Section 80TTA of the Income Tax Act

Section 80TTA of the Income Tax Act, 1961 provides a deduction of up to Rs. 10,000 on the income earned from interest on savings made in a bank, co-operative society or post office. There is no deduction for interest earned from fixed deposits an recurring deposits. Introduced in 2012, this provision aims to encourage savings while providing tax relief. The deduction is applicable only to savings account interest, not fixed deposits, and is available to resident and non-resident taxpayers, excluding senior citizens who claim under Section 80TTB.
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Section 80TTA of the Income Tax Act
2 min read
09 February 2024

Section 80TTA of the Income Tax Act offers a tax deduction for interest earned from savings accounts maintained with banks, post offices, or cooperative societies. This benefit is available only under the old tax regime. The maximum deduction that can be claimed under this section is Rs.10,000 in a financial year. It encourages individuals and Hindu Undivided Families (HUFs) to save without having to pay tax on small interest earnings. However, this deduction does not apply to fixed deposits or recurring deposits.

What is Section 80TTA of the Income Tax Act?

Section 80TTA of the Income Tax Act, 1961, allows individuals and HUFs to claim a deduction of up to Rs.10,000 on interest earned from savings held in banks, cooperative societies, or post offices. This benefit does not extend to interest received from fixed deposits or recurring deposit accounts. The deduction applies only to savings accounts and must be claimed while filing income tax returns under the old tax regime. Any amount earned as interest above Rs.10,000 is taxable under the head “Income from Other Sources”.

Who can claim an 80TTA deduction? Can NRIs avail of a deduction under 80TTA?

Section 80TTA is applicable to resident individuals and Hindu Undivided Families (HUFs) who earn interest on savings accounts held in banks, cooperative societies, or post offices. This benefit is not available to senior citizens, as they are covered under Section 80TTB, which offers a higher deduction limit. If both sections seem to apply, only one can be chosen.

Non-Resident Indians (NRIs) can also avail of deductions under Section 80TTA, but only under specific conditions. NRIs are allowed to open two types of accounts in India: NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts. While the interest on NRE accounts is fully exempt from tax and does not require a deduction claim, interest earned on NRO savings accounts is taxable and can be claimed under Section 80TTA—up to a limit of Rs.10,000.

It’s important to note that this section cannot be combined with 80TTB. A person must choose only one deduction—whichever offers the greater benefit—depending on their age and eligibility criteria.

Interest income not allowed as deduction under Section 80TTA

Under Section 80TTA of the Income Tax Act, deductions are allowed on the following types of interest incomes:

  1. Interest from savings accounts: Interest earned from savings accounts maintained with banks is allowed as a deduction under Section 80TTA. This includes interest earned on savings accounts held with scheduled banks, cooperative banks, or post offices.
  2. Interest from cooperative societies: Interest earned from savings accounts maintained with cooperative societies is also eligible for deduction under Section 80TTA. Cooperative societies may include credit societies, cooperative banks, or other similar entities.
  3. Interest from post offices: Interest earned from savings accounts maintained with post offices is permitted as a deduction under Section 80TTA. Post office savings accounts are considered as specified sources of income for the purpose of claiming this deduction.

It is important to note that the deduction under Section 80TTA is available only for interest income earned from specified sources, such as savings accounts. Other types of interest income, such as interest from fixed deposits (FDs), recurring deposits (RDs), time deposits, corporate bonds, debentures, securities, or investments in mutual funds, are not eligible for deduction under Section 80TTA.

Therefore, individuals and Hindu Undivided Families (HUFs) should ensure that the interest income they intend to claim as a deduction under Section 80TTA pertains specifically to savings accounts maintained with banks, cooperative societies, or post offices.

What interest income is not allowed as a deduction under Section 80TTA?

It is important to note that not all interest income qualifies for deduction under Section 80TTA. The following types of interest income are not eligible for deduction under this provision:

  1. Interest income earned from fixed deposits (FDs), recurring deposits (RDs), or time deposits.
  2. Interest income earned from corporate bonds, debentures, or securities.
  3. Interest income earned from investments in mutual funds or other financial instruments.

Maximum deduction allowed under Section 80TTA

The maximum amount that can be claimed as a deduction under Section 80TTA is Rs.10,000 per financial year. If your total savings account interest income is less than Rs.10,000, then the entire amount can be deducted. If it exceeds Rs.10,000, only Rs.10,000 can be claimed. You must consider the combined interest earned across all your savings accounts in banks, post offices, or cooperative societies while calculating the total. This limit applies per person, not per account or institution.

While managing your savings and tax planning, consider how home ownership can further enhance your financial portfolio. A home loan from Bajaj Finserv offers competitive interest rates starting at 7.49%* p.a and flexible repayment options up to 32 years. Check your home loan eligibility today and discover how much you can borrow for your dream home. You may already be eligible, find out by entering your mobile number and OTP.

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Benefits of Section 10(13A) for taxpayers

  1. Tax savings: Claiming an HRA exemption under Section 10(13A) reduces the taxable income of the taxpayer, resulting in a lower tax liability.

  2. Financial relief: Taxpayers can avail of financial relief by offsetting a portion of their rental expenses through the tax exemption on HRA.

  3. Incentive for home rentals: Section 10(13A) serves as an incentive for taxpayers to opt for rental accommodations, especially in urban areas where housing costs are high.

  4. Simplifies tax compliance: By providing a clear framework for HRA exemption, Section 10(13A) simplifies tax compliance for both taxpayers and employers.

Types of expenses covered under HRA under Section 10(13A)

Under Section 10(13A) of the Income Tax Act, the following types of expenses are covered under House Rent Allowance (HRA) for exemption from income tax:

  1. Rent paid: The actual amount of rent paid by the taxpayer for the residential accommodation they occupy.

  2. Brokerage or commission: Any brokerage or commission paid to a real estate agent or broker for securing the rented accommodation.

  3. Maintenance charges: Expenses incurred towards maintenance charges for the rented accommodation, such as society maintenance fees or charges for common facilities.

  4. Utilities: Payments are made for utilities related to the rented accommodation, including electricity, water, and gas bills.

  5. Lease agreement costs: Costs associated with the preparation and registration of the lease agreement, if applicable.

  6. Municipal taxes: Payments made towards municipal taxes or property taxes for the rented property.

  7. Stamp duty: Stamp duty paid for the rental agreement or lease deed, if applicable.

It is important to note that only expenses directly related to the rental accommodation occupied by the taxpayer are eligible for exemption under Section 10(13A) of the Income Tax Act.

Factors affecting house rent allowance calculation under Section 10(13A)

Several factors influence the calculation of House Rent Allowance (HRA) under Section 10(13A) of the Income Tax Act. These factors include:

  1. Salary: The amount of HRA received by the employee is typically a percentage of their salary. A higher salary generally results in a higher HRA.

  2. HRA received: The actual amount of HRA received from the employer is a crucial factor in calculating the exemption under Section 10(13A).

  3. Rent paid: The amount of rent paid by the employee for their residential accommodation plays a significant role. The exemption under Section 10(13A) is limited to the least of the following:

  • Actual HRA received from the employer.

  • Rent paid minus 10% of salary.

  • 50% of salary if residing in metro cities (40% for non-metro cities).

  1. Location: The city in which the employee resides also affects the calculation of HRA exemption. Higher rates of HRA exemption are allowed for individuals living in metro cities compared to non-metro cities.

  2. Salary structure: The salary structure, including the proportion of basic salary and allowances, can impact the calculation of HRA and the resultant tax exemption.

  3. Nature of employment: The nature of employment, such as government or private sector, may influence the terms and conditions of HRA and its calculation.

  4. Actual residence: The actual residence of the employee, whether rented or owned, and the rental agreement details determine the eligibility for HRA exemption.

  5. Submission of rent receipts: Taxpayers are required to submit rent receipts or other documentary evidence of rent payments to claim HRA exemption while filing their Income Tax Returns.

Example calculation

Let’s take the case of a person living in a non-metro city with the following monthly salary details:

  • Basic salary: Rs.30,000

  • Dearness allowance (DA): Rs.5,000

  • HRA received: Rs.12,000

  • Rent paid: Rs.15,000

Calculation:

  • Actual HRA received = Rs.12,000

  • 40% of salary (Basic + DA) = 40% of Rs.35,000 = Rs.14,000

  • Rent paid minus 10% of salary = Rs.15,000 – Rs.3,500 = Rs.11,500

The minimum of these three figures is Rs.11,500. Hence, the exempt portion of HRA is Rs.11,500 per month. The remaining Rs.500 will be added to taxable income.

This example shows how rental costs can impact your monthly budget significantly. Many professionals find that transitioning from renting to homeownership through a well-structured home loan can offer better long-term financial benefits. Check your eligibility for a home loan from Bajaj Finserv to explore affordable homeownership options. You may already be eligible, find out by entering your mobile number and OTP.

 

Other topics you might find interesting

Income Tax Notice Section 142 1​

Section 80CCD 2 of Income Tax Act

Section 194H of Income Tax Act

Section 80CCD 1 of Income Tax Act

Section 148 of Income Tax Act

Section 80GGC of Income Tax Act

Section 80DD of Income Tax Act

Section 80E of Income Tax Act

Home Loan Interest Deduction

Section 80CCD 1B of Income Tax Act

Section 80DDB of Income Tax Act

Income Tax Slab

 

Can I claim HRA and deduction on home loan interest?

Yes, it is possible to claim both HRA exemption under Section 10(13A) and home loan interest deduction under Section 24(b), provided you meet certain conditions.

There are cases where a person may own a home in one area but live in a rented house elsewhere due to work-related reasons. For example, if your workplace is far from your owned house, and you rent a property closer to the office, you can justify both claims. However, valid reasons and proper documentation are necessary. The home loan interest benefit is allowed for the owned house, while HRA exemption can be claimed for the rented accommodation, as long as you are not residing in the owned house.

This dual benefit scenario highlights how strategic property investments can maximise tax savings. If you're planning to purchase a home for investment or future residence while continuing to rent elsewhere, Bajaj Finserv provides flexible home loan solutions to support such financial planning. Check your eligibility for a home loan from Bajaj Finserv to start building your property portfolio. You may already be eligible, find out by entering your mobile number and OTP.

Section 10(13A) of the Income Tax Act plays a crucial role in providing tax relief to salaried individuals for their rental housing expenses. By understanding the provisions of this section and fulfilling the necessary conditions, taxpayers can optimise their tax planning strategies and maximise their tax savings. It is essential for taxpayers to maintain accurate records of rent payments and comply with the documentation requirements to claim HRA exemption effectively. Additionally, using an income tax calculator can help individuals estimate their potential savings and plan their finances more efficiently.

Related income tax sections\

Section 16(ia)

Section 194IA

Section 80G

Section 80GGC

Section 80CCE

Section 179

Section 54B

Section 17(1)

Section 54GB

Section 80RRB

 

Popular calculators for your financial calculations

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Frequently asked questions

Am I eligible to claim a tax deduction for interest on fixed deposits under Section 80TTA?

No, Section 80TTA does not allow deductions for interest earned on fixed deposits. It is applicable only to interest earned from savings bank accounts.

Can I claim a tax deduction under Section 80TTA for a savings account in a cooperative society?

Yes, you can. Interest earned on a savings account held in a registered cooperative society is eligible for deduction under Section 80TTA.

Is there a restriction on how many bank accounts I can use to claim deductions under Section 80TTA?

No, there is no restriction on the number of savings accounts. However, the total interest eligible for deduction cannot exceed Rs.10,000 across all accounts.

Do I have to report the interest earned from my savings account?

Yes, even if you plan to claim a deduction, the interest earned must be reported under ‘Income from Other Sources’ in your tax return.

How do I claim a deduction under Section 80TTA?

To claim this deduction, include your savings interest income in your tax return and then claim it as a deduction under Section 80TTA while filing.

While you're optimising your tax savings, consider how owning a home can provide additional tax benefits under Section 24B for home loan interest. Bajaj Finserv offers home loans with flexible terms and quick approval processes. Check your eligibility for a home loan and explore how property investment can complement your tax planning. You may already be eligible, find out by entering your mobile number and OTP.

What happens if I do not report my savings account interest income?

If you fail to report such income, you may be subject to penalties and interest. The Income Tax Department may add it during scrutiny and demand additional taxes.

Can I claim deductions under both Section 80TTA and 80TTB?

No, you cannot claim both. Only one of the two can be claimed depending on your age and eligibility. Section 80TTB applies to senior citizens.

What is the maximum deduction allowed under Section 80TTA?

The maximum deduction you can claim under Section 80TTA is Rs.10,000 per financial year, based on interest earned from savings accounts.

Beyond savings account interest, homeowners can claim much higher deductions on home loan interest payments. If you're ready to transition from renter to homeowner, Bajaj Finserv provides loans up to Rs. 15 Crore* with competitive rates. Check your loan offers and see how much you could save on taxes while building property wealth. You may already be eligible, find out by entering your mobile number and OTP.

Is Section 80TTA applicable under the new tax regime?

No, deductions under Section 80TTA are not allowed if you opt for the new tax regime. This benefit is available only under the old regime.

When can I claim tax exemption on house rent allowance?

You can claim HRA exemption only if HRA is included in your salary and you are actually paying rent for your accommodation. It is not available to those who own the house they live in or do not receive HRA from their employer.

How can I claim an HRA exemption?

To claim HRA exemption, you need to provide your employer with rent receipts and other relevant documents during proof submission. Alternatively, if you missed claiming it through your employer, you can claim it directly when filing your income tax return.

I am a self-employed individual. Can I claim an HRA exemption?

No, self-employed individuals are not eligible to claim HRA exemption under Section 10(13A). However, they may claim a deduction under Section 80GG if they pay rent and meet other applicable conditions.

How to claim HRA in the Income Tax Return (ITR)?

In your ITR, include the taxable portion of HRA under ‘Salary as per Section 17(1)’. The exempt portion should be entered under ‘Allowances to the extent exempt under Section 10’. Make sure the exemption is supported by documentation if required.

How to claim HRA if not mentioned in Form 16?

If your Form 16 does not include an HRA component, it means your employer hasn’t provided HRA. In such a case, you cannot claim exemption under Section 10(13A), but you may still be eligible for deduction under Section 80GG if you pay rent.

What is an HRA certificate?

An HRA certificate is issued by a government employee to support a claim for HRA when they are not staying in government-provided accommodation. It confirms that the individual is eligible to receive HRA as per official rules.

Government employees often have stable income profiles that make them attractive candidates for home loans. If you're a government employee currently claiming HRA, you might want to explore homeownership options that could provide better long-term financial stability and tax benefits. Check your eligibility for a home loan from Bajaj Finserv to discover competitive rates designed for government employees. You may already be eligible, find out by entering your mobile number and OTP.

What if I forget to submit rent proof or miss claiming HRA in the return?

If you miss submitting rent receipts to your employer, you can still claim HRA exemption when filing your ITR. If you miss it even while filing, you can submit a revised return before 31st December of the assessment year or before assessment completion.

Can I file a revised return if I forgot to claim HRA?

Yes, you can file a revised return to include your HRA claim as long as it’s before 31st December of the relevant assessment year or before the income tax department completes your assessment, whichever is earlier.

Can I claim both 80GG and HRA?

No, you cannot claim both. If you receive HRA as part of your salary, you must claim exemption under Section 10(13A). Section 80GG is available only to those who pay rent but do not receive HRA from their employer.

While understanding these tax provisions is important, many individuals eventually consider transitioning from renting to homeownership for better financial control and tax benefits. If you're evaluating this option, exploring home loan eligibility can help you understand your purchasing power. Check your eligibility for a home loan from Bajaj Finserv to see if homeownership is within your reach. You may already be eligible, find out by entering your mobile number and OTP.

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