Section 80TTA and 80TTB

We all know that saving money is very crucial for achieving financial independence. Usually, many of us keep our hard-earned money in savings accounts or open up time deposits or fixed deposits. But what to do when you have to pay hefty taxes on the interest amount earned on those savings. Therefore, to give relief to certain taxpayers the Indian government has introduced Section 80TTA and Section 80TTB of the Income Tax Act, 1961 which pertains to deduction available on interest amount earned on savings accounts and deposits. In this article, we are going to discuss both Section 80TTA and Section 80TTB in detail.

Section 80TTA – Deduction with regard to interest income earned on Savings Account.

● Who is eligible for deduction under Section 80TTA?
Individuals or Hindu Undivided Families (HUF) assessees can claim a deduction under Section 80TTA on the interest earned on savings accounts maintained with the scheduled banks, post offices & cooperative societies.

● How much deduction is allowed under Section 80TTA?
As per Section 80TTA, an eligible assessee can claim a deduction lower of the actual interest amount earned on savings accounts or the Rupees. 10,000, from the gross total income. So, the maximum limit of deduction available under this section is Rupees 10,000.

Section 80TTB – Deduction in respect of interest income earned on deposits in the case of Senior Citizens.

● Who is eligible for deduction under Section 80TTB?
A resident senior citizen is an eligible assessee for the applicability for Section 80TTB i.e., age should be 60 years or above at any time during the relevant Financial Year (FY) and must have attained a residential status as per Income Tax Act, 1961.

● How much deduction is allowed under Section 80TTB?
As per Section 80TTB, a deduction lower of the amount of Rupees 50,000 or a specified income (included in the gross total income) is allowed to the senior resident assessees.

For the purpose of Section 80TTB, specified Income means the aggregate of the following:-
➢ Interest on bank deposits (savings or fixed).
➢ Interest on deposits held in cooperative banks.
➢ Interest in post office deposits.

Please Note – The deduction under Section 80TTA would not be available to a resident senior citizen eligible for deduction under Section 80TTB.

Also, for the purpose of Section 80TTA & 80TTB, where interest income is derived from any saving account or deposit held by, on or behalf, of a firm, an AOP or a BOI, then the partner of the firm or member of AOP/BOI would not be allowed deduction in respect of such income while computing their total income.

Let’s understand the above provisions of Section 80TTA and 80TTB with an illustration.