How to claim the 80tta deduction for FY 2019-20 on interest income bank deposits.
Under section 80TTA, if you earn income your bank deposit, that would be exempted (but not wholly).
The income received in the form of interest from a bank savings account is taxable, however, the amount up to ₹ 10000 is exempted u/s 80tta deduction limit.
Income interest from a bank deposit in any form if exceeding from ₹ 10000 is taxable under “Income from other sources“.
Also Read: Complete guide on Income Tax deduction u/s 80C, 80CCD, 80CCC & 80CCG
How to calculate 80tta deduction amount
Computation of amount received from interest earned from bank deposits is not rocket science.
The taxpayer required to arrange the bank statement for all your accounts for the particular financial year.
Any interest received quarterly, halfyearly or annually against post office saving and the amount in saving bank account is treated as income received from interest.
Deduction under Section 80TTA is not available to senior citizens.
Process of Furnish Claim deduction
- Income received from Intrest must be furnished under income from other sources in ITR form.
- Disclose actual interest income under 80TTA section of ITR form.
Sometimes taxpayer forgets to disclose the details like income and which results in discrepancies in the form.
This deduction is NOT allowed on interest earned on time deposits. Time deposits mean deposits repayable on the expiry of fixed periods. It shall not be allowed for –
- Interest from fixed deposits
- Interest from recurring deposits
- Any other time deposits
Section 80TTB for Senior citizen
Section 80TTB is the new amendment introduced in the budget 2018 for the senior citizen.
Senior citizens can avail the benefit of interest income u/s 80TTB up to ₹ 50000 on all kinds of interest income.
Let us consider the following incomes for a senior citizen:
- Interest on bank deposits (savings or fixed).
- Interest on deposits held in the co-operative society.
- Interest on post office deposits.
Tax Exemption under Section 10(15)(i)
Under Section 10(15)(i) Interest earned from post office savings bank up to Rs. 3500 for individuals and Rs. 7000 for the joint account is exempted.
The best part is the cumulative impact of section 10(15)(i) and 80TTA are that the exemption under section 10(15)(i) can be claimed in addition to the deduction under section 80TTA.
Difference between section 80TTA and 80TTB
Also Read: Fill Income Tax return Form “IV” u/s 44AD, 44ADA, 44AE
Important Note:- Section 80TTB is introduced in budget 2018 for the senior citizen.
Example on tax savings u/s 80TTA & 80TTB
So saving account interest is eligible for tax deduction under section 80TTA but the FD and RD don’t qualify for this section for the normal taxpayer but in case of senior citizen interest from all kind of deposit (FS, RD, saving account, term deposit) is eligible for tax deduction under section 80TTB.
However, you can avoid TDS deduction on interest income by furnishing Form 15G/15H.
FAQ u/s 80TTA and 80TTB
Question: If having more than one saving accounts, Is the interest income of each account is eligible for tax deduction?
Answer: No, It is required to add all the interest income of all your saving account, and then apply u/s 80tta & 80ttb.
Question: Is bank deduct TDS from interest from savings account both for a senior citizen as well as Normal taxpayer.
Answer: No, TDS is not applicable on interest on the savings account, rather, bank deduct TDS from interest paid against Fixed Deposit or recurring deposit. If the account holder submits Form G/H Tds on FD or RD will not be deducted.
Question: If the income of interest from saving account exceed exemption limit i.e. 10,000 for the normal taxpayer and 50,000 for senior citizen. What would be the tax scenario?
Answer: You have to enter the maximum exemption account in 80TTA/80TTB column of Income-tax form and rest of the amount required to mention in Income from other sources.
Question: Is the interest from a savings account in India completely tax-free? If not, what is the limit before it is taxed?
Answer: Interest from saving account is exempted u/s 80tta maximum limit up to ₹ 10000 for normal taxpayer and ₹ 50,000 u/s 80ttb for senior citizen. It is also mandatory to disclose your completed income from the interest of saving accounts under head Income from other sources.
Question: Do we have to declare interest income from Savings, FD, and RD even though it’s below Rs. 10,000 (Exemption Limit) while filing an ITR?
Answer: Yes, You have to mention it in Income from other sources and also mention the amount u/s 80tta or 80ttb and will get the exemption.
Question: If eligible for both, can I claim exemptions of ₹ 150k under Section 80C and ₹ 10k under Section 80TTA for a total of ₹ 160k?
Answer: Yes, you can, in addition, section 80TTB is introduced for senior citizen for the maximum limit of ₹ 50K.