Learn about the tax implications of you earning interest in your savings bank account.
Key message – No tax on your savings account interest
Interest up to 10000 per year is exempt from tax for an individual
You, as an individual, do not pay tax on savings account interest up to 10,000 per year.This is applicable for all your savings accounts. You can claim exemption under section 80TTA.
The limit is 10,000 per person per financial year across all accounts.
Multiple savings accounts
It does not matter, if you have multiple savings account.
The exemption is applicable to your total interest income from all your savings accounts.
How to claim exemption when filing Income Tax Return?
You should show the interest under “Other sources of income”.
You should enter exempt amount under “Deductions under chapter VI A (Section)” / “Section 80TTA”.
This value has to be either actual savings account interest or 10000 whichever is lower.
Non resident Indian?
Applicable to all individual tax-payers including NRIs.
Section 80TTA and Fixed deposits
Section 80TTA is not applicable to fixed deposits (FD).
Savings Bank Interest and TDS (Tax deduction at source)
Tax is not deducted at source for SB accounts.
Learn how it may apply to you with easy to understand examples.
Example 1: You earn 8000 interest in your savings account.
You do not pay any tax on the interest.
Example 2: You earn 12000 interest in your savings account.
You do not pay tax on 10,000. The rest, 2000, is added to your income and taxed at the rate applicable to you.
Example 3: You have two accounts in Bank A and Bank B. You get 7000 interest in Bank A and 2000 interest in Bank B.
Your total interest across all accounts was 9000. So you do not pay any tax.
Example 4: You have 3 accounts, in which you earn 4000, 2000 and 5000 interest.
You total interest is 11000 (=4000+2000+5000). You do not pay tax on 10,000 and rest (=1000) is added to your income.
Hopefully you have learnt about the income tax exemption allowed for your savings bank interest under section 80TTA. If you have any doubts or questions, please leave a comment.