Section 80TTA & 80TTB: Tax Deduction On Savings & Fixed Deposit Interest

Found in almost every Indian home, both savings accounts and Fixed Deposits (FDs) are common financial instruments. While savings accounts generally offer modest interest rates—typically around 4%—FDs offer comparatively higher returns. 

For individuals holding significant bank balances, the interest income in a year can be substantial. And naturally, the higher the interest earned, the higher the tax liability is likely to be. Fortunately, the Income Tax Act, 1961 offers tax relief on interest income through two key provisions—Section 80TTA and 80TTB. This article explains both sections in detail to help you make smarter investment decisions. 

Introduction To Tax Deductions on Interest Income

Interest income earned from savings accounts, FDs, recurring deposits, and other types of deposits is considered taxable under the head ‘Income from Other Sources’. It is added to your total taxable income and taxed as per your applicable income tax slab rate. Thanks to Section 80TTA and 80TTB, you can claim deductions, reduce your taxable income, and ultimately, your tax liability. 

Additional Read: Fixed Deposit vs Recurring Deposit : Key Differences & Best Choice

What Is Section 80TTA?

Section 80TTA of the Income Tax Act allows a deduction of up to ₹10,000 per year on interest earned from savings accounts. These accounts can be held with banks, co-operative societies engaged in banking, or post offices. The deduction is available to individuals below 60 years of age, including Non-Resident Indians (NRIs) for interest earned in a Non-Resident Ordinary (NRO) savings account. It is also available to Hindu Undivided Families (HUFs).

The deduction does not apply to FDs, recurring deposits, or any other deposits. Moreover, the ₹10,000 limit is applicable per taxpayer and not per account. It is the combined limit for multiple savings accounts with different entities. 

For instance, if Roy has interest income of ₹10,000 from ABC Bank and ₹5,000 from XYZ Bank, the total interest income is ₹15,000. However, according to the provisions of Section 80TTA, the maximum deduction he can claim is ₹10,000. The remaining ₹5000 will be added to his taxable income and taxed accordingly.  

Note: Section 80TTA deduction is available only under the old tax regime. 

Section 80TTA At a Glance

What Is Section 80TTB?

Section 80TTB is a provision exclusive to senior citizens. It allows a deduction of up to ₹50,000 on interest income. Unlike Section 80TTA, which covers only savings account interest, Section 80TTB also includes interest income from different types of deposits, including FDs, deposits held in cooperative societies, and post office deposits. 

Senior citizens claiming a deduction under Section 80TTB cannot claim an additional deduction under Section 80TTA, even if they have interest income from a savings account. 

For instance, Radha, aged 65, earns ₹8,000 interest from her savings bank account in a year and ₹55,000 combined from all other eligible deposits. Her total interest income amounts to ₹63,000. But she can only claim a deduction of ₹50,000 under Section 80TTB. She cannot split the deduction as ₹8,000 under Section 80TTA and ₹50,000 under Section 80TTB.

Note: Similar to Section 80TTA, the 80TTB deduction is available only under the old tax regime. 

Section 80TTB At a Glance

Key Differences Between Section 80TTA and 80TTB

Conclusion

Section 80TTA and Section 80TTB both offer tax relief on interest income. While 80TTA allows regular taxpayers to claim deductions on interest earned from savings accounts, Section 80TTB is designed exclusively for senior citizens and covers interest income from a wider range of deposits. By understanding the applicability and rules of these provisions, you can maximise your tax savings and retain more of your hard-earned income.  

Additional Read: Deductions under Section 80CCD of Income Tax in India 
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