Is 80TTA Applicable in the New Tax Regime

Nimisha Panda
Apr 16
6 min read

In India, practically everyone has a savings account. The majority of individuals are unaware, nonetheless, that interest received in a savings account is subject to taxes. When submitting income tax returns, this interest gets taxed under "Income from other sources." Under the new tax system, people can take a few deductions. On the other hand, the previous tax system provided several exemptions and discounts. Tax deductions up to Rs. 10,000 on interest income from a savings bank account are allowable under Section 80TTA (the previous tax regime). In this article, we will go over the Section 80TTA and 80TTA deduction limits in detail.

What is Section 80TTA?

Taxpayers may deduct up to Rs 10,000 in interest from savings accounts held in banks, cooperative societies, or post offices under Section 80TTA of the Income Tax Act of 1961. All individuals and Hindu Undivided Families (HUFs) are covered by this clause, with the exception of senior persons, who are entitled to a higher deduction under Section 80TTB. Interest earned from savings accounts is the only amount that can be deducted under Section 80TTA; interest from recurring deposits or fixed deposits (FDs) is not eligible.

Type of Interest Incomes Allowed as Section 80TTA Deduction

Interest income received from the following sources is deductible:

Out of a bank savings account
From a savings account with a cooperative organization that conducts banking operations
From a post office savings account

Type of Interest Incomes Not Allowed as Section 80TTA Deduction

Not eligible for the deduction under Section 80TTA is

Fixed deposit interest
Recurring deposit interest
interest received on debentures and corporate bonds.
Interest earned on deposits in provident funds
Interest from the lending industry

Eligibility to Claim Deduction Under Sec 80 TTA

Both individuals and HUFs are eligible for the Section 80TTA deduction. NRIs are also eligible for a deduction under Section 80TTA. It is important to remember that in India, NRIs are only permitted to open two kinds of accounts. NRE and NRO accounts, for example. However, because interest received on NRE accounts is tax-free, only holders of NRO savings accounts can benefit from Section 80TTA. Take note that:

Senior adults 60 years of age and older are exempt from this provision since they get covered under provision 80TTB.
80TTB and 80TTA are incompatible. The taxpayer may only select the deduction that will benefit him the greatest if both sections apply to him.

Maximum Deduction Under 80TTA

The highest amount that gets deducted is Rs 10,000. The full amount of your interest income will be deductible if it is less than Rs 10,000. Your deduction will be capped at Rs 10,000 if your interest income exceeds that amount. You must consider your interest income from all banks if you have several accounts.

Steps to Claim Section 80TTA Deduction

Use the procedures listed below to submit a Section 80TTA deduction:

Step 1: Assess Eligibility

Finding out if you qualify is the first step. To be eligible for the deduction, you must be either an individual or a HUF. Under Section 80TTA, note companies, partnerships, LLPs, etc., cannot claim deductions.

Step 2: Determine Your Interest Income

Next, check how much interest was earned overall during the fiscal year from cooperative societies and savings accounts.

Step 3: Calculate the Deduction Amount

The highest deduction permitted under Section 80TTA is Rs 10,000. A person may claim the full amount as a deduction if their total interest income is less than or equal to Rs 10,000.

Step 4: Include the total income

When determining your taxes, the next step is to include the interest income in your overall income.

Step 5: Submit Your ITR

Be sure to include interest income under "Income from Other Sources" and claim a deduction under Section 80TTA when submitting your ITR.

Illustration

In a fiscal year, if Mr. X, a 35 years old person, receives Rs 5,00,000 in salary income, the interest on his bank savings account is Rs 5,000, and the interest on his fixed deposits is Rs 15,000. Additionally, Rs 10,000 might be deducted under Section 80C. After that, taxable income will be calculated as follows under the previous tax system:

Particulars	Amount (in Rs)	Amount (in Rs)
Salary income Less: Standard Deduction	5,00,000 (50,000)	4,50,000
Income from other sources -savings account interest -fixed deposit interest	5,000 15,000	20,000
Gross Total Income	-	4,70,000
Less: Deduction under Chapter VI-A -80C-80TTA	10,0005,000	(15,000)
Taxable Salary	-	4,55,000

Applicability of Section 80TTA in New Tax Regime

Your savings bank account interest is subject to the slab rate that applies to you under the heading of income from other sources. Interest received from a savings bank account with the post office up to Rs. 3,500 in a fiscal year is exempt under Section 10(15)(i) read with Circular: No. 410 [F. No. 178/68/83-IT (A-I)], dated 12-2-1985. Interest from a post office savings account beyond this amount gets included in your income. There is no exemption for interest received on a savings bank account that you receive.

Conclusion

In conclusion, Section 80TTA of the Income Tax Act offers a deduction of up to Rs 10,000 on interest generated from savings accounts, which offers significant tax relief to both individuals and Hindu Undivided Families (HUFs). Fixed deposits, recurring deposits, and other specified income sources are not eligible for the deduction, even though interest income from banks, cooperative societies, and post offices is. Taxpayers must make sure they fulfil the requirements, figure out their interest income, and accurately file their income tax return in order to be eligible for this deduction.

FAQs

Q1. Can I claim deductions under section 80TTA in the new tax regime?

No. Under the new tax structure, you are not eligible to receive the benefit of section 80TTA. It only applies to taxpayers who choose to use the previous tax system.

Q2. What is the maximum amount of deduction permitted under section 80TTA?

Section 80TTA deductions are limited to a maximum of Rs. 10,000. It includes Interest revenue from several bank accounts. The number of accounts eligible for this benefit is unlimited.

Q3. Does section 80TTA cover interest from fixed deposits?

The 80TTA deduction does not apply to interest earned on fixed deposits. This section of the Income Tax Act only allows for the interest income deduction from savings accounts.

Q4. Is interest from current accounts covered under section 80TTA?

No, section 80TTA does not cover interest from current accounts. You can only deduct interest income from savings accounts with banks, post offices, and cooperative societies.

Q5. What happens if I fail to claim a deduction under section 80TTA?

You can take advantage of this tax benefit by filing a revised return within the allotted time if you are eligible for the 80TTA deduction but choose not to claim it.

Q6. Can NRIs claim deduction under Section 80TTA?

NRE and NRO accounts are the only ones that non-Indian residents can open. Interest earned on NRE accounts is non-taxable. NRO savings accounts are the only ones that qualify for the 80TTA benefit. Recall that NRO term deposits are not eligible for deductions.

Q7. Can senior citizens claim both 80TTA and 80TTB?

Section 80TTA covers HUFs and people. However, Section 80TTB is only available to older folks. As a result, senior citizens are not eligible for 80TTA and 80TTB deductions.

Q8. Is there a restriction on the number of bank accounts for which I can claim a deduction under Section 80TTA?

Section 80TTA restricts the amount of interest earned, not the number of accounts kept. Therefore, any number of accounts may be eligible for tax benefits.

Q9. What will be the consequences of failing to report the interest income earned on the balance maintained in a savings bank account?

Assume that someone, whether on purpose or not, fails to disclose their income for a year. After their return gets selected for examination, they will have to pay the tax owed and interest and face penalties for non-compliance.