Is Savings Account Interest Taxable in India? Section 80TTA, TDS & ITR Guide

How Savings Account Interest is Taxed in India

When your savings account earns interest, that income is classified under 'Income from Other Sources' in your Income Tax Return. It is added to your total income and taxed at your applicable slab rate — whether 5%, 10%, 15%, 20%, or 30% depending on your income bracket.

This applies to: savings accounts, post office savings accounts, and cooperative bank savings accounts. It does NOT apply to fixed deposits, recurring deposits, or time deposits — those have different tax treatment (TDS rules and no 80TTA deduction).

How Savings Account Interest is Calculated

Banks in India calculate savings account interest on a daily balance basis (since 2010, mandated by RBI):

Formula: Interest = (Daily Balance × Annual Interest Rate × Number of Days) ÷ 365

The interest is typically credited to your account quarterly (March 31, June 30, September 30, December 31) though the calculation is daily. AU Bank offers competitive savings account interest rates — check au.bank.in for current rates.

Section 80TTA: ₹10,000 Deduction for Savings Account Interest

Section 80TTA of the Income Tax Act, 1961, provides a deduction of up to ₹10,000 per year on interest earned from:

• Savings accounts with banks (scheduled commercial banks, cooperative banks)
• Post office savings accounts
• Savings accounts with cooperative societies engaged in banking

Who can claim 80TTA? Individuals and HUFs (Hindu Undivided Families) who are NOT senior citizens (below 60 years of age). Senior citizens get the higher benefit under 80TTB.

Important: 80TTA is available ONLY under the old tax regime. If you have opted for the new tax regime, Section 80TTA deduction is NOT applicable.

Section 80TTB: ₹50,000 Deduction for Senior Citizens

Section 80TTB, introduced in Budget 2018, provides a significantly higher deduction for senior citizens (individuals aged 60 years or above). Under 80TTB:

• Maximum deduction: ₹50,000 per financial year.
• Covers interest from savings accounts, fixed deposits, recurring deposits, and any other deposits with banks, cooperative banks, or post offices.
• Unlike 80TTA (which covers only savings accounts), 80TTB covers ALL interest income from banking instruments.
• Available only under the old tax regime — not available under new tax regime.

Old Tax Regime vs New Tax Regime: Key Difference for Savings Interest

TDS on Savings Account Interest: When Does Your Bank Deduct It?

Many people confuse TDS on FD with TDS on savings accounts. The rules are different:

• TDS is NOT typically deducted on savings account interest** — unlike FD interest, savings account interest is not subject to TDS deduction at source under standard banking practice.
• Exception:** If total interest (including savings) from a single bank exceeds ₹40,000 in a financial year (₹50,000 for senior citizens), the bank may deduct TDS at 10% on the savings interest portion.
• Your responsibility:** Even if TDS is not deducted, you must include savings account interest in your ITR and pay applicable tax. It is a self-declaration requirement.

How to Submit Form 15G/15H to Avoid TDS

If your total income (including savings account interest) is below the basic exemption limit, you can submit Form 15G (for non-seniors) or Form 15H (for senior citizens) to your bank, requesting them not to deduct TDS:

• Form 15G:** For individuals below 60 years whose total income is below the taxable threshold (₹2.5 lakh under old regime; ₹3 lakh under new regime).
• Form 15H:** For individuals aged 60 years and above whose tax liability for the year is nil.
• When to submit:** At the beginning of every financial year (April) — submit at each bank where you have accounts.
• How to submit:** Via net banking (most banks have online Form 15G/H submission), at your branch, or through mobile banking app.

How to Declare Savings Interest in Your ITR

When filing your Income Tax Return:

• Which schedule: Declare savings account interest under 'Schedule OS' (Other Sources)** in your ITR.
• Which ITR form:** ITR-1 (Sahaj) covers savings account interest for salaried individuals. ITR-2 for those with capital gains.
• Where to find the amount:** Check your bank's annual interest statement or Form 26AS. You can also check your savings account statement — interest credits are usually quarterly.
• Deduction: Claim 80TTA deduction (up to ₹10,000) in 'Chapter VI-A Deductions'** section of your ITR if you are under the old tax regime.

Joint Account Interest: Who Pays the Tax?

In a joint savings account, the interest is taxable in the hands of the primary account holder (the first named holder). All interest income from a joint account must be included in the primary holder's ITR.

Frequently Asked Questions (FAQs)

What is the TDS threshold on savings account interest?

For most savings accounts, TDS is not deducted. However, if total interest from all sources at one bank exceeds ₹40,000 (₹50,000 for senior citizens), the bank may deduct TDS. Always check your Form 26AS at the beginning of filing season.

What is Form 15G and when should I submit it?

Form 15G is a self-declaration form submitted by individuals below 60 years to inform the bank that their total income is below the taxable limit, requesting no TDS deduction. It must be submitted at the beginning of each financial year (April) for each bank where you have accounts.

Is fixed deposit interest covered under Section 80TTA?

No. Section 80TTA covers ONLY savings account interest. FD (Fixed Deposit) interest is not eligible for 80TTA deduction. However, senior citizens can claim ₹50,000 deduction on all bank interest (including FD) under Section 80TTB.

How do I find out how much interest my savings account earned last year?

You can find the annual interest earned by: (1) Checking your savings account statement for quarterly interest credits, (2) Downloading your Annual Interest Statement from bank net banking, or (3) Checking Form 26AS from the income tax portal (incometax.gov.in).

What is the tax on NRE savings account interest?

Interest earned on NRE (Non-Resident External) savings accounts is completely exempt from tax in India under Section 10(4) of the Income Tax Act, as long as the account holder qualifies as a non-resident under FEMA. No ITR declaration is needed for NRE interest.