80TTA is an interest income deduction section of the income tax act that is available to resident individuals and Hindu United Families (HUF). Section 80TTA talks about the interest income deduction of INR 10,000. In this article we’re going to take a deeper look at section 80TTA, all its effects, how do you claim it and what other measures need to be kept in mind.
What is interest income and which interest income is considered in section 80TTA? What is considered interest income 80TTA deduction for AY 2020-21
Section 80TTA of the income tax act talks about the interest income earned through various sources and the deduction that can be claimed while filing for taxes. The deduction allowed under section 80TTA is capped at INR 10,000 and it includes income only received through interest. Any other income cannot be clubbed under this section.
However, not all interest income is included under this head. Interest income only from particular sources can be available for section 80TTA deduction. Some of the examples from where interest income can be deducted are:
- Interest income earned from a savings bank account
- Interest income earned from a cooperative society carrying on the business of banking
- Interest income earned from the savings bank account in a post office
These are the various sources from where the interest income earned is available for deduction under section 80TTA. For example, interest income earned from bonds that you bought either personally or for the business is not included for deduction under section 80TTA. This is just one of the examples wherein the interest income is not included. Some other examples of where interest income is not included under section 80TTA are:
- Interest income earned from fixed deposits
- Interest income earned from recurring deposits
- Interest income earned from any other time deposits
What is the minimum and maximum deduction allowed under section 80TTA of the income tax act?
For the 80TTA deduction for AY 2020-21, the maximum deduction allowed is INR 10,000. There is no minimum deduction that is required under section 80TTA. The interim budget in the year 2019 had increased the amount of deduction to INR 40,000 however that’s been changed and for ay 2020-21 the maximum deduction is back at INR 10,000. In case the interest income is lower than INR 10,000 then the amount of the interest income earned will be the amount for the deduction. However, in case the interest income is more than INR 10,000 the permissible amount is only INR 10,000. One cannot claim more than INR 10,000 even if their interest income is more.
The amount mentioned in interest income has to be combined with all the interest earned from all the banks. The amount isn’t just dedicated to a single bank account, but the interest income earned throughout all the different bank accounts held.
Example of interest income earned under section 80TTA
Before we further discuss the examples that need, one must know that all the interest income needs to be included under the head of ‘income from other sources. All of this needs to be considered in the total return and then the interest income deduction needs to be considered for section 80TTA.
Let’s say for example Ms Nirali Mehta earns INR 15,00,000 from the business. Her income from other sources is interest income on a savings account at INR 10,000 and interest income on fixed deposits at INR 15,000.
First, the entire sum of INR 15,000 + INR 15,000 needs to be included under the head of income from other sources. This is what it should look like
|Particulars||Amount in INR||Amount in INR|
|Income from salary||10,00,000|
|Income from other sources|
|Total income from other sources||30,000|
|Gross Total Income||10,30,000|
|Deduction under Chapter VI-A|
|Deduction under 80C||15,000|
|Deduction under 80TTA||10,000||25,000|
Even though the interest income earned in the year is INR 15,000 the deduction that Ms Nirali Mehta can receive under section 80TTA is only INR 10,000. This is because the maximum deduction available under section 80TTA is INR 10,000. Therefore, post the income from other sources and considering the deduction for the same under 80C and 80TTA the final taxable salary is INR 10,05,000.
Is it necessary to disclose the interest income earned and what are the consequences of not paying for it?
Yes. According to the Income Tax Act, every individual or Hindu united family (HUF) must disclose all the income earned through the different sources and streams of investment for the particular year that they are filing the taxes for.
By not disclosing the income earned, the individual or the Hindu united family (HUF) can be exposed to a penalty that they have to pay and may also have to pay interest on the amount of tax that is not paid. This is everything that one needs to know about section 80TTA of the income tax act.
What is section 80TTB under the income tax act?
Section 80TTA under the income tax act is for residents and individuals under the age of 60. To cater to the senior citizens, the interest income earned by them comes under section 80TTB of the income tax act. Most of the rules that apply to section 80TTA are the same rules that apply to section 80TTB. This is, the interest income earned from a savings account either from a bank, post office or co-operative society carrying business for the bank is eligible for deduction under section 80TTB.
The only difference which is the biggest difference is that under section 80TTA, the maximum amount available for deduction is INR 10,000. However, under section 80TTB the maximum amount that is available for deduction is INR 50,000. This means that if a senior citizen earns around INR 50,000 through interest income, the entire amount is available for deduction, as against the INR 10,000 allowed under section 80TTA.
This is the only major difference between Section 80TTA and Section 80TTB under the income tax act of 1961.
FAQs about deductions under section 80TTA
- What is the section of 80TTA under the income tax act for?
Section 80TTA is the tax that needs to be paid on the interest income earned from savings bank accounts or from savings accounts held with the post office.
- Who can avail for deduction under section 80TTA of the income tax act?
Individual residents and Hindu United Families (HUF) are the ones who can avail of deduction under section 80TTA of the income tax act.
- What is the maximum deduction allowed under section 80TTA?
The maximum deduction one can claim under section 80TTA of the income tax act is INR 10,000. Any income greater than INR 10,000 needs to be taxed. The sum can be lower than INR 10,000. There is no rule or compulsion on that.
- When is the due date for section 80TTA deduction for AY 2020-21?
The Income Tax Return due date has been extended from 31st July to 2021 to 30th September 2021. This means section 80TTA for AY 2020-21 can be filled during the same time too.
- What is the difference between Section 80TTA and Section 80TTB under the income tax act?
While both, section 80TTA and Section 80TTB cater towards the income earned through interest, section 80TTB is catered towards senior citizens. Since section 80TTB is catered towards senior citizens, the amount that is available for deduction is also higher.