Is Interest On Your Savings Account Taxable? Here's How To Claim Deduction In ITR Filing

Ever wondered how to reduce your tax burden and make the most of your hard-earned savings? Look no further! In this guide, we’ll break down the simple steps to claim a deduction on interest earned from your bank deposits, saving you money come tax season. It’s a win-win – keep more of your cash and become a tax-savvy superhero!

Also Read: Investments, Payments or Incomes On Which You Get Tax Benefits; Check ITR Filing Checklist

Section 80TTA of Income Tax Act Eligibility

Section 80TTA of the Income Tax Act, 1961 offers a rebate on the interest income received by individuals or Hindu Undivided Families (HUF) from savings accounts held with banks, co-operative societies, or post offices, capped at Rs. 10,000 per fiscal year.

Interest rates on savings bank accounts in India fluctuate across different banks and may undergo periodic adjustments.

Who is eligible for deduction under section 80TTA?

The deduction provided by Section 80TTA is exclusively accessible to individuals and Hindu Undivided Families (HUFs), excluding entities like companies, firms, or trusts.

Moreover, this deduction applies solely to the interest accrued from savings accounts and does not extend to other forms of interest income like fixed deposits or recurring deposits.

How much deduction is allowed under 80TTA?

The maximum deduction that can be claimed under this section is Rs. 10,000 per financial year, regardless of the amount of interest earned.

If the interest earned is less than Rs. 10,000, then the actual interest earned will be considered as the deduction amount.

How to claim a deduction under 80TTA?

The deduction under this section can be claimed while filing the income tax return.

The interest income from the savings account should be reported under the head ‘Income from other sources’ in the income tax return.

The deduction under Section 80TTA is not available for senior citizens who are eligible for a separate deduction under Section 80TTB for interest income earned on deposits with banks, post offices, or cooperative societies.

Section 80TTB

Section 80TTB of the Income Tax Act allows tax benefits on interest earned from deposits with banks, post offices or cooperative banks. The deduction is allowed for a maximum interest income of up to Rs 50,000 earned by the senior citizen. Both the interest earned on saving deposits and fixed deposits are eligible for deduction under this provision.

Also, u/s 194A of the Income Tax Act, no tax is deducted at source (TDS) on interest payment of up to Rs 50,000 by the bank, post office or co-operative bank to a senior citizen. This limit is to be computed for every bank individually.