All of the banks in the country offer an interest rate for daily balances maintained in the savings account. Some banks like State Bank of India offer an interest rate of just 3 per cent, while banks like IDFC First Bank offer an interest rate of as much as 7 per cent. We all know that the interest on bank fixed deposits is taxable: The question that now arises is:
Is the interest on savings bank taxable?
The interest on the savings bank account is exempt up to a sum of Rs 10,000. So, if your interest is above Rs 10,000 from a savings bank account in a year, you need to offer the same for the purpose of income tax payment.
It's also important to remember that while bank deposits attract a TDS, if the interest amount exceeds Rs 10,000 per year, this is not true in the case of savings bank accounts. The interest has to be offered for tax, even though there is no TDS that is applicable.
How is interest on multiple savings bank accounts taxed?
If you have multiple savings bank accounts, then you need to add the interest received on all these savings bank accounts and offer them for the purpose of paying income tax in India. You need to look at your bank statements and compute the total interest and add the same to your total income for the payment of tax.
As we all know, most banks in the country, if not all, add interest rates on March 31, June 30, Sept 30 and Dec 31. Therefore, in your bank statement if you look at these dates, you will see the interest received. If the interest from all of these exceeds Rs 10,000, the same should be reported as income from other sources.
Any sum above Rs 10,000 from interest from savings bank account has to be reported for the purpose of computing total tax liability.