Know income tax on interest earned from savings account

• March 25, 2021
• CA Chandan Agarwal's Office

Union Budget 2021-22 exempted senior citizens from filing income tax in case pension and interest income are are their only sources of income. Most seniors in India depend on interest income on their life long savings in a bank account. Even if you’re not a senior citizen who depends on the interest income from funds stashed in the bank account, it is imperative to know how it is taxed.

The income from interest earned from a savings bank account is categorised under ‘other income’ head by the Income Tax Department. So, the income earned from a savings account has to be declared under income from other sources. While incomes from the fixed deposit and recurring deposit are taxable while interest from the savings bank account and post office deposits are tax-deductible to a certain degree. Although income from all three sources are categorised under ‘other income’ head.

For starters, residents of 60 years or less or Hindu United Family (HUF), any interest income upto Rs 10,000 in a financial year is exempt from tax under Section 80TTA. This source of this interest income can either be a savings bank account, savings bank account with a co-operative society or post office. For those above 60 years, income tax exemption is available under Section 80TTB of maximum Rs 50,000 or actual interest income whichever is lower.

The interest income from the savings account is added to income from all sources under ‘other sources’ and the overall income is then taxed as per the relevant tax bracket.

While the exemptions given under Section 80TTA and Section 80TTB are similar.

Section 80TTA provides deductions on savings account in a bank, co-operative bank, or post office for residents 60 years or under and HUF upto Rs 10,000.

Section 80TTB exclusively provides deductions of upto Rs 50,000 per annum on interest earned from savings account, from co-operative society engaged in the business of banking, including a co-operative land mortgage bank or a co-operative land development bank; or Interest on post office deposits. Deduction under Section 80TTB is exclusively available for senior citizens.

Source: https://www.timesnownews.com/business-economy/personal-finance/planning-investing/article/know-income-tax-on-interest-earned-from-savings-account/736809