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How is Interest from a Savings Account Taxed?
Savings accounts are intended to encourage more savings. Individuals with a steady income, such as salaried employees, can benefit from savings accounts. Here's how savings account interest is taxed.
The interest earned on savings accounts is tax-free up to Rs 10,000 per fiscal year. The Rs 10000 limit includes the total of all savings bank account interest earned by an individual or HUF. If the total interest earned from savings bank accounts exceeds Rs 10000, it must be reported on the tax form as 'income from other sources'.
How is Interest from savings accounts taxed?
The interest earned on your savings account is added to your other income, and your total income is taxed according to the applicable tax bracket. This will vary from fiscal year to fiscal year, depending on the amount of money in your bank account at the time. Depending on your bank, interest may appear on your statement as an annual, biannual, or quarterly credit(s).
When filing income taxes, don't forget to include the interest from your savings account?
In the case of biannual interest payout, which is the most common method of paying out interest earned, the interest earned may actually be for the previous year. In such cases, seek the assistance of bank personnel to understand how to calculate the interest earned during the relevant fiscal year. If the net interest earned exceeds Rs 10,000, a Rs 10,000 deduction will be applied to the total. Any amount exceeding Rs 10,000 must be declared in the income section during tax calculations.
Section 80 TA
- Section 80TTA is titled as 'Deduction in respect of interest on deposits in savings accounts' in the Income Tax Act.
- Individuals and HUF under the age of 60 are eligible for this deduction.
- Section 80TTA is only applicable to savings accounts and not term deposits, fixed deposits, or recurring deposits.
- Savings account deposits held in a post office, bank, or cooperative society can be deducted under Section 80TTA of the Income Tax Act.
- Interest earned from any of these sources over Rs.10,000 is taxable.
Section 80 TTB
- This section allows senior citizens to deduct up to Rs.50,000 per year in interest on savings accounts and fixed deposits.
- Individuals and Hindu Undivided Families, with the exception of senior citizens, are not eligible for Section 80TTB tax deductions.
- The 80TTB deductions are not available to non-resident Indians (NRIs).
- This is applicable to all types of deposits, such as savings bank accounts, fixed deposit accounts, recurring deposit accounts, and so on.
- The Section 80TTB deduction is not available if the interest income from a savings account is specifically owned by an AOP, a firm, or a body of individuals (BOI).
