Small savings schemes, apart from fixed deposits, are the safest option among risk-free instruments to invest. Small savings schemes, such as post office savings accounts, have their interest rates updated every quarter. The government has left the interest rate for small savings schemes steady for the July to September quarter. Just like an interest-bearing account maintained with a bank, one can also open a savings account with a post office to meet emergency or immediate financial needs. But do you know the tax exemption rules of post office savings accounts and how much tax you can save.? Let's discuss briefly.
Post Office Savings Account Tax Exemption Rules
Although it is well known that a person can make a tax deduction of up to Rs 10,000 from his or her interest income received from a post office savings account under section 80TTA. While also seeking the tax advantage under section 80TTA, a depositor can also claim the interest from a post office savings account as a tax-free income. As a result, Section 10(15)(i) of the Income Tax Act allows you to claim interest from a post office savings account as tax-free income.
According to a government announcement dated June 3, 2011, post office savings account interest up to Rs 3,500 for single accounts and Rs 7,000 for joint accounts is free from taxation. "To an extent of the interest of Rs. 3,500 in the case of an individual account and Rs. 7,000 in the case of joint account", the notification has stated. Individuals can seek interest income from savings accounts kept with a post office up to Rs 10,000 under section 80TTA of the Income Tax Act, or up to Rs Rs 50,000 under section 80 TTB if they are elderly citizens.
Furthermore, he or she can seek the deduction benefit under section 10(15)(i) on the interest income from savings account with a post office up to Rs 3,500 in respect of an individual account and Rs 7,000 in respect of a joint account. As a result, a non-senior person can declare Rs 7,000 as tax-free interest on a jointly owned post office savings account, as well as a tax benefit from interest income of up to Rs 10,000 on post office savings account in a surplus of Rs 7,000, respectively.
Keep in mind that you must declare such exemption on your income tax return (ITR) under the heading 'Exempt Income' if you have declared an exemption on the interest you earned from your savings account maintained at any post office.