Section 80TTA of Income Tax Act: Deduction on Interest

Section 80TTA of Income Tax Act: Deduction on Interest. Section 80TTA of Income Tax Act is a provision that allows individuals and Hindu Undivided Families (HUFs) to claim a deduction on interest earned from savings accounts. This section helps small taxpayers reduce their tax liability by allowing them to claim up to Rs. 10,000 as deduction on such interest income. It is an important provision under Chapter VI-A of the Income Tax Act, 1961 and applies to both resident and non-resident individuals with certain conditions.
What is Section 80TTA of Income Tax Act?
Section 80TTA of Income Tax Act, 1961 was introduced to provide relief on the interest income earned from savings accounts held with banks, cooperative societies, or post offices. The section provides a maximum deduction of Rs. 10,000 on such interest earned during a financial year. It means if your interest income from savings accounts is within Rs. 10,000, it is fully deductible from your total income. However, if it exceeds Rs. 10,000, the excess is taxable under the head "Income from Other Sources."
This deduction is not applicable on fixed deposits, recurring deposits, or any other time deposits. It is only limited to interest income from savings accounts. It is important to note that Section 80TTA does not apply to senior citizens, who are covered under Section 80TTB of the Income Tax Act.
Who Can Claim Deduction Under Section 80TTA of Income Tax Act?
The deduction under Section 80TTA is allowed to individuals and HUFs. Any person who earns interest income on a savings account held in a bank, cooperative society, or post office can claim this deduction. This provision is especially useful for salaried individuals and small taxpayers who maintain savings accounts and earn nominal interest from them.
Non-resident Indians (NRIs) are also eligible for this deduction, but only on the interest earned from Non-Resident Ordinary (NRO) savings accounts. The interest from Non-Resident External (NRE) accounts is tax-free in India and hence does not qualify for this deduction.
Senior citizens above the age of 60 years are not eligible to claim deduction under Section 80TTA. Instead, they can claim higher deductions under Section 80TTB, which allows deduction of up to Rs. 50,000 on interest income from both savings and fixed deposits.
Features of Section 80TTA of Income Tax Act
The key features of Section 80TTA of Income Tax Act make it a valuable tool for small taxpayers to reduce their taxable income. The deduction is applicable only on interest earned from savings accounts and is limited to Rs. 10,000 per financial year. This means if you have multiple savings accounts across various banks or post offices, you need to calculate the total interest income from all these accounts combined. If the cumulative interest is below Rs. 10,000, the entire amount is deductible. If it exceeds, only Rs. 10,000 is allowed as deduction.
This deduction is over and above the deduction allowed under Section 80C, which is up to Rs. 1.5 lakh. This gives additional tax saving benefits. Also, no TDS is deducted on savings account interest, unlike fixed deposit interest where TDS may be applicable depending on the amount.
One important point to note is that if your total income is below the minimum taxable limit, then even if your interest income exceeds Rs. 10,000, you do not have to pay any tax and 80TTA becomes irrelevant.
Can NRIs Claim Deduction Under Section 80TTA of Income Tax Act?
Yes, Non-Resident Indians (NRIs) are allowed to claim deduction under Section 80TTA, but with a condition. NRIs usually hold two types of accounts in India – NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts. The interest earned on NRE accounts is tax-free in India and thus, no deduction under Section 80TTA is required.
However, if an NRI earns interest on an NRO savings account, then that interest is taxable and eligible for deduction under Section 80TTA. The deduction is limited to Rs. 10,000, just like for resident individuals. Interest from fixed deposits or recurring deposits held in NRO accounts is not eligible under this section.
Deduction Limit Under Section 80TTA of Income Tax Act
The maximum deduction available under Section 80TTA of Income Tax Act is Rs. 10,000 in a financial year. This deduction is allowed on the total interest income earned from all savings accounts held by the taxpayer in banks, cooperative societies, or post offices. It is not a per-account deduction, but a combined limit.
If your total savings account interest income is Rs. 7,000 in a year, then you can claim Rs. 7,000 as deduction. If your interest income is Rs. 12,000, then only Rs. 10,000 is deductible, and the remaining Rs. 2,000 will be added to your total taxable income.
This deduction is over and above the Rs. 1.5 lakh limit of Section 80C and provides additional tax-saving opportunities to individuals and HUFs.
Type of Interest Incomes Allowed Under Section 80TTA of Income Tax Act
Section 80TTA applies only to certain types of interest incomes. The types of interest incomes allowed as deduction under this section include:

Interest earned on savings accounts held in any bank, whether it is a private bank, public sector bank, or foreign bank operating in India.

Interest earned on savings accounts held with cooperative banks or cooperative credit societies engaged in the business of banking.

Interest earned on savings accounts held with post offices across India.

These are the only sources of interest income that are eligible for deduction under Section 80TTA. The deduction is allowed up to Rs. 10,000 in total from all these sources combined.
Type of Interest Incomes Not Allowed Under Section 80TTA of Income Tax Act
Not all types of interest income are eligible for deduction under Section 80TTA. The types of interest incomes that are not allowed as deduction include:

Interest earned from fixed deposits or term deposits in banks, cooperative banks, or post offices.

Interest earned from recurring deposits.

Interest income from corporate bonds or company-issued debentures.

Interest from Provident Fund (PF) deposits.

Interest earned from lending business or loans given to individuals.

If you have earned interest from any of these sources, it will be taxable under the head "Income from Other Sources" and no deduction can be claimed under Section 80TTA.
How to Claim Deduction Under Section 80TTA of Income Tax Act?
Claiming deduction under Section 80TTA of Income Tax Act is a simple process. Here’s how you can claim it:

Calculate the total interest income earned from all your savings accounts. This includes bank, post office, and cooperative society savings accounts.

Include this income under the head "Income from Other Sources" while computing your total income for the year.

Once your gross total income is calculated, you can claim deduction under Section 80TTA (under Chapter VI-A deductions).

If your total interest income is less than Rs. 10,000, you can claim the entire amount as deduction. If it exceeds Rs. 10,000, claim only Rs. 10,000.

While filing your Income Tax Return (ITR), ensure you opt for the old tax regime. The deduction under Section 80TTA is not available in the new tax regime.

File your return before the due date (generally 31st July of the assessment year) to be eligible for the deduction.

Latest Update: New Tax Bill 2025 Impact on Section 80TTA
As per the New Tax Bill 2025, changes have been proposed to simplify various sections of the Income Tax Act. Section 80TTA and Section 80TTB (which applies to senior citizens) have been proposed to be merged into a single section numbered 153.
This new section provides structured provisions and clear eligibility criteria and deduction limits for different categories of taxpayers. The new format is expected to enhance clarity and make compliance easier for both senior citizens and general taxpayers. However, until officially notified, Section 80TTA and Section 80TTB remain applicable as per the current Act.
Example on Claiming Section 80TTA Deduction
Let us understand how Section 80TTA deduction works with an example:
Mr. A is 35 years old and earns a salary of Rs. 5,00,000 in a year. He also earns Rs. 5,000 as interest from his savings account and Rs. 15,000 from fixed deposits. He also claims Rs. 10,000 as deduction under Section 80C.
Here’s how his tax computation will look under the old tax regime:

Salary Income: Rs. 5,00,000

Less: Standard Deduction: Rs. 50,000

Net Salary: Rs. 4,50,000

Interest from Savings: Rs. 5,000

Interest from Fixed Deposits: Rs. 15,000

Gross Total Income: Rs. 4,70,000

Less: Deductions

Section 80C: Rs. 10,000

Section 80TTA: Rs. 5,000

Net Taxable Income: Rs. 4,55,000

Conclusion
Section 80TTA of Income Tax Act is a beneficial provision for taxpayers to reduce their tax burden on small savings. It encourages people to maintain savings in banks and promotes financial inclusion. While it does not cover FD or RD interest, it is a useful tool for salaried individuals and others with moderate income to save tax. Always check your eligibility and choose the right tax regime to avail of such deductions. Make sure your interest calculations are accurate and reported properly while filing your ITR to claim the benefit successfully.
Need any support? Book a Consultation with our experts through:
Email: info@ccoffice.in
Call/Whatsapp: +91 9988424211.
Frequently Asked Questions (FAQs)
Q1. Can both 80TTA and 80TTB be claimed together?
Ans. No, both cannot be claimed together. If you are eligible for Section 80TTB (for senior citizens), then Section 80TTA cannot be claimed.
Q2. Is TDS applicable on interest from savings account?
Ans. No, there is no TDS deduction on interest earned from savings bank accounts.
Q3. Is 80TTA available in the new tax regime?
Ans. No, if you opt for the new tax regime, you cannot claim deduction under Section 80TTA.
Q4. How do I know my savings interest for the year?
Ans. You can check the interest credited to your savings account via your bank statement or request a year-end interest certificate from your bank.
Q5. Is interest from cooperative banks allowed under 80TTA?
Ans. Yes, savings interest from cooperative banks engaged in banking is allowed under Section 80TTA.
Q6. Does 80TTA apply to savings accounts in post office?
Ans. Yes, interest from savings accounts maintained with post offices is eligible under Section 80TTA.
Q7. Do I need to submit any proof while claiming 80TTA?
Ans. Although not mandatory to submit, it is advisable to keep bank statements or interest certificates as proof in case of scrutiny.

Section 80TTA of Income Tax Act is a provision that allows individuals and Hindu Undivided Families (HUFs) to claim a deduction on interest earned from savings accounts. This section helps small taxpayers reduce their tax liability by allowing them to claim up to Rs. 10,000 as deduction on such interest income. It is an important provision under Chapter VI-A of the Income Tax Act, 1961 and applies to both resident and non-resident individuals with certain conditions.

What is Section 80TTA of Income Tax Act?

Section 80TTA of Income Tax Act, 1961 was introduced to provide relief on the interest income earned from savings accounts held with banks, cooperative societies, or post offices. The section provides a maximum deduction of Rs. 10,000 on such interest earned during a financial year. It means if your interest income from savings accounts is within Rs. 10,000, it is fully deductible from your total income. However, if it exceeds Rs. 10,000, the excess is taxable under the head "Income from Other Sources."

This deduction is not applicable on fixed deposits, recurring deposits, or any other time deposits. It is only limited to interest income from savings accounts. It is important to note that Section 80TTA does not apply to senior citizens, who are covered under Section 80TTB of the Income Tax Act.

Who Can Claim Deduction Under Section 80TTA of Income Tax Act?

The deduction under Section 80TTA is allowed to individuals and HUFs. Any person who earns interest income on a savings account held in a bank, cooperative society, or post office can claim this deduction. This provision is especially useful for salaried individuals and small taxpayers who maintain savings accounts and earn nominal interest from them.

Non-resident Indians (NRIs) are also eligible for this deduction, but only on the interest earned from Non-Resident Ordinary (NRO) savings accounts. The interest from Non-Resident External (NRE) accounts is tax-free in India and hence does not qualify for this deduction.

Senior citizens above the age of 60 years are not eligible to claim deduction under Section 80TTA. Instead, they can claim higher deductions under Section 80TTB, which allows deduction of up to Rs. 50,000 on interest income from both savings and fixed deposits.

Features of Section 80TTA of Income Tax Act

The key features of Section 80TTA of Income Tax Act make it a valuable tool for small taxpayers to reduce their taxable income. The deduction is applicable only on interest earned from savings accounts and is limited to Rs. 10,000 per financial year. This means if you have multiple savings accounts across various banks or post offices, you need to calculate the total interest income from all these accounts combined. If the cumulative interest is below Rs. 10,000, the entire amount is deductible. If it exceeds, only Rs. 10,000 is allowed as deduction.

This deduction is over and above the deduction allowed under Section 80C, which is up to Rs. 1.5 lakh. This gives additional tax saving benefits. Also, no TDS is deducted on savings account interest, unlike fixed deposit interest where TDS may be applicable depending on the amount.

One important point to note is that if your total income is below the minimum taxable limit, then even if your interest income exceeds Rs. 10,000, you do not have to pay any tax and 80TTA becomes irrelevant.

Can NRIs Claim Deduction Under Section 80TTA of Income Tax Act?

Yes, Non-Resident Indians (NRIs) are allowed to claim deduction under Section 80TTA, but with a condition. NRIs usually hold two types of accounts in India – NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts. The interest earned on NRE accounts is tax-free in India and thus, no deduction under Section 80TTA is required.

However, if an NRI earns interest on an NRO savings account, then that interest is taxable and eligible for deduction under Section 80TTA. The deduction is limited to Rs. 10,000, just like for resident individuals. Interest from fixed deposits or recurring deposits held in NRO accounts is not eligible under this section.

Deduction Limit Under Section 80TTA of Income Tax Act

The maximum deduction available under Section 80TTA of Income Tax Act is Rs. 10,000 in a financial year. This deduction is allowed on the total interest income earned from all savings accounts held by the taxpayer in banks, cooperative societies, or post offices. It is not a per-account deduction, but a combined limit.

If your total savings account interest income is Rs. 7,000 in a year, then you can claim Rs. 7,000 as deduction. If your interest income is Rs. 12,000, then only Rs. 10,000 is deductible, and the remaining Rs. 2,000 will be added to your total taxable income.

This deduction is over and above the Rs. 1.5 lakh limit of Section 80C and provides additional tax-saving opportunities to individuals and HUFs.

Type of Interest Incomes Allowed Under Section 80TTA of Income Tax Act

Section 80TTA applies only to certain types of interest incomes. The types of interest incomes allowed as deduction under this section include:

Interest earned on savings accounts held in any bank, whether it is a private bank, public sector bank, or foreign bank operating in India.
Interest earned on savings accounts held with cooperative banks or cooperative credit societies engaged in the business of banking.
Interest earned on savings accounts held with post offices across India.

These are the only sources of interest income that are eligible for deduction under Section 80TTA. The deduction is allowed up to Rs. 10,000 in total from all these sources combined.

Type of Interest Incomes Not Allowed Under Section 80TTA of Income Tax Act

Not all types of interest income are eligible for deduction under Section 80TTA. The types of interest incomes that are not allowed as deduction include:

Interest earned from fixed deposits or term deposits in banks, cooperative banks, or post offices.
Interest earned from recurring deposits.
Interest income from corporate bonds or company-issued debentures.
Interest from Provident Fund (PF) deposits.
Interest earned from lending business or loans given to individuals.

If you have earned interest from any of these sources, it will be taxable under the head "Income from Other Sources" and no deduction can be claimed under Section 80TTA.

How to Claim Deduction Under Section 80TTA of Income Tax Act?

Claiming deduction under Section 80TTA of Income Tax Act is a simple process. Here’s how you can claim it:

Calculate the total interest income earned from all your savings accounts. This includes bank, post office, and cooperative society savings accounts.
Include this income under the head "Income from Other Sources" while computing your total income for the year.
Once your gross total income is calculated, you can claim deduction under Section 80TTA (under Chapter VI-A deductions).
If your total interest income is less than Rs. 10,000, you can claim the entire amount as deduction. If it exceeds Rs. 10,000, claim only Rs. 10,000.
While filing your Income Tax Return (ITR), ensure you opt for the old tax regime. The deduction under Section 80TTA is not available in the new tax regime.
File your return before the due date (generally 31st July of the assessment year) to be eligible for the deduction.

Latest Update: New Tax Bill 2025 Impact on Section 80TTA

As per the New Tax Bill 2025, changes have been proposed to simplify various sections of the Income Tax Act. Section 80TTA and Section 80TTB (which applies to senior citizens) have been proposed to be merged into a single section numbered 153.

This new section provides structured provisions and clear eligibility criteria and deduction limits for different categories of taxpayers. The new format is expected to enhance clarity and make compliance easier for both senior citizens and general taxpayers. However, until officially notified, Section 80TTA and Section 80TTB remain applicable as per the current Act.

Example on Claiming Section 80TTA Deduction

Let us understand how Section 80TTA deduction works with an example:

Mr. A is 35 years old and earns a salary of Rs. 5,00,000 in a year. He also earns Rs. 5,000 as interest from his savings account and Rs. 15,000 from fixed deposits. He also claims Rs. 10,000 as deduction under Section 80C.

Here’s how his tax computation will look under the old tax regime:

Salary Income: Rs. 5,00,000
Less: Standard Deduction: Rs. 50,000
Net Salary: Rs. 4,50,000
Interest from Savings: Rs. 5,000
Interest from Fixed Deposits: Rs. 15,000
Gross Total Income: Rs. 4,70,000
Less: Deductions

Section 80C: Rs. 10,000
Section 80TTA: Rs. 5,000

Net Taxable Income: Rs. 4,55,000

Conclusion

Section 80TTA of Income Tax Act is a beneficial provision for taxpayers to reduce their tax burden on small savings. It encourages people to maintain savings in banks and promotes financial inclusion. While it does not cover FD or RD interest, it is a useful tool for salaried individuals and others with moderate income to save tax. Always check your eligibility and choose the right tax regime to avail of such deductions. Make sure your interest calculations are accurate and reported properly while filing your ITR to claim the benefit successfully.

Need any support? Book a Consultation with our experts through:

Email: info@ccoffice.in

Call/Whatsapp: +91 9988424211.

Frequently Asked Questions (FAQs)

Q1. Can both 80TTA and 80TTB be claimed together?

Ans. No, both cannot be claimed together. If you are eligible for Section 80TTB (for senior citizens), then Section 80TTA cannot be claimed.

Q2. Is TDS applicable on interest from savings account?

Ans. No, there is no TDS deduction on interest earned from savings bank accounts.

Q3. Is 80TTA available in the new tax regime?

Ans. No, if you opt for the new tax regime, you cannot claim deduction under Section 80TTA.

Q4. How do I know my savings interest for the year?

Ans. You can check the interest credited to your savings account via your bank statement or request a year-end interest certificate from your bank.

Q5. Is interest from cooperative banks allowed under 80TTA?

Ans. Yes, savings interest from cooperative banks engaged in banking is allowed under Section 80TTA.

Q6. Does 80TTA apply to savings accounts in post office?

Ans. Yes, interest from savings accounts maintained with post offices is eligible under Section 80TTA.

Q7. Do I need to submit any proof while claiming 80TTA?

Ans. Although not mandatory to submit, it is advisable to keep bank statements or interest certificates as proof in case of scrutiny.