Section 80TTA provides a deduction of Rs.10000 on interest earned by an individual on his or her savings accounts income.
Who is eligible for Income Tax Deduction under Section 80TTA?
Deduction under section 80TTA is allowed only to individual tax payers and Hindu undivided family (HUF). This benefit is not available to a firm, an association of person, a body of individuals, LLP or company etc.
Claiming Deduction under Section 80TTA
You can claim deduction on interest earned –
- From a savings bank account
- From a savings account with co-operative society involved in the banking business.
- Saving post office accounts.
Deduction not allowed under Section 80TTA
You cannot claim deduction on interest earned on term deposits. Term deposits means deposits which are repayable on expiry of fixed period. Deduction is not allowed if –
- Interest earned on fixed deposit
- Interest earned on recurring deposit
- Other time deposits
Maximum Deduction under Section 80TTA
The maximum deduction allowed u/s 80TTA is Rs.10000. If your interest income is less than Rs.10000, full amount of interest will be your deduction but if your interest income is more than Rs.10000, you are entitled for maximum deduction of Rs.10000 only not more than that.
How to Claim Deduction under Section 80TTA?
To claim deduction u/s 80TTA, you have to add all your savings interest income under the head “Income from other sources” while preparing your tax return.
Documents Required for Income Tax Deduction under Section 80TTA
You can easily calculate your interest income & tax deduction with the help of savings bank account statement.
Deduction limit u/s 80TTA
How banks compute interest on Savings account?
Many peoples become confused between the old and the new method used for calculating interest on savings account. Both the methods used by banks for calculating savings interest are given below –
- Old method – Previously, banks provide interest on the minimum balance available in the account of an individual in a particular month. For ex – If you maintained a balance of Rs.100000 during a month except one day when your balance fell down to Rs.10000, the bank will calculate interest on Rs.10000 only. Now, this process has been changed by the banks and new method is introduced.
- New method – Now days, banks calculating interest on the basis of money lying in the account of an individual at the end of the day. As a result, customers are getting better interest on their deposits.
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