Section 80TTA Explained: How to Save Tax on Your Savings Account Interest

You may receive interest on the balance in your savings account. While this interest counts as income, it is also subject to tax. However, under India’s Income Tax Act, Section 80TTA allows individuals to claim a deduction on this interest income, helping reduce their overall tax liability.

This article explains how Section 80TTA works, who can claim it, and how much deduction it offers.

What is Section 80TTA of the Income Tax Act?

Section 80TTA of the Income Tax Act of 1961 provides a deduction of up to ₹10,000 on interest earned from savings accounts in banks, cooperative societies, and post offices. This deduction is available to individuals and Hindu Undivided Families (HUFs) but not to senior citizens, as they have a separate provision under Section 80TTB.

If the total interest income from all savings accounts exceeds ₹10,000, only ₹10,000 is deductible, and the remaining amount is taxed under ‘Income from Other Sources.’

The provisions of this section also extend to Non-Resident Indians (NRIs) who can claim this deduction, but only for interest earned on Non-Resident (Ordinary) (NRO) savings accounts, as interest on Non-Resident External (NRE) accounts is tax-free.

Eligible instruments under Section 80TTA

Interest earned from savings accounts maintained with banks, cooperative societies engaged in banking, and post offices qualifies for deduction. However, the following is the list of interest incomes that do not qualify for deduction under Section 80TTA:

• Interest earned from fixed deposits is fully taxable.
• Interest from recurring deposits is not eligible for deduction.
• Interest earned from corporate bonds and debentures is taxable.
• Interest from provident fund accounts does not qualify.
• Any interest earned from lending activities is excluded.

How to make a claim under Section 80TTA Deduction

Suppose you have a savings account with a bank and earn interest on your deposits. In 2024-25, you received ₹12,000 as interest from your savings account. Under Section 80TTA of the Income Tax Act, you are eligible for a deduction of up to ₹10,000 on this interest income.

When filing your income tax return, you must first report the entire ₹12,000 under the head’ Income from Other Sources.’ Then, you can claim a deduction of ₹10,000 under Section 80TTA. This means only ₹2,000 of your interest income will be taxable.

For example, if your total taxable income before deductions is ₹6,00,000, adding ₹12,000 from interest makes it ₹6,12,000. After claiming the ₹10,000 deduction under Section 80TTA, your taxable income is reduced to ₹6,02,000. You will then pay tax based on the applicable slab rates for this adjusted income.

Provisions of TDS under Section 80TTA

Under Sec 80TTA, Tax Deducted at Source (TDS) does not apply to interest earned from savings accounts. Banks do not deduct TDS on this interest, regardless of the amount. However, taxpayers must report this income under ‘Income from Other Sources’ when filing their tax returns.

However, if you invest in fixed and recurring deposits, the bank will deduct TDS if interest exceeds ₹40,000 (₹50,000 for senior citizens), but savings account interest remains exempt from TDS.

How to find out how much interest you earned?

Here’s how you can find out how much interest you earned during the year:

• Check your bank passbook or net banking statements.
• Most banks show monthly or quarterly interest credits.
• Sum up the total interest for the year.
• Alternatively, request a consolidated interest certificate from the bank.

Can you claim for multiple accounts?

Yes, you can add interest from all your savings accounts across different banks, post offices, and cooperative banks. The combined deduction, however, should not exceed ₹10,000. For example:

• ₹3,000 from Bank’ X’
• ₹4,000 from Bank’ Y’
• ₹2,500 from the Indian Post Office

The total interest income you earned here is ₹9,500. As per the provision, you can claim the full amount under 80TTA.

Ways to save taxes other than Section 80TTA

• You can claim a deduction of up to ₹2 lakh per year on the interest paid on a home loan for a self-occupied property under Section 24(b). The interest claim has no upper limit if the property is rented out. This is separate from principal repayment benefits under Section 80C.

• You can claim tax exemption on House Rent Allowance (HRA) if you live in rented accommodation and receive HRA as part of your salary. The amount exempt depends on your salary, HRA received, rent paid, and city of residence. It is only applicable if you don’t own a house in the city where you work.

• Employees can claim a Leave Travel Allowance (LTA) exemption for domestic travel expenses incurred while on leave. It is available for two journeys in a block of four calendar years. Only travel costs (rail, air, or public transport) are allowed, and hotel or food bills are not covered. Proper documentation is necessary for exemption.

• Under Section 80E, you can claim a deduction on the full interest paid on an education loan for higher studies. There is no cap on the amount, but the deduction is allowed for a maximum of 8 years or until the interest is paid, whichever is earlier. This applies to self, spouse, children, or legal ward loans.

• Under Section 80GGC(for individuals), you can claim a 100% deduction for contributions to political parties or electoral trusts. This is only valid if the donation is made via non-cash modes like cheque, demand draft, or digital transfer. Companies can also claim this under Section 80GGB.

• If you incur expenses for the medical treatment, training, or rehabilitation of a disabled dependent, you can claim a flat deduction under Section 80DD. The limit is ₹75,000 for disability and ₹1.25 lakh for severe disability. This is different from Section 80U, which is for self-disability.

• Resident Indian authors (excluding those of textbooks) can claim a deduction of up to ₹3 lakh under Section 80QQB for royalty income from books. The royalty must be received under a valid agreement, and a certificate from the payer is required. Foreign royalties must be brought to India in convertible foreign exchange within six months.

• Government-backed institutions, such as the National Highways Authority of India (NHAI), Rural Electrification Corporation of India (REC), Power Finance Corporation (PFC), and Indian Railway Finance Corporation (IRFC), issue tax-free bonds. The interest earned on these bonds is completely exempt under Section 10(15). Though these bonds offer modest returns, they are a secure and legal route to earning tax-free income if held until maturity.

• Agricultural income is completely exempt from tax under Section 10(1). This includes income from farming, land lease, or the sale of produce directly tied to agricultural operations. However, it may be considered for rate calculation when total income exceeds the exemption limit through partial integration.

Conclusion

While ₹10,000 may seem small, for people in the 20-30% tax bracket, this deduction can help them save ₹2,000–₹3,000 in taxes annually. It is easy to miss out, but every rupee saved is a rupee earned. Also, this deduction can be a handy tool with rising interest rates on savings accounts in some banks and digital savings platforms.