Saving is a habit and a necessity for everyone. To secure their future, people open savings accounts in banks, where they earn interest on their deposits. But did you know that this interest can also be taxed?
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Tax on Savings Account: If you have a bank account, this news will prove to be very useful for you. Middle-class people save money to secure their future and keep it in a bank account, which is used for their own benefit and that of their families. Today, we’ll discuss the interest earned on this money. When money remains in a bank account for a long time, it starts earning interest, but now the question arises whether that interest is taxable. Let’s find out how much tax is levied on the interest earned on money kept in a savings account.
Is tax payable on savings account interest?
If the bank pays interest on the money in your savings account, it will be considered part of your income and you will have to pay tax on it. However, the Income Tax Department has also provided some exemptions on this.
How much exemption is available?
If you have received interest of more than ₹10,000 in your bank account, you must pay tax under Section 80TTA of the Income Tax Act. However, if the interest is up to or less than ₹10,000, you are not required to pay tax. This exemption applies to savings accounts held at banks, post offices, or cooperative banks.
How is tax levied above ₹10,000?
If you have received interest of more than ₹10,000 in your bank account, you must pay tax on the excess amount. For example, if your total income falls in the 20% tax slab and you received ₹15,000 in interest, you will be taxed at 20% on ₹5,000.
Are FDs also eligible for exemption?
The Income Tax Department has granted exemption only on savings accounts. If you have invested in a fixed deposit (FD) or recurring deposit (RD), the interest earned on those deposits is not eligible for exemption.
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