Under the proposed new section 80TTA of the Income-tax Act, a deduction up to an extent of Rs. 10,000 in aggregate shall be allowed to an Assessee (Tax Payer), being an Individual or a Hindu Undivided Family (HUF), in respect of any income by way of interest on deposits (not being time deposits*) in a savings account with;
- A banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);
- 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); or
- A post office, as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).
However, where the aforesaid income is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed in respect of such income in computing the total income of any partner of the firm or any member of the association or body.
This amendment is already effective from 1st April, 2013 and this will accordingly apply in relation to the assessment year 2013-14 and subsequent assessment years.
Benefits to Taxpayer
The insertion of this new section is a relief to Individual or Hindu Undivided Family (HUF) as interest on saving bank account was always a taxable income with no corresponding tax benefits. It would also help in avoiding inclusion of small savings bank interest in the taxable income, which was required to be done after deletion of section 80L.
* Here “time deposits” means the deposits repayable on expiry of fixed periods.