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Implications of Section 80TTA for NRI - India 2021

The intent of Government is always to make a simple law but sometimes the results are just the opposite. The same happens when an NRI claims the deduction on interest income. Lets see Implications of Section 80TTA for NRI - India 2021.

For a resident, provision is simple, i.e., up to the age of 60 years, the assessee can claim the deduction on savings bank interest income up to Rs.10,000 under section 80TTA and Assessee having age more than 60 years, the deduction amount will be increased to 50,000 under section 80TTB

But whether the same provision is also applicable for NRI. To know this, we have to understand the provision of these sections:

Legal definition of section 80TTA

Where the Gross Total Income of an assessee being individual or HUF (Other than a person who is claiming the deduction under section 80TTB) having an income on savings bank account with

  1. Banking company
  2. Co-operative society
  3. Post office

there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income ·of the assessee a deduction as specified hereunder, namely:-

(i) in a case where the amount of such income does not exceed in the aggregate of 10,000, the whole of such amount; and

(ii) in any other case, 10,000

Legal Term of Section 80TTB: Where the GTI of an assessee being Senior citizen having an income on bank account with

  1. Banking company
  2. Co-operative society
  3. Post office

there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income ·of the assessee a deduction as specified hereunder, namely:-

(i) in a case where the amount of such income does not exceed in the aggregate of 50,000, the whole of such amount; and

(ii) in any other case, 50,000

In this article, we will discuss about...

Deep Dive of 80TTA and 80TTB and its effect on NRI

   1. Availability of deduction:

  • 80TTA is available to an assessee who is an Individual or HUF (Other than a person who is claiming the deduction under section 80TTB)
  • As we have read above that 80TTB is available only to senior citizen
  • Now, there are 2 things in 80TTB i.e. person should be a senior mean his age should be more than 60 years and he should be a citizen I.e. he should be a resident.
  • So, Non-resident is not eligible to claim the deduction under 80TTB hence he can claim the deduction under section 80TTA even at the age of such a Non-resident is more than 60 years.
  • In Simple terms, NRI can claim the deduction under section 80TTA whether his age is less than 60 years or more than 60 years.

    2. Type of income on which Deduction can be claimed

  • 80TTA is available only to interest income on savings bank deposit but 80TTB is available to all interest income which includes interest income on the savings bank account, recurring deposit, or fixed deposit.
  • As we have understood that Non-resident cannot claim the deduction under section 80TTB, hence he is eligible to claim only on the interest income on a savings bank deposit.

    3. Amount of deduction

 NRI can claim the deduction of lower of the following:

Actual interest earned on the savings bank account

Or

Rs.10,000

   4. TDS deduction

  • For a resident, TDS on interest income is deducted under section 194A (For age up to 60 years, if the interest amount exceeds 10,000 and if the age is more than 60 years, if the income exceeds Rs.50,000) @ 10%
  • However, for NRI, TDS is deducted under section 195 @ 30%
  • Also, NRI is not eligible to obtain form 15G
  • Further, the bank shall deduct the TDS @ 30% along with 4% cess.

Conclusion

Let me summarise the above provisions in the simplest possible way:-

A NON-RESIDENT INDIVIDUAL IS ELIGIBLE TO CLAIM THE DEDUCTION UNDER SECTION 80TTA OF INTEREST INCOME ON SAVINGS BANK DEPOSIT IRRESPECTIVE OF HIS AGE.


Now let’s see some FAQ, which will be more helpful for you to understand these provisions

Q.1 NRI has earned the interest income on a fixed deposit. Can he claim the deduction under section 80TTA?

Answer: As we explained earlier that 80TTA exemption is available only on the interest income from savings bank deposits hence NRI is not able to claim the deduction

Q.2 A NRI, age 72, has earned the interest income on savings bank interest. How much deduction shall be available to him?

Answer:  Although the age of NRI is more than 60 years but still, a deduction of Rs.50,000 under section 80TTB is not available to him because to claim the deduction under section 80TTB, he should be a senior citizen i.e. senior and Indian citizen. Hence NRI is not a resident of India hence he cannot claim the deduction under section 80TTB. Hence he can claim the deduction of lower of the following amount under section 80TTA:

Actual Interest earned on savings bank interest

Or

Rs.10,000

Q.3 An Assessee earned the interest income in a savings bank deposit of Rs.7,500, whether the TDS is deducted?

Answer: If the assessee is a resident then Section 194A is applicable where no TDS is deducted if the interest income is up to Rs.10,000 (In case his age is up to 60 Years) and Rs.50,000 (If his age is more than 50,000)

However, if the assessee is NRI then Section 195 is applicable where the TDS is deducted irrespective of interest income @ 30%.

Hence, in the above case, if the NRI earned interest income of Rs.7,500 on savings bank deposit then although TDS will be deducted under section 195 @30%. However, he can claim the refund of such TDS by the filing of return of income.

Q.4 NRI, Age 40 Years, has earned the interest income of 10,000 on a recurring deposit. Whether he can claim the deduction under section 80TTA?

Answer:  Here, although the age of NRI is 40 years i.e. he is not a senior citizen still he is not eligible to claim the deduction under section 80TTA, because as we discussed earlier that Section 80TTA deduction is available only on the interest income earned on savings bank deposit but in the above matter, such NRI has earned the interest on recurring deposit. Hence he shall not be able to claim the deduction and TDS shall be deducted under section 195.


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