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ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Section 80TTA of the Income Tax Act provides crucial tax relief for individual taxpayers by allowing deductions on interest earned from savings accounts.
Section 80TTA, incorporated into the Indian Income Tax Act in 2013, is designed to offer tax relief to individuals and Hindu Undivided Families (HUFs). This provision permits a deduction of up to ₹10,000 from the taxable income for the interest earned on savings accounts maintained with banks, cooperative societies, or post offices.
A savings account works as a digital piggy bank that accumulates interest on the money in the account. While many individuals possess savings bank accounts, raising awareness about the tax implications of the interest earned on such accounts is necessary. The interest gained on a savings bank account is subject to taxation under the Income from Other Sources category. You should know that a deduction for interest is permissible under section 80TTA. It plays a crucial role in promoting financial inclusion to cultivate sound financial habits.
Section 80TTA within the Income Tax Act is a significant provision that provides tax relief to individual taxpayers concerning the interest accrued from their savings accounts. Formulated to promote savings among the public, this section establishes guidelines for seeking deductions and efficiently managing tax responsibilities associated with interest income.
Deductions under Section 80TTA are applicable to both Individuals and Hindu Undivided Families (HUF). Non-Resident Indians (NRIs) can also take advantage of the Section 80TTA deduction. It is important to note that NRIs are permitted to open only two types of accounts in India, namely NRE (Non-Residential External) and NRO (Non-Residential Ordinary) accounts. However, only holders of NRO savings accounts are eligible to claim the benefit of Section 80TTA since interest earned on NRE accounts is exempt from taxation.
According to Section 80TTA of the Income Tax Act, 1961 in India, individuals and Hindu Undivided Families (HUFs) can claim a deduction on interest income from specific sources. The deduction is applicable for interest earned, with a maximum limit of ₹10,000. The following are the types of interest incomes permitted as deductions under Section 80TTA:
The deduction under Section 80TTA pertains to interest earned on savings bank accounts. This includes interest accrued on deposits in a savings account held with a bank, cooperative society, or post office.
Interest earned on deposits in a cooperative society is also eligible for the deduction under Section 80TTA. However, this applies exclusively to deposits made with a cooperative society engaged in the banking business.
The maximum deduction permitted under Section 80TTA is capped at ₹10,000. If your interest income is below ₹10,000, the entire interest income becomes eligible for deduction. However, if your interest income exceeds ₹10,000, your deduction will be restricted to ₹10,000. It is important to aggregate your total interest income from all banks if you possess multiple accounts.
Begin by combining your overall interest income and include it under the category ‘Income from Other Sources’ in your tax return. Compute your gross total income for the fiscal year, including all income categories, and then designate the applicable amount as a deduction under Section 80TTA. Here is an example of deductions under Section 80TTA:
Name |
Total Income (₹) |
Interest Income (₹) |
Deduction Claimed under Section 80TTA (₹) |
Rajesh Kumar |
600,000 |
8,500 |
8,500 |
Sunita Sharma |
800,000 |
12,000 |
10,000 |
Arjun Singh |
550,000 |
9,500 |
9,500 |
Priya Patel |
720,000 |
15,000 |
10,000 |
It is crucial to be aware that you cannot claim a Section 80TTA deduction if you choose the new tax regime as per Section 115BAC.
Similar to resident Indians, Non-Resident Indians (NRIs) have the eligibility to claim a deduction under Section 80TTA.
NRIs have the option to open NRE (Non-Residential External) and NRO (Non-Residential Ordinary) accounts in India. While the interest earned on NRE accounts is exempt from taxation, it’s important to note that the benefit under Section 80TTA is applicable exclusively to NRO savings accounts. No deduction is permitted on NRO term deposits (fixed deposits).
Section 80TTA of the Income Tax Act emerges as a valuable tool for taxpayers seeking to optimize their savings and reduce their tax liabilities. As a manifestation of the government’s commitment to financial inclusion and responsible financial practices, Section 80TTA empowers individuals to make informed decisions and contribute to a more financially literate society. Understanding and leveraging the benefits of Section 80TTA can significantly impact an individual’s financial well-being and tax planning strategies.
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Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.