A new section 80TTA has been inserted with effect from assessment year 2013-2014. Section 80TTA provides a deduction of up to Rs 10, 000 in aggregate to an individual or a Hindu undivided family in respect of any income by way of interest received on deposit (not being time deposits) in a savings account of banks, cooperative banks and post office.
Tax deduction under section 80TTA is not account specific. This means, if you have four saving accounts in different banks, co-operative banks or in post office then it does not mean that you will be eligible for Rs 40000 (4*10000) tax deduction under section 80TTA. In this case, you will be eligible for Rs 10000 tax deduction for the entire interest amount received from different saving bank accounts.
To claim tax deduction under section 80TTA, you are required first to include the interest from saving bank account as your income and then claim the deduction from gross total income.
If interest from saving bank account is less than Rs 10000 then tax deduction under section 80TTA will be restricted to the amount that is received. if its more than Rs 10000 then maximum tax deduction allowed under section 80TTA will be Rs 10000. This means amount received as interest or Rs 10000 which ever is less will be allowed as tax deduction under section 80TTA.
Provide that where the income referred to section 80TTA of income tax act 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.
By virtue of notification no 32/2011, interest received from a post office saving bank was exempt to the extent of Rs. 3, 500 (in an individual account) and Rs. 7, 000 (in a joint account) under income tax act.
From assessment year 2013-2014, this exemption can be claimed in addition to the above tax deduction as discussed under section 80TTA of income tax act, 1961.
I am a non resident Indian living in USA. Can you please let me know whether I can claim income tax benefits under section 80TTA of income tax act?
Section 80TTA is applicable to individual being a taxpayer in India. No where in section 80TTA the residential status of individual is mentioned so this section is applicable and you can claim the benefit of income tax deduction.
I am getting interest amount of Rs. 7, 000 from my bank saving account. Can I claim deduction of Rs. 10, 000?
No, tax deduction available under section 80TTA is a maximum deduction. If you are getting Rs. 7000 as interest per year then only that much will be allowed as a deduction under section 80TTA.