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Rs.10,000 tax deduction available on savings account interest
April, 18th 2016

Advance tax is payable by an individual in prescribed instalments, if the total tax liability on the estimated income is likely to be Rs.10,000 or more during the relevant financial year (FY). This tax liability is calculated after considering the tax deducted at source (TDS).

Further, resident senior citizens (aged 60 years or above during the FY) who do not have income chargeable under the head ‘profit and gains of business or profession’, are not required to pay advance tax.

In your case, since you are working as a consultant, you may be earning professional income. So, you would be required to pay advance tax in specified instalments. As per the Budget proposal, from FY17 onwards, you would be required to pay advance tax in four specified instalments on 15 June, 15 September, 15 December and 15 March.

I have earned savings bank account interest. Is it entirely taxable?

The interest earned on a savings bank account maintained with a specified bank, cooperative society or post office is taxable in the hands of the individual as ‘income from other sources’. One can claim tax deduction with respect to savings bank interest earned from total income subject to maximum cap of Rs.10,000 per FY under section 80TTA of the Income tax Act, 1961. The balance interest shall be taxable as per the applicable income tax slab rate.

If your total income exceeds Rs.1 crore during FY16, surcharge at 12% will be applied on the basic tax rate.

Also, education cess of 3% on basic as well as surcharge (if applicable) shall be levied. It is proposed in the Finance Bill 2016 to increase the surcharge to 15% from 12% on total income exceeding Rs.1 crore.

I received Rs.5 lakh as pension in a savings account and earn good annual interest on it. How much tax would I have to pay on its interest?

The interest earned on a savings bank account is taxable in the hands of the individual as ‘income from other sources’. One can claim deduction on interest earned on a savings account maintained with a specified bank, cooperative society or post office from total income subject to a maximum cap of Rs.10,000 per FY under section 80TTA. Depending upon the applicable income tax slab rate, you will be taxed on the balance savings bank interest amount. If your total income exceeds Rs.1 crore during the FY ending 31 March 2016, surcharge at 12% will be applied on the basic tax rate. Also, education cess of 3% on basic as well as surcharge (if applicable) shall be levied. It is proposed in the Finance Bill to increase the surcharge to 15% from 12% on total income exceeding Rs.1 crore for FY17.

 
 
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