What are Section 80TTA and Section 80TTB?

This section of the the Income Tax Act that allows taxpayers to claim deductions on interest income earned from savings bank accounts. The maximum tax deduction amount that can be claimed under Section 80TTA is ₹10,000 in a financial year. It’s important to remember that if the interest amount earned exceeds the maximum claim for the deduction, it will be taxable under ‘income from other sources.’

Section 80TTB of the Income Tax Act was introduced in Budget 2018 and it allows senior citizens to claim tax deduction benefit of up to ₹50,000 annually on interest earnings from bank/post office/co-operative bank term deposits. This tax benefit extends to not just savings accounts but also recurring deposit and fixed deposit accounts held with a bank or with the post office. It is also notable that this tax deduction can only be claimed by senior citizens opting for the old tax regime.

However advantageous the Section 80TTA may be for taxpayers, not all individuals can claim deductions under it. You need to meet some key eligibility criteria. Below are the key eligibility criteria the tax payer needs to fulfill to get Section 80 TTA benefits:

1. For Sec 80TTA to apply, the tax payer must be under 60 years.

2. Individuals or HUF (The Hindu Undivided Family) can reap the benefits of 80TTA.

3. NRIs holding a Non-Resident Ordinary (NRO) savings account are eligible.

4. Taxpayers who have opted for the old, existing tax regime.

5. Establishments with savings accounts in financial institutions like banks, cooperative societies, and post offices.

Sec 80TTA is a part of Chapter VI A of The Income Tax Act, 1961 and is titled ‘Deduction in respect of interest on deposits in savings account’. Thus, the primary use of exemptions under the section is in the case of the interest amount collected at the end of the fiscal year.

As already mentioned, the tax payer needs to meet some key criteria in order to be eligible to avail the tax benefits of Section 80TTB. Key eligibility criteria that one needs to meet are:

• Tax payer must be resident senior citizen i.e. aged 60 years or older
• NRI taxpayers are not eligible for this benefit
• Non-individual tax payers like HUFs and AOPs are not eligible
• Interest earned from savings accounts, fixed deposits and recurring deposit are eligible
• Account must be held with bank or post office to be eligible

The ₹50,000 annual tax limit is a cumulative limit across all eligible accounts held by the resident senior citizen taxpayer

Now that we have learned the principal workings of sec 80TTA, let us dive deeper into knowing the organizations whose savings accounts are eligible for deductions under 80TTA:

Savings accounts that are eligible for Section 80TTA benefits mentioned earlier are also eligible for Section 80TTB benefit if held by resident senior citizens. Additional types of account that are eligible for benefits u/s 80TTB are:

The quantum or amount of deduction that can be requested is ₹10,000. This is fixed for a financial year.

Also, note that this is the total deduction amount permissible under Section 80TTA. This interest amount can be from multiple savings accounts or a single account. But the ₹10,000 mark cannot be stretched further.

The below-given pointers will give us better clarity regarding understanding the limits on deduction amounts under 80TTA:

• Any interest amount less than ₹10,000 is exempt from any kind of tax.
• If the interest amount accrued is over ₹10,000, only ₹10,000 is exempt from tax under Sec 80TTA. The rest of the amount will be taxed under the usual tax slabs applicable in a particular financial year.

For example, Neha earned ₹15,000 as interest from various channels under which the section is applicable. What will be the interest income tax deduction that can’t be claimed under the IT Act?

The interest amount that is exempt from tax is ₹10,000. The balance amount, i.e. 15000-10000, will be taxed.

This means ₹5,000 is the interest income on which Section 80TTA will not apply. This amount will be taxed as per the norms

As per existing tax rules, Section 80TTB tax benefits are limited to annual interest income of up to ₹50,000. This is a cumulative limit irrespective of the number of savings accounts, fixed deposits and recurring deposits held by the eligible resident senior citizen tax payer.

If interest income during the financial year exceeds ₹50,000, the incremental amount will be treated as “income from other sources” and taxed as per the applicable income tax slab rate.

Exclusions criteria to be considered under Section 80TTA and Section 80TTB are as follows:

• Section 80TTA and TTB benefits are not applicable under Section 115BAC, as these are not among the eligible new tax regime deductions
• All individuals above 60 years are excluded from the benefits offered under Section 80TTA. Resident senior citizens can only avail Section 80TTB benefits
• 80TTA and 80TTB only applies to the interest income and not on the principal amount.
• Interest income from non-banking finance companies (NBFCs) doesn’t qualify for deductions under either Section 80TTA or 80TTB.
• Interest income from FDs and RDs won’t be considered under 80TTA. These are available only u/s 80TTB
• Only individuals and HUFs qualify to avail the 80TTA benefits. Other entities like corporates, firms, domestic or international associations of people, artificial juridical persons, and others are not eligible for benefits under Section 80TTA.
• Only resident senior citizens aged 60 years or more can avail Section 80TTB benefits. Other types of tax payers cannot avail this benefit.
• NRI with a Non-Resident Ordinary (NRO) account qualify for Sec 80TTA benefits. However, senior citizen NRI tax payer cannot avail Section 80TTB benefit.

Below are the key differences between Sections 80TTA and 80TTB of the Income Tax Act: