Important Keyword: Fixed Deposit, HUF, Section 80C.
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Tax Saving FD (Fixed Deposit) – Features and Eligibility
Fixed Deposits (FDs) are widely regarded as one of the safest investment options, appealing particularly to older generations who prioritize stability over higher-risk investments like shares and securities.
What are Tax Saving FD?
Tax Saving Fixed Deposits (FDs) are a specific type of Fixed Deposit that offers tax benefits along with interest income. Here are the key details and features of Tax Saving FDs:
Eligibility to Invest:
Investors: Resident individuals and Hindu Undivided Families (HUFs) are eligible to invest.
Types of Deposits: Can be single holder or joint holder deposits, with specific conditions for claiming tax deductions under Section 80C.
Features of Tax Saving Fixed Deposit:
Minimum Investment: Starts from INR 100, and subsequent investments must be in multiples of INR 100.
Maximum Deduction: Up to INR 1,50,000 per financial year can be claimed as a deduction under Section 80C of the Income Tax Act.
Lock-in Period: Has a mandatory lock-in period of 5 years from the date of deposit receipt issuance.
Non-Pledgeable: The deposit cannot be pledged as security for loans or other assets.
Withdrawal Restrictions: Withdrawals are not allowed before maturity, making it important for investors to consider their liquidity needs.
Interest Rates: Typically range between 7% to 9%, offering higher returns compared to savings accounts.
Interest Payout Options: Investors can choose to receive interest payouts monthly, quarterly, or opt for reinvestment of interest into the principal amount.
Tax Implications: Interest earned on these deposits is taxable as per the investor’s income tax slab. Additionally, TDS (Tax Deducted at Source) at 10% is applicable if interest exceeds INR 40,000 in a financial year.
Senior Citizen Benefits: Residents aged 60 years or above can claim additional interest deduction up to INR 50,000 under Section 80TTB.
Nomination Facility: Investors can nominate someone to withdraw the deposit in case of their demise, ensuring smooth succession of funds.
Considerations:
Long-Term Commitment: Since the funds are locked in for 5 years, investors should evaluate their financial goals and emergency fund requirements before investing.
Tax Efficiency: Tax Saving FDs provide immediate tax benefits by reducing taxable income, thereby lowering overall tax liability for investors.
Risk Factor: While FDs are considered safe, they do not offer protection against inflation, and the returns may vary based on interest rate changes.
Important Keyword: Chapter VI-A, HUF, Section 80DD.
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Section 80DD: Deduction for Differently Abled Dependent
With advancements in medical technology, treatments have become more effective yet often expensive. Some illnesses and conditions leave individuals reliant on others for daily survival, imposing significant financial burdens on their families. To alleviate this strain, the Income Tax Act offers a provision under section 80DD for tax deductions.
This deduction is intended to support families financially caring for dependents with disabilities or specific medical conditions. It serves as a relief measure, acknowledging the extra costs incurred in treatment, rehabilitation, and overall maintenance of individuals needing special care. By reducing taxable income, it aims to ease the financial responsibilities shouldered by families facing these challenging circumstances.
What are the Conditions to Claim Section 80DD Deduction?
To be eligible for the deduction under section 80DD of the Income Tax Act, certain conditions must be met:
The taxpayer must be a resident Indian.
The deduction is applicable when claimed for a dependent family member, not for the taxpayer themselves.
If the dependent has already claimed a deduction under section 80U, the taxpayer cannot claim a deduction under section 80DD.
The taxpayer must have incurred expenses for medical treatment, nursing, rehabilitation, or training of the differently-abled dependent.
The taxpayer should have paid or deposited any amount under an approved scheme for the maintenance of the dependent with a disability, such as those offered by LIC or other insurers.
The disability of the dependent must be at least 40%, certified by medical authorities.
A copy of the certificate issued by medical authorities certifying the disability must be submitted along with the income tax return.
Which Medical Authority is eligible to issue the certificate?
To claim the deduction under section 80DD of the Income Tax Act, it’s crucial to obtain a medical certificate from a qualified medical practitioner. The following professionals are recognized for issuing such certificates:
A neurologist holding an MD in Neurology.
A pediatric neurologist for disabled children.
A civil surgeon or Chief Medical Officer in a government hospital.
These certificates establish the disability status required for eligibility under section 80DD. Dependents eligible for this deduction include:
Spouse
Siblings
Children
Parents
Members of a Hindu Undivided Family (HUF)
The deduction amount under section 80DD is fixed, not dependent on actual expenses incurred but cannot be nil. The extent of deduction varies based on the severity of disability:
Disabled Person: Individuals with at least 40% disability.
Severely Disabled Person: Individuals with at least 80% disability.
Taxpayers can claim this deduction to alleviate the financial burden associated with caring for dependents with disabilities, subject to the conditions specified under the Income Tax Act.
Category
Deduction Amount
Disabled Person
INR 75,000
Severly Disabled Person
INR 1,25,000
ITR Form Applicable for Section 80DD
Under section 80DD of the Income Tax Act, the following disabilities are covered for claiming deductions:
Autism
Cerebral palsy
Blindness
Low vision
Leprosy cured
Hearing impairment
Locomotor disability
Mental retardation
Mental illness
Taxpayers who meet the specified conditions can claim this deduction when filing their Income Tax Return (ITR). This deduction is applicable to individuals and Hindu Undivided Families (HUFs), and it can be claimed using any of the ITR forms such as ITR 1, ITR 2, ITR 3, or ITR 4, depending on their income sources and other factors.
Supporting Documents
To substantiate the claim for deduction under section 80DD, taxpayers need to submit the following documents along with the standard documents required for filing ITR:
Medical Certificate: Issued by a qualified medical practitioner specifying the disability.
Form 10-IA: This form needs to be filled and submitted along with the ITR, providing details of the expenditure incurred on the medical treatment, rehabilitation, etc.
Self-Declaration Certificate: A self-declaration stating that the dependent meets the criteria laid out under section 80DD.
Receipts of Insurance Premium: If any amount has been paid or deposited under an approved scheme of LIC or any other insurer for the maintenance of the dependent.
These documents collectively validate the taxpayer’s eligibility for claiming the deduction under section 80DD, thereby providing financial relief in recognition of the costs associated with caring for dependents with disabilities.
Comparison between 80U & 80DD
Parameters
80U
80DD
Eligible beneficiary
Taxpayer himself
Dependents of taxpayer
Type of beneficiary
Resident Individual
Resident Individual or HUF
Pre-requisiteof incurring expenses
Flat deduction irrespective of the expenses incurred
Flat deduction provided that expenses have been incurred for support & maintenance of dependent
Important Keyword: Chapter VI-A, HUF, Section 80DDB.
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Section 80DDB: Deduction for Treatment of Specified Diseases
Facing substantial medical expenses, particularly for serious illnesses, can pose a significant financial challenge in today’s times. These ongoing costs throughout a person’s life can impose a considerable economic burden. Therefore, Section 80DDB of the Income Tax Act offers a means to alleviate some of this financial strain by allowing you to deduct expenses incurred in treating specified severe diseases.
This provision is designed to provide relief to taxpayers who bear the brunt of medical bills associated with critical illnesses. It allows for deductions on expenses directly related to the treatment of these diseases, thereby reducing the taxable income and easing the overall financial impact.
For instance, if a taxpayer incurs substantial medical costs for treating conditions specified under Section 80DDB, such as cancer, neurological diseases, or chronic renal failure, they can claim deductions accordingly. This deduction helps in mitigating the financial burden that arises from extensive and recurring medical expenditures.
Section 80DDB of the Income Tax Act
Section 80DDB of the Income Tax Act offers a significant provision aimed at easing the financial burden of medical treatment for specified severe diseases. This deduction is available to individuals and Hindu Undivided Families (HUFs) who incur expenses towards the treatment of themselves or their dependent family members.
Diseases covered under 80DDB
The diseases covered under Section 80DDB include:
Neurological Diseases: Listed with a disability of at least 40% and above, such as Dementia, Dystonia Musculorum Deformans, Motor Neuron Disease, Ataxia, Chorea, Hemiballismus, Aphasia, and Parkinson’s Disease.
Malignant Cancer
AIDS
Chronic Kidney Failure
Haemophilia
Thalassemia
Eligibility to claim 80DDB deduction
To be eligible for claiming the deduction under Section 80DDB, the taxpayer must meet the following criteria:
Individual: The individual taxpayer must either be undergoing treatment for one of the specified diseases or must be paying for the treatment of their dependent family members, which includes children, spouse, parents, or siblings.
HUF: The deduction can be claimed by the Karta of the HUF or any member of the HUF for the treatment of their dependent family members.
This provision acknowledges the financial strain associated with treating severe illnesses and aims to provide relief by allowing taxpayers to reduce their taxable income by the amount spent on medical treatment for these diseases. It underscores the government’s commitment to supporting healthcare expenses and providing financial assistance to individuals and families facing significant medical challenges.
Deduction limit for section 80DDB
The deduction amount will depend on the age of the person for whom such expenses are incurred.
Age of the person who is undergoing the treatment
Deduction Limit
< 60 years
INR 40,000 or actual expense whichever is less
>= 60 years
INR 1,00,000 or actual expense whichever is less
Section 80DDB of the Income Tax Act offers a crucial deduction specifically aimed at easing the financial burden of medical treatment for specified severe diseases. Here are some important points to understand about this provision:
Limitation to Actual Expenditure: The deduction under Section 80DDB is restricted to the actual amount spent on medical treatment for specified diseases. Taxpayers can claim this deduction only up to the extent of their expenses incurred.
Age Criteria for Deduction: The eligibility for deduction under Section 80DDB is determined based on the age of the individual receiving the medical treatment, not the age of the taxpayer claiming the deduction. This ensures that individuals of all ages facing severe diseases can benefit from this provision.
Prescription Requirement: Effective from 1st April 2016, a crucial requirement for claiming the deduction is obtaining a prescription for the treatment from a specialist. This specialist can be from any recognized hospital, not necessarily a government one. This measure ensures that the medical treatment is well-documented and legitimate.
Adjustment with Reimbursements: When claiming a deduction under Section 80DDB, taxpayers must adjust the claimed amount with any reimbursements received from insurance companies or employers. This prevents double benefits and ensures fair tax treatment.
Ineligibility under New Tax Regime: Taxpayers opting for the new tax regime introduced in recent years are not eligible to claim deductions under Section 80DDB. This highlights the differentiation in tax benefits between the old and new tax regimes.
Non-Applicability to Certain Incomes: Deductions under Section 80DDB cannot be used to offset taxes on short-term capital gains under Section 111A, long-term capital gains, or incomes taxed at special rates. This specifies the types of incomes against which this deduction cannot be applied.
How is the Deduction Calculated Under Section 80DDB?
Actual expenses for treatment
xxx
Maximum (INR 40,000/1,00,000)
xxx
Whichever is lower
xxx
Less: Insurance claim
(xxx)
Amount of deduction
xxx
To understand the calculation better, let us take an example:
Let’s break down the scenarios for Abhijeet and Ashutosh regarding their eligibility for deduction under Section 80DDB based on their medical expenses and reimbursements:
Scenario 1: Abhijeet
Abhijeet is 35 years old.
He incurred medical expenses of INR 70,000 on the treatment of a specific disease.
He received a reimbursement of INR 25,000 from the insurance company.
To calculate Abhijeet’s eligible deduction:
Total medical expenses incurred: INR 70,000
Reimbursement received: INR 25,000
Deductible amount under Section 80DDB:
Deductible amount = Total medical expenses – Reimbursement received
Deductible amount = INR 70,000 – INR 25,000
Deductible amount = INR 45,000
Since Abhijeet’s age (35 years) is less than 60 years, he can claim a deduction up to the permissible limit for his age category. Therefore, he can claim a deduction of INR 45,000 under Section 80DDB.
Scenario 2: Ashutosh
Ashutosh is 40 years old.
He incurred medical expenses of INR 70,000 on the treatment of a specific disease.
He received a reimbursement of INR 50,000 from the insurance company.
To calculate Ashutosh’s eligible deduction:
Total medical expenses incurred: INR 70,000
Reimbursement received: INR 50,000
Deductible amount under Section 80DDB:
Deductible amount = Total medical expenses – Reimbursement received
Deductible amount = INR 70,000 – INR 50,000
Deductible amount = INR 20,000
In this scenario, Ashutosh cannot claim a deduction under Section 80DDB because the reimbursement he received (INR 50,000) exceeds the permissible limit for deduction. According to Section 80DDB, the deduction is allowed only for the amount of expenditure incurred beyond any reimbursements received.
It’s important to note that if Ashutosh were a senior citizen (age 60 years or above), he would be eligible to claim a deduction up to INR 1,00,000, provided he meets the other conditions specified under Section 80DDB.
Required documents
For claiming the deduction under this section, the invoices are required for the expenditure. Further, it is mandatory to provide valid proof via the certificate of the disease. A medical practitioner can issue the certificate as shown in the table below.
Disease
Eligible Person who can issue certificate
Neurological Diseases where the disability level is proven to be 40% and above
any degree that the medical council of India recognizes as equivalent.
Malignant Cancers
Any specialist who has a postgraduate degree in general or internal medicine
Or
any degree that the Medical Council of India recognizes as equivalent.
AIDS (Full Blown Acquired Immuno-Deficiency Syndrome)
Any specialist who has a postgraduate degree in general or internal medicine
Or
any degree that the medical council of India reconizes as equivalent.
Chronic Renal Failure
Chronic Renal Failure A nephrologist who has an MD degree in Nephrology. Or a urologist who has a Master Chirurgiae (M.Ch.) degree in Urology
Or
any degree that the Medical Council of India recognizes as equivalent.
Hematological Disorders (i) Haemophilia (ii) Thalassaemia
A specialist who has an MD degree in Hematology
Or
any degree that the Medical Council of India recognizes as equivalent.
Content of Certificate
When claiming deductions under Section 80DDB for medical expenses incurred on specified severe diseases, it’s crucial to ensure that the necessary certificate contains the following details:
Name and Age of Patient: The certificate should clearly state the name and age of the patient for whom the medical treatment was undertaken.
Name of the Disease: It should specify the name of the disease for which the treatment was received. This ensures clarity on the nature of the medical condition being treated.
Details of the Specialist: The certificate must include comprehensive details of the specialist who issued the prescription. This should cover:
Name: Full name of the specialist.
Address: Complete address of the specialist’s place of practice.
Registration Number: Registration number of the specialist with their respective medical council or authority.
Qualification: Details of the specialist’s medical qualifications.
Hospital Details (if applicable): If the medical treatment was undertaken in a government hospital, the certificate should also include:
Name: Name of the government hospital.
Address: Complete address of the hospital.
These details are essential to substantiate the claim for deduction under Section 80DDB while filing Income Tax Returns (ITR). Taxpayers must ensure that the certificate provided by the specialist meets these requirements to validate their claim effectively.
ITR Form Applicable for Section 80DDB
Regarding the ITR forms applicable for claiming deduction under Section 80DDB, individuals and Hindu Undivided Families (HUFs) can file their tax returns using any of the following forms based on their income sources and complexity of finances:
ITR 1: For individuals having income from salaries, one house property, other sources (excluding winnings from lottery and income from race horses).
ITR 2: For individuals and HUFs not having income from business or profession.
ITR 3: For individuals and HUFs having income from business or profession.
ITR 4: For individuals, HUFs, and firms (other than LLPs) having presumptive income from business or profession.
Important Keyword: Chapter VI-A, HUF, ITR-1, Section 80G.
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Section 80G: Tax Deduction on Donations
Section 80G of the Income Tax Act provides an opportunity for taxpayers to claim deductions on donations made to specified charitable organizations and relief funds. This provision not only incentivizes donations but also allows taxpayers to contribute towards societal welfare while reducing their tax liability.
What is the Eligible Mode of Payment?
The method of payment plays a crucial role in determining eligibility for claiming deductions under Section 80G of the Income Tax Act. To qualify for these deductions, contributions must be made via cash, cheque, or demand draft.
Effective from the financial year 2017-18, donations made in cash exceeding INR 2,000 are not eligible for tax deductions. Previously, this limit stood at INR 10,000. Therefore, to avail of the deduction, contributions exceeding INR 2,000 should be made via cheque or demand draft.
It’s important to note that donations in the form of food, clothes, or medicines do not qualify for tax deductions under Section 80G of the Income Tax Act. To maximize your tax benefits while supporting charitable causes, ensure your contributions adhere to these guidelines regarding payment methods and eligible donations.
How to Claim Deduction:
When filing your income tax return, provide details such as:
Name, PAN, and address of the charitable institution.
Amount donated.
Type of donation (whether to a specific fund or institution).
Limits and Eligible Institutions:
Not all donations qualify for full deduction. Here’s a breakdown:
100% Deduction: Donations to funds like the National Defense Fund, Prime Minister’s National Relief Fund, and various educational and cultural institutions.
50% Deduction: Donations to funds like the Jawaharlal Nehru Memorial Fund and Prime Minister’s Drought Relief Fund.
Donations with 100% Income Tax Deduction without any qualifying limit:
National Defense Fund set up by the Central Government
Prime Minister’s National Relief Fund
National Foundation for Communal Harmony
An approved university/educational institution of National Eminence
Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
Fund set up by a State Government for medical relief to the poor
National Illness Assistance Fund
National Blood Transfusion Council or any State Blood Transfusion Council
Fund for Technology Development and Application
National Sports Fund
National Cultural Fund
The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund
Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
Any trust, institution, or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat (contribution made during January 26, 2001, and September 30, 2001)
Prime Minister’s Armenia Earthquake Relief Fund
Africa (Public Contributions — India) Fund
Swachh Bharat Kosh (applicable from the financial year 2014-15)
Clean Ganga Fund (applicable from the financial year 2014-15)
National Fund for Control of Drug Abuse (applicable from the financial year 2015-16)
Donations with 50% Income Tax Deduction without any qualifying limit:
Jawaharlal Nehru Memorial Fund
Prime Minister’s Drought Relief Fund
Indira Gandhi Memorial Trust
The Rajiv Gandhi Foundation
Donations with 100% Income Tax Deduction subject to qualifying limit of 10% of adjusted gross total income:
Government or any approved local authority, institution, or association for promoting family planning.
Donation by a Company to the Indian Olympic Association or any other notified association or institution in India for sports infrastructure development or sponsorship.
Donations with 50% Income Tax Deduction subject to qualifying limit of 10% of adjusted gross total income:
Donation to any public charitable trust.
Authority constituted in India for housing accommodation needs or urban planning and development.
Corporation referred in Section 10(26BB) for promoting minority community interests.
Repairs or renovation of notified temples, Mosques, Gurudwaras, Churches, or other places of worship.
Any other fund or institution meeting conditions under Section 80G(5).
What is Adjusted Gross Total Income for 80G?
It begins with computing your total income from all sources and then making adjustments as specified by tax regulations.
To determine your Adjusted Gross Total Income, start with your gross total income, which encompasses earnings from employment, business, property, and other sources. Next, deduct allowable expenses such as interest payments on loans, certain taxes paid, and investments in specified savings schemes. These deductions help lower your taxable income, thereby reducing the amount of tax you owe.
In the context of donations made to charitable organizations or trusts, Section 80G of the Income Tax Act provides incentives for philanthropy. When you contribute to eligible entities, you can claim deductions on the donated amount from your total income. This reduces your taxable income, resulting in lower tax liability.
Gross Total Income
xxx
Less: Chapter VI-A Deductions except 80G
(xxx)
Less: Exempt Income
(xxx)
Less: Income chargeable to tax at special rate
(xxx)
Less: Income referred to in Sections 115A, 115AB, 115AC, and 115AD relating to non-residents and foreign companies.
(xxx)
Adjusted Total Income
xxx
Let us take an example to understand the calculation better:
Raj contributed INR 25,000 to a government-approved institution for promoting family planning. (100% tax deduction allowed to a qualifying limit of 10% ATI)
Further, he contributed INR 40,000 towards the renovation of a temple (50% tax deduction allowed to a qualifying limit of 10% ATI)
He calculated his adjusted total income as INR 4,50,000.
Particulars
Amount (INR)
Donation with 100% tax deduction qualifying limit
25,000
Donation with 50% tax deduction qualifying limit
40,000
Total Donation
65,000
10% of ATI
45,000 (25,000*100% + 20,000*50%)
ITR Form Applicable for Section 80G
When filing your Income Tax Return (ITR) and claiming deductions under Section 80G, it’s essential to choose the appropriate ITR form based on your income sources. The available options include ITR 1, ITR 2, ITR 3, and ITR 4, each catering to different types of taxpayers. Here’s a breakdown to help you understand which form applies to you:
ITR 1 (Sahaj): This form is suitable for individuals with income from salaries, one house property, other sources (like interest income), and having total income up to Rs. 50 lakh. If you have made donations under Section 80G and your income sources fall within the scope of ITR 1, you can claim deductions accordingly.
ITR 2: If you have income from more than one house property, income from capital gains, or foreign assets/income, ITR 2 is applicable. You can still claim deductions under Section 80G while using this form, provided it matches your income profile.
ITR 3: This form is for individuals and HUFs (Hindu Undivided Families) having income from business or profession. If you fall under this category and have made donations eligible under Section 80G, use ITR 3 to file your return.
ITR 4 (Sugam): For individuals, HUFs, and firms (other than LLPs) opting for presumptive taxation under Sections 44AD, 44ADA, or 44AE, ITR 4 is appropriate. You can claim Section 80G deductions if your income is computed under these presumptive schemes.
Supporting Documents for Claiming Section 80G Deductions
Apart from the basic documents like PAN card and Form 16, you will need specific documents related to your donations:
Stamped Receipt: Obtain a receipt from the organization to which you made the donation. This receipt should bear the stamp of the organization, details of your donation including amount, date, and PAN of the organization.
Form 58: If you have donated to funds that qualify for 100% exemption under Section 80G, ensure you obtain Form 58 from the organization. This form is necessary to claim such deductions.
Section 80TTA: Deduction for Saving Account Interest
Many individuals hold savings accounts where they earn interest periodically—monthly, quarterly, or yearly. What many aren’t aware of is that this interest income is taxable under the category of ‘Income from other sources’. However, there’s a provision under the Income Tax Act, known as section 80TTA, which allows taxpayers to claim a deduction on such interest income.
Section 80TTA
Section 80TTA of the Income Tax Act offers a beneficial provision for individuals who earn interest on their savings accounts. Banks typically credit interest periodically—monthly, quarterly, or annually—according to their policies. This interest is categorized as taxable income under the “Income From Other Sources” head in your tax return.
However, the government allows taxpayers to claim a deduction on this savings interest income under Section 80TTA, up to a maximum of INR 10,000. This deduction helps reduce the taxable income, thereby lowering the overall tax liability for individuals.
Eligibility to claim deduction u/s 80TTA
Section 80TTA of the Income Tax Act allows resident individuals below 60 years and HUFs to claim deductions on their savings account interest. For those who are senior citizens (aged 60 years or more) or super senior citizens (aged 80 years or more), Section 80TTB becomes applicable for similar deductions. It’s noteworthy that non-resident Indians (NRIs) with income from NRO accounts can also claim deductions under Section 80TTA for the interest earned on such accounts. These provisions aim to ease tax liabilities for various categories of taxpayers, encouraging savings and financial prudence.
Deduction limit u/s 80TTA
Under Section 80TTA of the Income Tax Act, individuals can claim a deduction on interest earned from savings accounts. The maximum deduction allowed is up to INR 10,000 in a financial year. Here’s how it works:
If your total interest income from all savings accounts is less than INR 10,000 in a year, you can claim the entire interest amount as a deduction. This means if your cumulative interest income from savings accounts is, say, INR 8,000, you can deduct the full INR 8,000 from your taxable income.
However, if your total interest income exceeds INR 10,000 during the year, the maximum deduction you can claim under Section 80TTA is INR 10,000. For instance, if your total interest income is INR 12,000, the deductible amount under Section 80TTA will be INR 10,000. The remaining INR 2,000 will be added to your total income and taxed as per your applicable income tax slab.
Eligible interest’s u/s 80TTA
Section 80TTA of the Income Tax Act allows for deductions on certain types of interest income, but not all interest earnings qualify.
Eligible interests include:
Interest earned from savings accounts held with banks.
Interest earned from savings accounts held with cooperative societies.
Interest earned from savings accounts held with the Post Office.
On the other hand, the following types of interest income are not eligible for deduction under Section 80TTA:
Interest earned from fixed deposits (FDs).
Interest earned from recurring deposits (RDs).
Interest earned from any other types of time deposits.
To illustrate this with an example: Let’s consider Ms. Desai, a resident individual, for the financial year 2022-23. She earned INR 16,000 from interest on her Union Bank savings account, INR 24,000 from a Post Office fixed deposit, and INR 3,500 from debentures.
For tax purposes, Ms. Desai can claim a deduction under Section 80TTA only on the INR 16,000 earned from her Union Bank savings account, as it falls under the eligible category. The interest income from the Post Office fixed deposit and debentures does not qualify for this deduction.
As per the rule, Ms. Desai will be able to claim a deduction only on the interest earned from her Union Bank Savings.
Particulars
Amount
Union bank Savings Interest
16,000
Total InterestIncome Exemption
10,000
Interest Income taxable
6,000
Post Office Interest
24,000
Debenture Interest
3,500
Total Taxable Interest
33,500
How to Claim Savings Interest Deduction?
To claim the savings interest deduction while filing your income tax return (ITR), it’s crucial to follow specific steps as per the Income Tax Act. Individuals and Hindu Undivided Families (HUFs) are eligible to claim deduction under section 80TTA, provided certain conditions are met.
When you file your ITR, you need to first include the total interest earned on savings accounts under the category “Income From Other Sources.” This is considered as part of your taxable income. Next, you can claim a deduction on this interest income under section 80TTA of Chapter VI-A of the Income Tax Act.
Section 80TTA allows for a deduction of up to Rs. 10,000 on interest earned from savings bank accounts held with banks, cooperative societies, or post offices. This deduction is applicable for individuals and HUFs, ensuring they can reduce their taxable income by the amount of interest earned on savings up to Rs. 10,000.
It’s important to note that this deduction is applicable to interest earned on savings accounts only and not on interest from fixed deposits or recurring deposits. The taxpayer must accurately report these figures in their ITR form, choosing the appropriate form such as ITR 1, ITR 2, ITR 3, or ITR 4 based on their income sources and other applicable criteria.
