Section 80TTA Deduction- Interest on Bank savings deposit

Section 80TTA is 
introduced with effect from April 01, 2013 and will apply from AY 2013-14 and
onwards. Section is 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 held with banks, cooperative banks and post office. The
deduction is restricted to Rs 10,000 or actual interest whichever is lower.

It is also provided 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.
Analysis
of Section 80TTA
Who can claim deduction u/s
80TTA?
Deduction u/s 80TTA is applicable to individual taxpayers
and HUF only. This benefit is not available to a firm, an Association of
Persons, a Body of Individuals, LLP or Company Assessee.
Eligible savings account
for claiming deduction
Saving accounts with any of following entities will
qualify:
·  Bank or banking company;
·  Co-operative society engaged in carrying on the banking business and
as specified.
·  Post office savings account.
Section 80TTA deduction not available on FD Interest
This deduction is NOT applicable to the interest
you received on your FDs/time deposit or term deposit. Term deposit means a
deposit received by the bank for a fixed period and can be withdrawn only after
the expiry of the predefined fixed period.
Maximum Deduction
· The deduction allowed is  interest received on
eligible saving accounts or Rs. 10,000 whichever is lower.
· If interest earned is more than 10,000 then balance
amount will be taxable as before i.e   considered
as Income from Sources and taxed as per your slab rate.
· The deduction is in addition to deduction of Rs.
1.50 Lakh of section 80C of the Income Tax Act-1961.
Applicable from A.Y.
2013-14 Onwards
The section is applicable from April 01, 2012 and will
apply from AY 2013-14 and onwards.
TDS Provisions not
applicable on Saving Bank Interest
The interest earned on savings account is exempted from TDS under
Section 194A of Income Tax Act i.e No TDS is deducted on interest from saving
account.
Post office savings
bank interest exemption under section 10(15)(i)
Post office savings bank interest is exempt up to Rs.
3500 (in an individual account) and Rs. 7000 (in a joint account) under section
10(15)(i) by virtue of Notification No. 32/2011, dated June 3rd 2011 read with Notification No. GSR 607, dated June
9, 1989. The cumulative impact of section 10(15)(i) and 80TTA as
follows:
Up to the Asessment year 2011-12 Rs.
For the Assessment year 2012-13 Rs.
From the Assessment Year 2013-14 Rs.
Interest on Post Office saving Bank (exemption
under section 10(15)(i)
Full Exemption, nothing is taxable
Exemption up to Rs. 3500 in a single account and Rs.
7000 in a joint account
Exemption up to Rs. 3500 in a single account and Rs.
7000 in a joint account
Interest on savings account with a bank,
co-operative bank and Post office (deduction under section 80TTA)
No deduction
No deduction
Deduction up to Rs. 10000
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.
Extract of Section 80TTA
Deduction in respect of
interest on deposits in savings account.
80TTA. (1) 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 savings account with—
(a) a banking company to
which the Banking Regulation Act, 1949, applies (including any bank or 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, there
shall, in accordance with and subject to the provisions of this section, be
allowed, in computing the total income of the assessee a deduction as specified
hereunder, namely:—
(i) in a case where the
amount of such income does not exceed in the aggregate ten thousand rupees, the
whole of such amount; and
(ii) in any other case, ten
thousand rupees.
(2) 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.

Explanation.—For the
purposes of this section, “time deposits” means the deposits repayable on
expiry of fixed periods.’.
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