No Tax on Interest on Savings Bank Account

Over and above deductions under Chapter VI-A of the Income Tax Act, 1961, Finance Act, 2012 has inserted a new section 80TTA to give deduction for Interest earned on Savings Bank Account with Bank, Co-operative Bank and Post office to the extent of Rs. 10,000/-. Benefit of Section 80TTA is available to Individual and HUF.

 

This deduction is available from Assessment year 2013-14. It is to be noted that benefit under Section 80TTA is not available for Interest earned on Fixed Deposits or Sweep-in Account.

Benefit given under section 80TTA is in the nature of Deduction and not exemption. Thus, total interest earned on Savings Bank Account has to be included in “Income from Other Sources” and thus in “Gross Total Income” and thereafter the deduction have to be claimed under section 80TTA.

Maximum deduction available in any assessment year is lower of Rs 10,000/- or actual interest received from saving bank account.

 

This step by Finance Ministry would help in avoiding inclusion of small savings bank interest in the taxable income, which was required to be done after deletion of section 80L.