Income tax return (ITR) filing: How savings bank interest is taxed and can you save the income tax on it? Here's your answer
We all have a savings bank account but most of us are not aware that the interest received on this account is taxable. However, you can save taxes on interest received up to Rs 10,000 and mention the same while filing your income tax return (ITR).
Now, the question comes – how?
Well, Section 80TTA of the Income Tax Act, 1961 provides a deduction of Rs 10,000 on interest income earned on savings accounts. In case the individual is a senior citizen, the deduction can be claimed of up to Rs 50,000 under section 80TTB.
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This means that only the interest earned beyond Rs 10,000 (or Rs 50,000 in case of senior citizens) is taxable.
Who all are eligible for this?
Section 80TTA deduction is available to an individual and HUF. NRIs can also avail a deduction under this but only on the NRO savings account holders.
However, this is not applicable for those who opt for the new tax regime.
Is it applicable to all kind of savings accounts?
Yes, taxpayers are eligible to claim the deduction if the interest income is received from from a savings account with a bank, co-operative society or post office. The tax benefit can be claimed for any number of accounts till the aggregate interest amount of Rs 10,000.
Interest earned from fixed deposits, recurring deposits and time deposits are not allowed under Section 80TTA.
How to claim deduction under Section 80TTA while filing ITR?
For the same, first add the total interest income under the head ‘Income from Other Sources’ while filing ITR. Then calculate the gross total income for the from all the income heads and then show it as a deduction under Section 80TTA.