Few more days left to file your income tax return. It is important to file your ITR correctly and do not miss any transaction. One most common mistake is not reporting the interest earned on bank savings account. Interest on savings bank account over the deduction limit is taxed as 'Income from other source' as per the tax slab rate applicable to the tax payer. But if you miss reporting it in your ITR filing, you must be prepared to receive an income tax notice for that matter. And the penalties are heavier than the tax you would pay on the interest on savings account.
Interest on savings bank account earned upto ₹10,000 per year is allowed as deduction under Section 80TTA of the Income Tax Act. This limit of ₹10,000 includes interest from all savings accounts with banks, co-operative banks, and post offices. If the interest earned from these sources exceeds ₹10,000, the additional amount will be taxable under the head 'Income from other source.'
An important point to note here is that the deduction under Section 80TTA is available is not per bank account but on the total interest earned on all your bank accounts.
Deduction under Section 80TTA is not allowed on interest earned on time deposits such as fixed deposits, recurring deposits or any other time deposits. Also no tax is deducted at source on interest income on bank savings accounts.
Section 80TTA is not applicable to senior citizens. They enjoy a higher tax benefit under a different section. Interest earned on saving deposits and fixed deposit with banks or post office or co-operative banks for an amount up to ₹50,000 earned by the senior citizen is eligible for deduction under Section 80TTB.
Also, there will be no deduction of tax at source up to ₹50,000. This limit of ₹50,000 has to be computed for every bank individually.
