA. If the interest is lesser, then that amount can be claimed.
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.
S. 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 Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.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 S. 80C of the Income Tax Act, 1961.
TDS Provisions not applicable on Saving Bank Interest—The interest earned on savings account is exempted from TDS u/s 194A of Income Tax Act i.e No TDS is deducted on interest from saving account.
Reference:
As per S. 80TTA, of Income Tax Act, 1961-
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 (10 of 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 (6 of 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.
Explanation.—For the purposes of this section, “time deposits” means the deposits repayable on expiry of fixed periods.