If you keep a sizeable amount of money in savings bank accounts or bank fixed deposits, you must know about tax relief on interest income under Section 80TTA and 80TTB.
Let’s find out about the tax relief under Section 80TTA and Section 80TTB.
#1 Section 80 TTA (Interest Income on Savings Bank Accounts)
Interest earned on savings accounts is exempt from income tax to the extent of Rs 10,000 per financial year.
Only the interest earned on the savings account is eligible for benefit under Section 80TTA.
Only the saving accounts with the following entities qualify for the benefit under 80TTA.
- Banks
- Post Offices
- 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)
Interest earned on fixed deposits does NOT qualify for tax benefit under Section 80TTA.
Who is eligible?
- Individuals and HUF (Hindu Undivided Family) are eligible.
- NRIs can also take benefit under Section 80TTA. They can take benefit for interest earned on NRE and NRO savings accounts.
- If you are eligible for tax benefit under Section 80TTB, you cannot take benefit under Section 80TTA. To be discussed later.
#2 Section 80TTB (Only for Senior Citizens)
The tax relief is only for Senior Citizens. If your age is less than 60 years, you can’t seek tax relief under Section 80TTB.
This tax rule was introduced in Budget 2018 and is applicable from FY2019.
As per this section, interest income from savings bank accounts and fixed deposits is exempt from income tax to the extent of Rs 50,000 per financial year.
To be eligible for tax benefit under Section 80TTB, the deposit (savings and fixed) must be with one of the following:
- Banks
- Post Offices
- 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)
Who is eligible?
- Only resident senior citizens are eligible.
- Non-residents are not eligible. Taxpayers under the age of 60 are not eligible.
Points to Note
- Interest income from company fixed deposits or bonds/NCDs will not qualify for relief under Section 80TTB. Only the interest income from deposits with banks, post-offices and co-operative banks qualifies.
- Income from Pradhan Mantri Vaya Vandana Yojana (PMVVY) is NOT eligible for relief under Section 80TTB.
- As I understand, even the interest earned on Senior Citizens Savings Scheme (SCSS) is NOT eligible for relief. Not very sure about this though.
Section 80TTA Vs. Section 80TTB
If you contrast relief under Section 80TTA with Section 80TTB, you can see
- Relief under Section 80TTA is limited to savings accounts while Section 80TTB covers both savings account and fixed deposit accounts.
- Rs 10,000 under Section 80TTA vs Rs 50,000 under Section 80TTB
- Relief under Section 80TTA available to individuals and HUF. Section 80TTB provides relief to only individuals.
- Section 80TTB provides relief to only resident senior citizens. No such restriction under Section 80TTA.
Either Section 80TTA or Section 80TTB
As you can see, senior citizens (who are resident) will take tax benefit under Section 80TTB. Therefore, they won’t be able to take tax benefit under Section 80TTA of the Income Tax Act.
Only those who can’t seek relief under Section 80TTB can seek relief under Section 80TTA.
Since Section 80TTB provides much higher and wider tax relief, senior citizens have nothing to complain about.
Additionally, since Section 80TTB provides relief to only resident Indians, senior citizen NRIs cannot take benefit under Section 80TTB. Now that such senior citizens can’t take benefit under Section 80TTB, senior citizen NRIs can seek relief under Section 80TTA. Interest on NRE savings account or FDs is anyways exempt from tax. Senior Citizen NRIs can utilize this benefit under 80TTA for interest on NRO savings account.