Saving Tax On Savings Bank Interest – Sec 80TTA

By the Finance Act, 2012, a new section called 80TTA was added to the Income Tax Act – 1961. This section allows an income tax deduction of up to Rs 10,000 to an individual or a HUF for interest earned on the savings bank account held with a Bank, Post Office or a Society.This section is applicable with effect from April 01, 2013 and will apply from AY 2013-14 onwards.

If the interest earned out of saving bank account is more than Rs 10,000 . You will have to pay tax on the remaining amount over and above Rs 10,000 .This tax deduction is over and above Rs 1 lac deduction under Sec 80C.

Rs 10,000 is the total deduction allowed by combining all the saving bank accounts interest. If you earn Rs 6,000 from each of 3 different accounts (Total Rs 18,000) , you will get deduction of Rs 10,000 and pay tax on remaining Rs 8,000.

So you can keep upto 2.5 lacs as balance in a savings bank offering 4% or 1.4 lacs in a bank offering 7% and enjoy nil tax-liability.