The interest accrued from a savings account is taxable although there is no deduction of tax at source (TDS). The interest collected from your savings account is added to the income from all the other sources. Then, this sum total income is taxed as per the tax slab under which it falls.  However, there is a tax exemption upto an amount of Rs.  10,000. Both individuals and HUFS can benefit from this deduction under Section 80TTA of the Income Tax Act. 

Method of charging tax on Interest on Savings Account

  • The interest garnered from your savings account is counted along with the income from other sources, and this total income is then taxed as per the tax slab under which it falls.

  • This will differ every financial year according to the money present in your bank account. 

  • The most common mode of paying interest is biannual. In this mode, the interest may be for the previous year. In this scenario, you can get the help of a bank personnel to compute the interest accrued in the relevant financial year.

  • Jot down all the interest credits specified in your bank accounts and add them up. If the total exceeds Rs. 10,000, there will be a deduction of Rs. 10,000 on the sum.

  • Under the Income Tax Act, Section 80TTA  enables you to avail deductions on savings account investments in post offices, banks, or cooperative societies. 

  • Section 80TTB enables senior citizen taxpayers who are aged 60 years and more to claim a particular amount (At any time of the FY) as a deduction from their gross total income for that financial year. 

  • Section 80TTB encompasses all types of deposits like savings account deposits, fixed deposits, recurring deposits, etc. The deduction threshold value is Rs. 50,000.