How interest on deposits is taxed?
Posted on: 14/Jan/2017 3:54:47 PM
Much of the demonitised money has seen its end as savings in bank and post office accounts. Although earning an interest, many forget that this interest is liable to tax. Interest earned from saving accounts is considered as income under the head, income from other sources and is taxed at the applicable slab rate in the hands of the individual. But all of this interest is not taxable.
From assessment year, AY, 2013-14, a new section-section 80TTA-was introduced in the Income Tax Act, 1961. Under this section, interest income of up to Rs10,000-earned from all the savings bank accounts, either with a bank or banking company or with a cooperative society engaged in banking business, or a post office-is exempt from tax. The amount above Rs10,000 in a financial year will be added to the other taxable income of the taxpayer, and will attract tax. For instance, if your interest income from various savings accounts, including at a post office, is Rs8,000 this year, then you don�t have to pay any tax on it. But if this total interest income is, say, about Rs15,000, then you need to pay tax on Rs5,000 as per the tax slab applicable to you.
Irrespective of the amount of interest earned during a year, it should be disclosed in the income tax return. Avoiding or ignoring to disclose savings account interest not only makes the income tax return incorrect, you may end up paying penalty and be required to revise your return if the income tax department traces this income during assessment.
