Maximise tax benefit on interest income from savings accounts

For non-senior citizens, the maximum benefit can go up to ~17,000 using Section 80TTA and Section 10(15)(i)

Many taxpayers would have kept higher than usual levels of cash in their savings accounts during the past year to have quick access to money in an emergency. The interest earned from savings accounts would, therefore, be higher this year. Taxpayers should familiarise themselves with all the benefits available on such income to minimise their tax outgo.

Section 80 TTA

An individual or Hindu Undivided Family can claim deduction under Section 80TTA up to ~10,000 on interest earned in a savings account. Gopal Bohra, partner, N.A. Shah Associates, says, “The savings account can be with any bank, co-operative bank or post office.” However, no deduction is allowed on the interest earned from time deposits, fixed deposits (FDS), or recurring deposits.

Those who hold joint accounts need to understand how Section 80TTA will apply to them. Kapil Rana, founder and chairman, Hostbooks, says, “In case of a joint account, both can claim partial deduction, i.e., of 50 per cent, subject to the maximum limit of ~10,000 for both individuals separately.”

For example, if two joint account holders of a savings bank account have disclosed in their income-tax (I-T) return, the share of their income as 50 per cent each of total interest income of ~19,000 earned from their joint account, then both can claim a deduction of ~9,500 each.

Section 80TTB

Deduction under Section 80TTB is allowed to senior citizens on the interest income earned from any bank deposit, including FD.

Naveen Wadhwa, deputy general manager, Taxmann, says, “Deduction up to ~50,000 is allowed under this provision on interest earned on deposits (including FDS) held in a banking company, including any bank or banking institution; a co-operative society engaged in banking business (including a co-operative land mortgage bank or a co-operative land development bank); or a post office.”

Section 10(15)(i)

Many taxpayers may not be aware that they can avail of an additional exemption under Section 10(15)(i) of the I-T Act. This benefit is available on the interest income from a post office savings scheme to the extent of ~3,500 in an individual account and ~7,000 in a joint account.

Bohra says, “Section 10(15)(i) provides an exemption to income earned in the form of interest, premium on redemption or any other payment on securities, bonds, annuity certificates, savings certificates, etc issued by the central government by way of notification.”

Some of the notified bonds or securities where the entire interest income is exempt under Section 10(15)(i) are 12-year national savings annuity certificates, post office cash certificates, post office cumulative time deposits, etc.

Points to keep in mind

An individual can claim deduction under either Section 80TTA or Section 80TTB. He cannot claim deductions under both Sections at the same time. However, Section 10(15)(i) benefit can be availed of with Section 80TTA or 80TTB. Rana says, “An individual is entitled to claim exemption under Section 10(15)(i), as well as deduction under Section 80TTA or 80TTB.”

The maximum benefit an individual can avail of on the interest income from a savings account can go up to ~17,000.

According to Rana, “An individual can save tax on interest income up to ~13,500 in case of a single-owned savings account and ~17,000 in case of a joint savings account opened in a post office.”

If pre-filled data is incorrect

Some of the fields in I-T return forms are auto- or pre-filled by the I-T department. Rana says, “It is an individual’s responsibility to check the pre-filled data and ensure all the fields are correctly filled. If you find that some fields are incorrect, correct them.” Wadhwa, too, adds that the pre-filled data is editable and should be modified.