Deduction for interest on deposits in a savings account
Deduction u/s 80TTA & 80TTB
Sec 80TTA: Deduction in respect of “ interest on deposits in a savings account”
Income Tax Act, 1961 provides a deduction on the interest income earned by certain assessees on the deposits in savings bank accounts.
The amount of deduction is limited to the extent of Rs. 10,000 in total.
Who are eligible to claim deduction u/s 80TTA?
- All individuals except the senior citizens and
- All HUFs
are allowed to claim the deduction under section 80TTA.
Senior citizens can claim the deduction of interest income earned on savings bank deposits under section 80TTB.
Interest earned by firms/companies on deposits with saving bank account is fully taxable and they can not claim deduction under this section.
Which bank accounts are qualified to claim the deduction?
Interest earned on all the deposits in savings bank accounts 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).
No deduction is allowed on the interest earned on the following deposits:
The deduction under this section is allowed only in case of deposits with saving bank accounts with banks specified above. Hence the interest earned on the following deposits does not qualify for the deduction:
- Interest earned on any kind of time deposit / fixed deposit
- Interest earned on recurring deposits
- Interest earned on any other time deposit.
Section 80 TTB: Deduction in respect of interest on deposits in case of senior citizens
Finance Act 2018, has inserted a new Section 80TTB to the benefit of senior citizens.
- As per section 80TTB, all senior citizens are allowed to claim a deduction on the interest earned on deposits (savings as well as fixed) with the bank.
- The amount of deduction is restricted to Rs. 50,000/-
A senior citizen for the purpose of this section means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.
80 TTA v/s 80 TTB
The basic differences between the deduction u/s 80TTA and 80 TTB are listed below:
|Sec 80TTA||Sec 80TTB|
|Applicability||Individuals and HUFs except for senior citizens|
Only for Senior citizens
Amount of deduction
|Aggregating to Rs. 10,000||Aggregating to Rs. 50,000|
|Nature of deposit||Only on deposits with saving bank account|
Savings as well as fixed deposits
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