Section 80TTA
Also written 80TTA · Section 80TTA deduction
The deduction against tax on savings bank interest, available only to an individual or HUF, and only for a savings account with a bank, post office or cooperative bank — not for fixed deposit interest.
In plain language
Interest on your savings bank account is taxable income. Most people never notice, because banks do not deduct tax at source on it.
Section 80TTA gives you some relief. It lets an individual or a Hindu Undivided Family claim a deduction for the tax charged on that savings-account interest, up to a limit the rules set from time to time.
The workbook is precise about who and what qualifies, even though it does not print the rupee figure. Only a savings account counts, held with a bank, a post office or a cooperative bank. A fixed deposit does not qualify.
How it works
The workbook's own conditions, read together:
- The deduction is against tax charged on interest earned on a savings bank account.
- It is subject to limits on the amount claimed as deduction and other conditions specified from time to time — the workbook states that a limit exists without printing the rupee figure in this booklet.
- It is available only to an individual or a Hindu Undivided Family — not to a company, a firm or a trust.
- It is applicable for a savings bank account, post office or cooperative bank — the workbook names these three account types and no others.
Because the workbook gives no figure for the ceiling, the safe exam answer rests on the four conditions above, not on a number the source does not state.
A worked example
The limit itself is illustrative — the workbook gives no rupee figure for it in this booklet.
Suresh, a retired individual in Vadodara, earns Rs 9,000 in interest on his savings bank account during the year and another Rs 40,000 in interest on a fixed deposit at the same bank.
Under Section 80TTA, only the savings account interest is eligible for the deduction; the workbook's own wording restricts the section to that one account type. The fixed deposit interest earns no 80TTA deduction at all — it is taxed as ordinary interest income, and any TDS deducted on it under the FD rules is a separate matter entirely.
His daughter's family runs a small partnership firm with its own savings account. Because 80TTA is available only to an individual or a HUF, the firm cannot claim the deduction on the interest that account earns, however small the amount.
Why NISM asks about it
Chapter 10 (Tax Saving Options) places Section 80TTA in the same deductions table as 80C, 80CCD(1B), 80D and 80G, immediately noting that interest on a savings account is otherwise taxable. Expect a question that tests which account type qualifies (savings bank, post office or cooperative bank — not FD) and who can claim it (individual or HUF only).
Common exam traps
- 80TTA covers savings account interest only. Fixed deposit interest is excluded, even at the same bank.
- Only an individual or a HUF can claim it — not a company, firm or trust.
- The workbook states a limit exists but does not print the figure in this booklet. Answer from the conditions given, not an imported number.
- 80TTA is a deduction against tax on interest that is otherwise fully taxable — it does not make the interest itself tax-free, and interest above the limit is still taxed in full.
- Do not confuse this with the Fixed Deposit entry's own TDS rule — TDS is deducted at source on FD interest beyond a stipulated amount; 80TTA is a year-end deduction on savings-account interest. They apply to two different products.
Check yourself
1.Which statement about Section 80TTA is correct?
- a)Interest on a savings account is exempt from tax altogether
- b)Interest on a savings account is taxable, but a deduction is available subject to limits — only to an individual or HUF, and covering savings bank, post office and cooperative bank accounts
- c)It is available to companies and firms as well as individuals
- d)It applies only to fixed deposit interest
Show the answer
Answer: (b) Interest on a savings account is taxable, but a deduction is available subject to limits — only to an individual or HUF, and covering savings bank, post office and cooperative bank accounts
The section opens with the sentence people find surprising: "INTEREST ON SAVINGS ACCOUNT IS TAXABLE. However, tax charged on interest earned on savings bank account is eligible to be claimed as a deduction under section 80TTA, SUBJECT TO LIMITS on the amount claimed as deduction and other conditions specified from time to time. AVAILABLE ONLY TO INDIVIDUAL OR HUF. Applicable for SAVINGS BANK ACCOUNT, POST OFFICE OR COOPERATIVE BANKS." Option (a) confuses a deduction with an exemption, and it is a belief encouraged by Chapter 4's rule that there is "no TDS on interest on SB account balance, BUT TAXABLE IN THE HANDS OF DEPOSITOR" — the bank's silence is not permission. Option (c) contradicts the express restriction to individuals and HUFs. Option (d) confuses two products: fixed deposit interest attracts TDS beyond a stipulated amount, which is a different rule in a different chapter.
2.A taxpayer earns interest on a savings bank account and a post office savings account, and believes it is tax free because no TDS was deducted. What is the correct position?
- a)She is right; no TDS means no tax
- b)Savings interest is taxable and must be declared; Section 80TTA then gives a deduction subject to limits, available to an individual or HUF, covering bank, post office and cooperative bank interest
- c)Only the bank interest is taxable; post office interest is exempt
- d)She must pay tax on it with no deduction available
Show the answer
Answer: (b) Savings interest is taxable and must be declared; Section 80TTA then gives a deduction subject to limits, available to an individual or HUF, covering bank, post office and cooperative bank interest
Section 80TTA opens by contradicting her belief: "INTEREST ON SAVINGS ACCOUNT IS TAXABLE." Chapter 4 explains where the confusion comes from — "No Tax deducted at Source (TDS) on interest on SB account balance, BUT TAXABLE IN THE HANDS OF DEPOSITOR." Two different things are happening: TDS is the bank cutting tax before paying her, which it does not do here, and taxability is whether the income belongs in her return, which it does. The bank's silence is not permission. What she then receives is a deduction, not an exemption: "eligible to be claimed as a deduction under section 80TTA, SUBJECT TO LIMITS on the amount claimed as deduction and other conditions specified from time to time." Two boundaries apply and both favour her: "available ONLY TO INDIVIDUAL OR HUF", and "applicable for SAVINGS BANK ACCOUNT, POST OFFICE OR COOPERATIVE BANKS" — so her post office interest is covered too, which disposes of option (c).
Where this is taught
Free preparation for NISM Series SEBI-ICERelated terms
- Fixed DepositMoney placed with a bank for a fixed term at an agreed rate of interest. Safe and simple, but the interest is taxable, and TDS applies once interest crosses a stipulated amount.
- Savings Bank (SB) accountAn ordinary bank savings account paying low, liquid interest, with no TDS on the interest itself — distinct from the zero-balance Basic Savings Bank Deposit Account.
- Section 80CThe income-tax deduction for money put into life insurance, provident fund, ELSS, five-year bank deposits, NPS Tier 1, NSC and home-loan principal, capped in aggregate at Rs 1,50,000 a year.
- Previous yearUnder the Income Tax Act, 1961, the year in which income is earned. It is taxed in the following assessment year; each runs from 1 April to 31 March.
- TDS — Tax Deducted at SourceTax the bank deducts before crediting certain interest to you — absent on savings bank interest but charged on fixed and recurring deposit interest beyond a stipulated amount the workbook does not state.