Is savings bank interest taxable?

We all loves interest rates. Don’t we? The higher they are the better are the savings and better are the reasons for the account holder to smile. But wait. Did you know savings bank interest rates come under the ‘Income from other sources’? Yes. They are considered as an income and are thus taxable. Savings accounts are much more multidimensional than most account holders can even think of. The more they discover and realise about these great deposit accounts, the better are the chances of growing their hard-earned savings.  

Interest amount that gets accumulated in an individual’s savings account must be declared in tax returns. The required minimum deposit and interest rate varies depending on the type of savings account held by the customer. Remember, banks do not deduct Tax Deducted at Source (TDS) on savings bank interest. In simplified terms, people open a savings account to earn interest on savings. Banks calculate the interest by multiplying the rate of interest of the money deposited in the account holder’s account. The interest rate constantly changes from time-to-time. Experts have suggested keeping minimum balance in the savings accounts because the rate of interest is very low and it is also reduced by income tax payable at 2.8% per annum for person in 30% tax slab with 4% on saving account interest.

All individual taxpayers and Hindu undivided Fund (HUF) account holders are liable to pay tax for the interest they receive. However, interest up to Rs 10,000 is exempt from tax under Section 80TTA and Rs 50,000 for senior citizens under Section 80TTB.

• Savings account in a nationalised or regional bank
• Savings account in a co-operative society carrying on the business of banking
• Savings account in a post office

Calculating exemption limit:

Earlier banks offered interest on minimum balance available in the account in a month, but now banks calculate interest on a daily basis on the money lying in your account at the end of the day. This gives customers better benefits due to higher interest based on their deposits.

Savings bank interest income from all the accounts are added, including bank savings accounts, post office savings accounts, and co-operative bank savings accounts.

However, account holders can reduce their taxability by availing the many tax benefits available under the Income Tax Act, 1961. The account holders just need to know how interest income is taxed.  

Online-only savings account

There are a lot of online-only savings accounts attracting customers to open and manage account completely using the internet. These offer better rates as the organisation is not dealing with same overhead cost like traditional banks and these saving are hence, passed on to the account holder.

 Log on to https://savingaccount.in/ for more information.