The last date of income tax return (ITR) for tax year 2022-23 or fiscal year 2021-22 is July 31, 2022. Taxpayers who file their income tax return under the old tax regime are eligible for multiple tax deductions and exemptions. Did you know that you can claim a tax deduction of up to Rs 10,000 on the interest received from your savings bank accounts? Let’s see how it works
Section 80TTA Deduction Explained
Section 80TTA of the Income Tax Act, 1961, allows taxpayers to claim a deduction for the interest earned on a savings account. The maximum deduction allowed under this section 80TTA is Rs 10,000.
Taxpayers are eligible for the deduction if the interest income is received from: a) From a savings account at a bank, b) From a savings account at a cooperative or bank, c) Postal savings schemes. In addition, 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 more than 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 no deduction under Section 80TTA is allowed for the interest income from fixed or recurring deposits or other term deposits. Interest received from the deposits in non-bank finance companies (NBCSs) is not eligible for the tax benefits under Section 80TTA.
Who is eligible for a deduction under Section 80TTA?
Individual taxpayers residing in India and Hindu Undivided Family (HUF) are eligible for deductions under Section 80TTA. Non-resident Indians (NRIs) can receive tax breaks on their non-resident regular or NRO savings accounts under Section 80TTA. NRIs can only hold Non-Resident External (NRE) and NRO savings accounts in India. Since the NRE savings account is already tax-free, Section 80TTA only applies to the interest earned on the NRO savings account.
It is important to note that seniors over the age of 60 are not eligible for a deduction under Section 80TTA as they can claim deductions under Section 80TTB.
Anyone who opts for the new tax regime under Article 115BAC cannot claim the tax benefits under Article 80TTA.
How to claim a deduction under Section 80 TTA
Taxpayers should note that this is a deduction and not an exemption. Individuals must therefore first add up their total interest income under the heading ‘Income from other sources’ when filing an income tax return. They can then calculate the gross total income from heads of income for the financial year and show this as a deductible item under Article 80 TTA.
When filing an ITR, individuals must report all income earned during a fiscal year. Failure to do so may result in a fine for non-compliance.
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