Section 80TTA (New Section) Save up to ₹10,000 on Savings Account

By | November 11, 2014
Interest earned on normal savings bank account maintained with a banking company, co-operative society, or post office up to a maximum of Rs. 10,000/- will be exempted from income tax.  This will be over and above Rs.1 Lakh deduction u/s 80C.

Maximum Deduction of Rs.10,000/-



Deduction in respect of interest on deposits in savings accounts to the maximum extent of `10,000 [Section
80TTA] [W.e.f. A.Y. 2013-14]
Where the gross total income of an assessee, being an individual or a Hindu undivided family, includes any income
by way of interest on deposits (not being time deposits) in a saving account with-
(a) a banking company to which the Banking Regulation Act, 1949, applies (including any bank of banking
institution referred to in section 51 of that Act);
(b) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage
bank or a co-operative land development bank); or
(c) a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898
A deduction of such interest shall be allowed to the maximum extent of `10,000.
However, where the income referred to in this section is derived from any deposit in a savings account held by, or
on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this
section in respect of such income in computing the total income of any partner of the firm or any member of the

association or any individual of the body

New Section/ Amendment
Section 80 TTA is proposed to be introduced to provide deduction to an individual or a Hindu undivided family in respect of interest received on deposits (not being time deposits) in a savings account banks, cooperative banks and post office. The deduction is restricted to Rs 10,000.
It is also proposed to provide that where the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body.

The section is with effect from April 01, 2013 and will apply from AY 2013-14 and onwards.

Analysis/Conclusion

The insertion of this new section has been a relief to individual or Hindu undivided family as interest on saving bank account was always a taxable income with no corresponding tax benefits. It would also help in avoiding inclusion of small savings bank interest in the taxable income, which was required to be done after deletion of section 80L.
Source: Incometaxindia

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