Mr.Ramakanth, a Non Resident Indian (NRI) working at USA is holding Non-Resident Ordinary (NRO) Account in State Bank of India. During the Financial Year 2014-15, he has earned Rs.16000 towards interest on NRO Savings Account. He wants to know the eligibility of claiming deduction u/s 80TTA.
Deduction U/s 80TTA
Any individual (Resident or Non-Resident) or a Hindu Undivided Family (HUF) is entitled to a deduction towards interest on deposits in Savings Accounts in a bank up to a maximum of Rs.10000 per year.
The conditions for claiming the benefit
- The deposit must be other than time deposit, fixed deposit or recurring deposit
- The income by way of such deposits is included in the gross total income of the taxpayer
- The deposits are held in the name of the taxpayer with any bank, co-operative society or a Post Office.
- The quantum of deduction is the actual interest income or Rs.10000, whichever is less
NRO Savings Account
Any person resident outside India (NRI) is permitted to open NRO Account. There are various types of NRO account such as Savings, Current, Recurring, Fixed Deposit.
Any interest earned on NRO account is submitted to Income Tax. So, while filing the income tax return of NRI, interest earned on NRO accounts is be considered as income and offered for tax.
Now the question is does the interest earned on NRO Saving Account entitled to get exemption u/s 80TTA? Our answer is ‘Yes’. Section 80TTA talks about ‘Interest earned on Savings Account by Individual / HUF. This means even NRIs are eligible to claim deduction on interest earned from NRO Savings Account.
As per RBI circular, when a person resident in India leaves India for a country for taking up employment or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as a Non- Resident (Ordinary) Account. So, normally, Resident Savings account is re-designated as Non Resident Ordinary (NRO) Savings Account. Hence, deduction u/s 80TTA should be eligible for NRO Saving Account also.
Thought for the day
It is better to lose your ego to the one you love than to lose the one you love because of ego.