Section 80TTA of the Income Tax Act offers a deduction on interest earned from savings accounts up to ₹10,000 annually. This applies to individuals and Hindu Undivided Families (HUFs) apart from senior citizens, who can utilize a larger deduction of ₹50,000 per year on savings and fixed deposit (FD) interest under Section 80TTB. If savings account interest exceeds ₹10,000, it’s taxable under 'Income from Other Sources' at the applicable tax rate.

Key Features of Section 80TTA:

• Tax exemption up to ₹10,000 per annum on interest from savings accounts.
• This deduction is applicable to savings accounts owned by individuals and HUFs only.
• Exemption is available if total interest across all savings accounts does not exceed ₹10,000.
• If interest surpasses ₹10,000, only ₹10,000 is exempt, the surplus is taxable.
• The deduction under Section 80TTA is over the ₹1.5 lakh deduction under Section 80C.

No TDS for Savings Accounts:

If an individual's gross total income is below the taxable limit, Section 80TTA isn't applicable, even if the interest earned exceeds ₹10,000. For example, an income of ₹200,000, including ₹50,000 from savings interest, would still be tax-free.

Savings Accounts Covered:

• Banks as per the Banking Regulation Act, 1949.
• Post Offices per the Indian Post Office Act, 1898.
• Cooperative Societies engaged in banking activities within a community.

Deduction Limit:

The maximum deduction under Section 80TTA is ₹10,000. If savings interest is below ₹10,000, it is wholly deductible. For interest surpassing ₹10,000, the deduction is capped at ₹10,000.

Exclusions of Section 80TTA:

• No deduction on deposits with companies or NBFCs.
• Interest from time deposits like fixed or recurring deposits isn’t deductible.
• No deduction for interest income belonging to firms, associations, or bodies of individuals.

Section 80TTA provides relief by exempting small interest amounts from savings accounts from taxable income calculations, preventing penalties on minor incomes. It's beneficial for those with modest taxable incomes, offering an additional ₹10,000 deduction over the Section 80C allowance of ₹1.5 lakh.