Income Tax Return (ITR) filing: Did you know about benefits on savings account? Here is what section 80TTA offers
Even your interest earned on savings account fall under this bracket. But do not be sadden, as there is also a section in IT Act which helps you claim a certain sum every year on your savings account interest.
There are host of benefits provided by Income Tax Department, when you are processing your income tax return (ITR) filing. One of the major charms of ITR filing is that, it helps you reduce your tax payment. All a taxpayer has to do is file certain forms under ITR, to claim tax benefits. There are various deductions offered especially under section 80s of IT Act, which is most traditional form of ITR filing. How would you feel if you can claim your interest earned on savings bank account? Surely, it will be icing on the cake, because as per IT Act every income and income from other sources are eligible to pay taxes. Hence, even your interest earned on savings account fall under this bracket. But do not be sadden, as there is also a section in IT Act which helps you claim a certain sum every year on your savings account interest.
Savings account is the most traditional form of investment in banking and other form of financial system, as it provides guaranteed return and security. Since the government has always motivated citizens in opening small savings, basic savings account, they have also provide tax benefits.
For claiming those tax benefits, Section 80TTA plays a key role.
Under section 80TTA of IT Act, up to Rs 10,000 can be claimed on interest income. This is applicable to only savings account with a bank, co-operative society carrying on the business of banking and post office.
A maximum deduction of Rs 10,000 is allowed under section 80TTA. For instance, if your interest income is less than Rs 10,000 on your savings account, then the entire amount can be claimed. However, let’s say if your annual interest earned is up to Rs 15,000 on savings account at a particular bank, then you are allowed to only claim Rs 10,000 under this section, which means remaining Rs 5,000 will be taxable.
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One of the ways to know about your taxes on interest, is to always be in contact with banks to know your interest rates and how much interest amount you have received on your savings.
To claim the benefit, you need to add your total interest income under the header of Income from other Sources in your ITR filing. The deduction will fall under section 80 deductions, and hence under section 80TTA.
You will need your bank statement of all your savings account in whichever bank they are held in, for filing the above information. The Reserve Bank of India (RBI) has allowed banks to fix higher interest rates if they wish to, as earlier the central bank had set the savings account interest rate at 4%.
Currently, many banks and other financial institutions provide savings account interest rate in the range of 4% to 6% to the customers.
For calculating interest rate, banks look into the daily balance and not on the minimum balance. This means that you have high possibility to earn higher interest amount per quarter than earlier.