80TTA is a tax deduction available to individuals in India on the interest earned from their savings accounts. The purpose of this deduction is to provide relief to individuals from the tax liability on the interest earned from their small savings.
One of the most commonly asked questions about Section 80TTA is whether it is applicable for fixed deposits.The answer is - No, 80TTA is not applicable for interest earned from fixed deposits. However, it can be claimed from other deposits. Read on to find out more information about 80TTA and inclusions and exclusions under this section.
What is Section 80TTA?
Individuals in India can claim a tax deduction on the interest they get from their savings accounts because of Section 80TTA of the Income Tax Act of 1961. Residents can take advantage of this, including individuals and Hindu Undivided Families (HUFs).
The maximum amount that may be deducted under Section 80TTA in a given fiscal year is ₹10,000. This implies that if you receive interest from savings accounts of more than ₹10,000 within a fiscal year, you will not be able to deduct the whole amount. Only amounts up to ₹10,000 are subject to the deduction.
Relation Between 80TTA and Fixed Deposit
There is no deduction for interest earned from fixed deposits. Also, interest from recurring deposits or any other time deposits is not covered under this section.
How Can You Claim a Deduction Under Section 80TTA?
You must file your tax return and list interest earned from your accounts under "Income from Other Sources" to claim the deduction. You can then submit a tax return form with the appropriate part filled out and evidence of the interest earned, such as bank records or interest-earned certificates, to claim the deduction.
It is significant to note that the deduction provided under Section 80TTA is in addition to the deduction provided under Section 80C. It enables you to deduct expenses for investments and child’s education costs. However, you are only permitted to deduct up to ₹1,50,000 in total per fiscal year under Sections 80C and 80TTA.
Which is The Best Fixed Deposit?
Fixed deposits are a popular investment option in India because they offer a relatively high rate of returns with low risk. They are essentially a loan made by an individual to a bank or financial institution for a fixed period, during which the bank pays the individual a fixed rate of interest.
One fixed deposit product that you may want to consider is Shriram Fixed Deposit. This product is offered by Shriram Finance, one of the leading non-banking financial companies in India. It offers several benefits to individuals looking to invest in a fixed deposit:
Shriram Fixed Deposit offers a high rate of interest. The interest rate is competitive compared to other fixed deposit products in the market. And it is reviewed periodically to ensure that it remains competitive.
It offers a flexible tenure, ranging from 12 months to 60 months. Individuals can choose a tenure that suits their investment horizon and financial goals.
Shriram Fixed Deposit offers the convenience of online application and renewal. So, you can easily open or renew your fixed deposit from the comfort of your home.
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Why are Fixed Deposits Popular?
- Low Risk:Fixed deposits are considered as low-risk investments as they are not influenced by market fluctuations. They are secured by the financial institution, and the principal and interest earned are guaranteed.
- High rate of return: Fixed deposits typically offer a higher rate of return compared to other low-risk investment options such as a savings account. This makes them attractive for individuals looking to grow their savings.
- Flexibility: Fixed deposits offer flexibility in terms of the tenure or duration of the investment, ranging from a few months to several years. Individuals can choose a tenure that suits their investment horizon and financial goals.
- Convenience: Fixed deposits are easy to open and manage, with many banks and financial institutions offering online application process and easy renewals.
Who Can Claim an 80TTA Exemption?
In India, interest earned on savings accounts can be deducted from taxes under Section 80TTA for both individuals and Hindu Undivided Families (HUFs).
NRIs can benefit from this deduction as well, but only if they have a Non-Residential Ordinary (NRO) account. On the other hand, those who have a Non-Residential External (NRE) account are not eligible for the deduction because the interest on these accounts is already tax-exempt.
It should be emphasised that senior citizens who are 60 years or above can avail of the tax deductions provided under Section 80TTB. The deduction under Section 80TTB is available exclusively to senior citizens, while the deduction under Section 80TTA is available to all individuals and HUFs. If you decide to adhere to the new tax structure specified in Section 115BAC, you are not eligible to claim the tax deduction under Section 80TTA.
Takeaway
Section 80TTA tax benefit for fixed deposits is a great way for individuals to save on taxes while earning interest on their savings. This section of the Income Tax Act allows for a deduction of up to ₹10,000 on interest earned from fixed deposits held in savings accounts with banks, cooperative societies and post offices.
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FAQs
- Will I have to pay tax on the interest earned from my savings bank account even if my income is below the annual tax slab?
No, you will not have to pay tax on the interest earned from savings bank account if your total income is below the taxable limit for the relevant financial year. If your total income, including the interest earned from your savings bank account, is below the taxable limit, you will not have to pay any tax on the interest earned.
- Can I include more than 1 bank account under my 80TTA deductions?
The tax deduction is based on the amount of interest earned, not the number of accounts owned, as per Section 80TTA. Therefore, as long as the total interest generated throughout the financial year does not exceed ₹10,000, individuals may be subjected to tax deductions from any number of accounts.
- If the interest rates are changed by the RBI, will I lose out on exemptions?
The tax deduction available under Section 80TTA is not related to the interest rate of the savings account. Instead, it is based on the actual amount of interest earned on the savings account. So there will be no loss on exemptions if the interest rates are changed by RBI
- What happens if I do not report my interest income from my savings account balance?
If you do not accurately report the income earned from your savings account balance for a given year, either intentionally or unintentionally, you may face penalties for non-compliance and may be required to pay tax and interest if your tax return is selected for review.
- Is the deduction under Section 80TTA in addition to the deduction available under Section 80C?
Yes, Section 80TTA is in addition to the deduction available under Section 80C, which allows individuals to claim a deduction on their investments and expenses. However, the total deduction that an individual can claim under both Section 80C and Section 80TTA is limited to ₹1,50,000 per financial year.
Key Highlights
- Individuals and Hindu Undivided Families (HUFs) in India may claim a tax deduction on the interest generated from their savings accounts under Section 80TTA of the Income Tax Act of 1961.
- Fixed Deposits (FD), Recurring Deposits (RD), or deposits in Non-Banking Financial Institutions are not taken into account when calculating interest.
- The maximum amount of deduction that can be claimed under section 80TTA is ₹10,000 per financial year.
- The purpose of this deduction is to provide relief to individuals from the tax liability on the interest earned from their small savings.
