Section 80TTA of the Income Tax Act deals with deduction with respect to Interest income from Savings Bank Account. Section 80TTA does not apply to Interest income from Fixed Deposits. Deduction u/s 80TTA is available to an Individual Assessee and also a HUF. The Deduction is allowed for interest from Savings Account held with a Bank, Co-operative Society or a Post Office.
Purpose of Section 80TTA
The reason for introducing this deduction into the Income tax act is to promote Savings among the salaried individuals. Taking lessons from the economic downturn in the US, Indian government has contemplated to act. This has led to drafting this provision in a record time of 6 months and introducing it in the Budget.
Section 80TTA Deduction Limit AY 2016-17 2015-16
The maximum deduction an Individual or HUF can claim under this section cannot exceed Rs.10,000. It is hereby mentioned that this deduction is not available for Interest from Savings Accounts held by firms or BOPs.
Section 80TTA Applicable to NRI?
The ‘NRO Accounts’ do earn interest just like regular Savings Accounts. Therefore, any Interest earned by an NRI is also deductible under section 80TTA.
A NRI can claim Interest Deduction under 80TTA, whether the account is maintained with a Public Sector or a Private Sector Bank.
Recurring Deposits covered under 80TTA?
As the words ‘Savings Account’ were clearly mentioned in the Section, it is easy to conclude that any interest income earned from Recurring Deposit is not deductible under section 80TTA.
Any Income from Recurring Deposits are liable to Tax and the payer shall also deduct TDS at the rate of 10%.
Case Laws on Section 80TTA
There are not many case laws that deal with this section. In fact, there is one case law where section 80tta was even mentioned.
|Hindustan Colas Ltd , Mum vs Assessee|