Tax implications on savings account
A Savings Account is the most primary type of bank account you can open with a commercial bank in India. A Savings Account is essential because it supports you in the process of saving money. It empowers you to keep your money safe with bank's security, earn interest on the amount, and withdraw the funds as and when you require it. You are also eligible to get varied relevant facilities with your Savings bank Account.
For example, you can easily access your account, withdraw cash at any nearby ATM, use international debit cards for shopping, and bill pays. You can also transfer funds quickly via online banking and secure fund transfers. Moreover, while the account gives you many facilities, you must also be conscious of the tax on savings account that is implemented by the government.
Like any other financial instrument in the country, the interest you earn above a definite limit on your savings account funds will also attract tax. The tax on savings account interest is under the subhead 'Income from Other Sources' as per your particular income tax slab charges. However, certain deductions are ceded by the Indian government.
The tax implication on interest on Savings Account is distinguished for the individual tax payer below 60 years of age and above 60 years of age. It refers only to the income earned as interest. There is no TDS for the interest earned on the savings bank accounts of an individual or HUF.
How is interest from savings account taxed
The interest obtained from your Savings bank Account is affixed to your regular income from all the other roots, and then your total income is taxed as per the relevant tax bracket that you fall under.
It would be best to start the process by gathering all your savings bank account statements for the fiscal year. Have a thorough look into the bank statement to determine the interest accumulated to your savings account that can be detected in the deposit column. Your bank statement could show interest as an annual, biannual, or quarterly credit(s) depending on your particular bank.
In the case of biannual interest pay out that is the most typical way the interest gained is paid out - the interest earned may be for the former year. In such cases, seek the help of the bank staff to understand how to calculate the interest earned in the relevant financial year.
Now, note down all the interest credits specified in your bank accounts and sum them up.
Tax deduction under section 80TTA
Section 80TTA permits a taxpayer to claim a deduction on their interest income on Savings account and minimize their tax on savings account interest. To be eligible to claim the benefits under this section, you have to be a tax residing of India. Under Section 80TTA, you do not qualify for deductions on interest that is accrued on fixed deposits, recurring deposits or, any other sort of deposits.
A deduction up to Rs.10,000 is provided on the aggregate interest earned on your Savings Account with a bank, co-operative bank, and a post office as per Section 80TTA of the Income Tax Act.
This deduction pertains to interest on Savings Bank Accounts held by individual (below the age of 60 years) and Hindu Undivided Family (HUF). The taxpayer can claim deduction up to maximum of INR 10,000 on the interest income aggregated from all Savings Accounts.
Tax deduction under section 80TTB
The government grants specific privileges to Indian residents aged 60 years or more, to have more money in hand. Section 80TTB is one such move that permits deduction of up to Rs.50,000 on the interest income earned in one fiscal year.
However, only the interest earned on the fixed deposits, other deposit accounts, and savings bank account with commercial banks, post offices, and cooperative Banks fit this deduction. The tax payer must be a resident in India and aged 60 years or above for the same.
Savings account tax limit how to manage your money better
Many of us have a question that how is savings account interest taxed? The interest amount obtained above a specific limit attracts tax. It can be from savings and investments, For example, a savings account, post office plans, fixed deposits, and recurring deposits. According to the income tax slab charges applicable, the investor's interest on a savings account is considered under taxable income. However, under section 80TTA, deduction is also allowed on interest gained from a savings account. It comes with a maximum of Rs.10,000 each year.
To manage your money better, the first thing you can get for your benefit is to open a zero balance savings account. In these types of savings account, you do not have to maintain a careful balance and take out the money for your use. In addition, zero-balance savings account from different banks also come with striking features that you can relish after becoming a proud owner of the account.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.