Deduction in respect of interest on deposits in saving accounts - Section 80TTA - Income Tax - Ready Reckoner - Income Tax

Deduction in respect of interest on deposits in saving accounts - Section 80TTA Scope and Eligibility Section 80TTA(1) specifies that the deduction is available to an assessee, being an individual or a Hindu Undivided Family (HUF), other than those covered u/s 80TTB. The explicit exclusion of entities referred to in Section 80TTB (i.e., senior citizens) was introduced by the Finance Act, 2018, effective from April 1, 2019, to avoid dual benefit where a higher threshold is available to senior citizens u/s 80TTB.The provision further clarifies that the deduction is applicable only where the gross total income includes income by way of interest on deposits (not being time deposits) in a savings account with: (a) A banking company governed by the Banking Regulation Act, 1949 (including banks and banking institutions referred to in section 51 of that Act); (b) A co-operative society engaged in the business of banking (including co-operative land mortgage banks or co-operative land development banks); or (c) A Post Office as defined under the Indian Post Office Act, 1898. Quantum and Computation of Deduction The deduction allowed u/s 80TTA is up to a maximum of Rs. 10,000 per annum. The computation is as follows: If the total interest income from eligible savings accounts does not exceed Rs. 10,000, the entire amount is deductible. If the aggregate interest income exceeds Rs. 10,000, the deduction is restricted to Rs. 10,000. It is important to note that this limit applies per assessee, not per account or per institution. Therefore, even if an individual holds multiple savings accounts across different banks, co-operative societies, or post offices, the aggregate deduction cannot exceed Rs. 10,000 for all such accounts taken together. Exclusion of Time Deposits A crucial aspect of Section 80TTA is the explicit exclusion of time deposits from the ambit of deduction. The Explanation to the section defines time deposits as deposits repayable on expiry of fixed periods. This would include fixed deposits, recurring deposits, and any other deposit where the repayment is not on demand but after a specified tenure. Ineligibility for Certain Entities Section 80TTA(2) provides that where the income is derived from a deposit in a savings account held by, or on behalf of, a firm, an association of persons (AOP), or a body of individuals (BOI), no deduction shall be allowed under this section in respect of such income in computing the total income of any partner, member, or individual of such entities. This provision is intended to prevent the indirect claiming of deductions by individuals or HUFs through their association with firms, AOPs, or BOIs, thereby maintaining the integrity of the targeted relief and avoiding duplication or unintended extension of the benefit. [ Section 80TTA(2) ]