54 Responses to Interest on Saving Bank Account : Tax, 80TTA

  1. Bineet says:

    1. I got interest on ppf credited on 31 March 2013, So i will declare it in ITR of Assessment year 2013-2014, given the fact that Previous year in which this interest was credited is 2012-2013(1 April 2012-31March 2013) ??

    2. I got interest on saving account credited in my Account on 30 June 2012 and 31 Dec 2012. So i will declare it in AY 2013-2014 ?

    I am filing a revise return. Kindly help

    • Kirti says:

      Sir for PPF As the interest is credited on 31 Mar 2013 it has to be accounted in the FY 2012-12 or AY 2013-14.
      Show it under exempt Income in Interest income as explained in our article Exempt Income and Income Tax Return.
      Interest on Saving Account is tricky.
      Interest on saving bank account credited on 30 June 2012 is actually for 1 Jan 2012-30 Jun 2012.
      Interest on saving bank account credited on 31 Dec 2012 is actually for 1 Jul 2012-31 Dec 2012
      But if amount is less than 10K it’s ok.

  2. ajay says:

    how to calculate RATE OF INTEREST of recurring deposit.

    Suppose I’m investing 2500 per month in recurring deposit account for 2 years with rate of interest 8% compounded quarterly. Now I have to find out MATURITY AMOUNT. For this i will use formula :

    ACTUAL AMOUNT (MATURITY AMOUNT) = PRINCIPLE AMOUNT *( (1+RATE/100/4)^(4*2)-1)/(1-(1+RATE/100/4)^(-1/3))

    ACTUAL AMOUNT (MATURITY AMOUNT) = PRINCIPLE AMOUNT *( (1+8/100/4)^(4*2)-1)/(1-(1+8/100/4)^(-1/3))

    ACTUAL AMOUNT (MATURITY AMOUNT) = 65229/-

    ========================

    Now I want to know the FORMULA OF HOW TO CALCULATE RATE OF INTEREST.

    Suppose I’m investing 2500 per month in recurring deposit account interest compounded quarterly. My MATURITY AMOUNT IS 65229/-.
    But i don’t know what INTEREST RATE I HAVE GOT. I want to find out INTEREST RATE . WHAT FORMULA SHOULD I USE TO FIND OUT RATE OF INTEREST

    PLEASE REPLY.

  3. Mayank says:

    My Mother (housewife)has earned Saving bank interest as (Rs. 646) + FD interest as (Rs. 25459)= 26105 for FY 2012-13.No other source of income.

    1-Does she need to file ITR?
    2-Do i need to ask bank to deduct 10% tax on above?

  4. Mayank says:

    I earned interest from all Savings A/cs as 7000…My ITR filer has indicated ’7000 as income from other sources and deducted 3000 from taxable income’…Is it correct? or he has to deduct 7000 from taxable income?

    • Kirti says:

      Ex : For income of Rs 6,00,000 if you have earned Rs 7000 as interest on the saving bank account which comes as income from other sources
      On Income of 6,0,7000 taxability is 52942
      On Income of 6,00,00 taxability is 51500
      So as per me it is not correct,
      You have to show 7000 as income from other sources, claim 7000 as deduction in section 80TTA so net taxable income is 600000.
      Now do you want to revise your return?

  5. jay says:

    Under 80TTA examption of rs 10000, if i have minore a/c of my child & in both my a/c & my child a/c int income is more then 10000 then exampted both or only 10000rs.

    • Kirti says:

      Under 80TTA Only 10,000 Rs of interest on Saving Bank account of which you are primary or First holder is exempt.
      (iii) Section 10(32) provides exemption to extent of Rs. 1,500/- in respect of minor’s income for the purpose of clubbing. Therefore, exclude Rs. 1,500/- from the income of the minor while clubbing the income of the minor in the respective head. However, if income of the minor is to be clubbed in various heads, total exclusion should not exceed Rs. 1,500/-.
      So in Schedule SPI, Income of specified persons(spouse, minor child etc) includable in income of the assessee(income of the minor child to be
      included after Rs. 1,500 per child)
      show under relationship MINOR CHILD Nature of Income as INTEREST INCOME and under Amount (Interest income – 1500) ex: 12000-1500.
      Show Rs 1500 in Exempt Income Section under Others, including exempt income of minor children as shown in our article Exempt Income and Income Tax Return

  6. Suresh Iyer says:

    Hi

    I have interest earned from Savings Account – Rs. 11,000. I had invested in Corporate FD from Shriram Transport Financial in 2010 for a 3 year cumulative FD. The interest earned in the 3 year period was Rs. 9000.

    Kindly advise on how do I treat these incomes

    • Kirti says:

      In case of company fixed deposit, the TDS limit of the interest earned is caped at Rs 5,000. The companies would deduct tax at source if the interest earned in a financial year exceeds Rs 5,000 as per the tax slab of the individual.
      Please correct me if I am wrong. NO TDS was deducted for you for Corporate FD from Shriram Transport Financial.
      Assuming no TDS was deducted
      Interest earned i.e Rs 9000 would be your income from other sources. As your interest income from Saving Bank account is more than 5000 Rs please use ITR2 and not ITR1 Our article Income From Other Sources :Saving Bank Account, Fixed Deposit,RD and ITR discusses it in detail.
      Interest in Saving Bank account : Show 10,000 in section 80TTA (Same section where 80C etc are mentioned). Add 11,000 Rs to interest portion of Income from other sources as explained in our article Interest on Saving Bank Account : Tax, 80TTA

      • vicky says:

        Hello Kirti,
        I guess there is some confusion regarding what form to fill if the savings interest income is more than 5000. Here you are saying that we should go for ITR2. I raised a query to official IT website and there response was – interest income does not come under exempt and in this case one should go for ITR1 only.

  7. Nagaraj says:

    Hi Kirti,

    I was filling ITR 2 and landed up in couple of doubts here.

    1)I have declared some amount under allowances exempt under section 10 in the sheet Part B.(HRA,Conveyance amount)
    So where should i fill the details about it .Any schedule where in we should fill that.

    2)Also what needs to be filled under Schedule EI sheet, it has some options like interest, agriculture and others.
    Shd we fill the exempt income mentioned in 1 like HRA under it this as others?

    Thanks

    • Kirti says:

      Nagraj we usually don’t show HRA in ITR1 mostly it’s accounted in Form 16.
      This year there is confusion regarding exempt income and whether HRA,Travel allowance need to be declared but there is no notification from Income Tax dept regarding how to show HRA etc. So like in earlier years most CAs are not showing HRA in ITR1
      For HRA in ITR2 you need to show HRA allowance in Schedule S Details of Income from Salary (Fields marked in RED should not be left Blank) under
      Allowances exempt under section 10
      Mostly for exempt income we have interest like : Interest on EPF,PPF,Dividends etc which need to be shown.
      We have discussed it in detail in our Exempt Income and Income Tax Return
      Hope it helps!

  8. Kirti Azad says:

    I’ve a Auto Sweep account in SBI(Savings Plus).Total Interest for FY12-13 is Rs9832/- and TDS deducted is Rs 1088/-. Whether I can claim this interest in section 80TTA.I fall in 20% Tax slab. Interest from MOD or Auto sweep FD’s are taxexempted under 80TTa or we have to pay tax on them as per our Tax slab.

    • Kirti says:

      Kirti, after the sweep from saving bank account into Fixed Deposit that is treated as FD and hence interest from FD is taxed as per your income slab.
      Section 80TTA applies only to interest from Saving Bank account.
      Just a doubt, typically TDS is 10% of interest earned so if you have earned interest of 1088 then your interest should be 10,880.

  9. ASHOK KUMAR says:

    Dear Kirti,

    Do me correct one thing that its is interest on saving bank account

    • Kirti says:

      If you only have interest on saving bank account, first add it to interest income in Income form other sources and then show it as deduction under section 80TTA. As it is exempt income and above 5000 Rs use ITR2.

  10. ASHOK KUMAR says:

    Dear Kirti,

    will u please clarify, if we earn interest income above rs.-5000/- which ITR we have to file

  11. Nagaraj says:

    I have two questions with respect to income tax filing for this year.

    1) I have income from “Interest from saving bank account to about 2k, so I should show this in Income from other sources and deduct in 80TTA and use IRR1 itself “.Am i correct?

    2) My company provides me with HRA and conveyance allowances.Will these come under exempt income of 5k ,in which case do i need to go for ITR1 or ITR 2?I dont have any other income apart from these.

  12. Rachit says:

    Hello
    I have one question regarding saving a/c and RD interest…..I got around 2000 saving a/c interest and 3000 RD a/c interest should i need to show this amount in ITR form or not.

    • Kirti says:

      Yes any income earned has to be shown in income tax return form.
      Interest from Saving Bank account and RD interest come under Income from other sources. They have been explained in our article Income From Other Sources :Saving Bank Account, Fixed Deposit,RD and ITR with pictures.
      If you still have questions please ask

      • Rachit says:

        Hello
        Thanks for your reply…its clear about saving a/c but what about RD interest…..we have to show that also……

        • Kirti says:

          Thanks for asking for clarification. Realized that explanation was not complete so updated the article.
          If you have opened a Recurring Deposit or any of investment schemes in financial year for which you are filling return for example you opened in Oct 2012 ,then show it in the Income Tax Return by adding only interest earned as income from other sources. And keep on showing it.

          If you had opened a Recurring Deposit or any of investment schemes for which TDS was not deducted in earlier financial years, say Aug 2010 but has not reported any of the interest income till now then wait till the scheme attains mathttp://www.bemoneyaware.com/blog/wp-admin/edit-comments.php#comments-formurity, show it in income tax return of that year.

          So did you open Recurring Deposit this year ?

          • Rachit says:

            Hello
            Thanks again….actually me RD matured on Feb 2013…..and I got interest around 3k….. so should I show this interest in other income row….but I am still not sure because I read some where if interest less than 10k so not needed….

          • Kirti says:

            Interest less than 10k is exempt only for saving bank account. From whatever little we know we would suggest you to show interest income as income from other sources and pay tax on it.
            If you have link to where you read if interest less than 10k so not needed pass it on, we shall try to understand it

  13. Chirag says:

    Is the interest income garnered from the Postal MIS (Monthly Income Scheme) treated as a ‘term deposit’ or can I claim the amount under 80TTA?
    Am a little confused on how to treat the interest from the MIS. :(

    • Kirti says:

      Post Office Monthly Income Scheme (MIS) is meant for investors who want to invest a sum amount initially and earn interest on a monthly basis for their livelihood.
      This does not come under sec 80C so there is no tax-exemption for the amount you invest in this, and interest income is taxable, but there is no TDS cut in this scheme.
      Only interest from Saving Bank Account can be claimed in section 80TTA not even Fixed Deposit, or Recurring deposit etc

  14. Vaibhav says:

    Hello,

    Thanks for this useful info. One small question – while filing IT returns, where do I mention this plain savings bank account interest (Income from other sources or exempt income)?

    Regards,
    -Vaibhav

    • Kirti says:

      Thanks for asking Vaibhav, we had forgotten to mention it. We have added answer in the article above.

      • Vaibhav says:

        Hey thanks for the reply, Kirti.

        Can you also tell me where do I specify this interest income as ‘other income’ in ITR2?

        I didn’t find any such field ‘Income from other sources’ like that of in ITR1. I’m assuming this specified ‘other income’ will then be compensated against the one that I’ll be specifying in VIA schedule to avail 80tta deduction?

        Can you please clarify?

        Regards,
        -Vaibhav

        • Kirti says:

          Vaibhav we have written an article Income from other sources to explain it .
          If your interest from all your saving bank account is more than 10,000 Rs under section 80TTA show 10,000 and remaining add it to your other Income from other sources. If your interest all your from saving bank account is less than 10,000 say 7000 then show 7000 in 80TTA only.

  15. Gopinath says:

    I still didnt understand. Please elaborate with example.
    Lets say

    a) Bank has deducted 4000/- (ie. 10% of FD interest – 40000) but
    my tax slab is 20%.
    b) Bank has not deducted any tax on Saving A.c interest – Rs.30000/-

    What all sections and amounts I should show in e-return .
    Is there any extra tax I have to pay.

    • Kirti says:

      Gopinath the article is about Income on Saving Bank Account and not Fixed Deposit.
      Most of the banks are paying interest of 4% pm (Yes and Kotak are paying around 6%)on daily basis which is credited twice a month in your bank account without any Tax deducted or TDS
      For FD bank will deduct TDS if interest income in FY is more than 10,000. The interest income on FD comes under the head Income from other sources and is added to total income and taxed according to income slab. So if you are in 20% slab you would have to pay tax(10% + education cess) on the Interest from FD.

      In e return TDS on Interest from FD is shown in Income from other sources part and you need to pay self assessment tax
      These links will be helpful to you:
      How to Calculate Income Tax : On understanding different kinds of income
      Filling ITR-1 : Bank Details, Exempt Income, TDS Details
      Fixed Deposits and Tax

  16. ABHISHEK AGARWAL says:

    can i take the deduction of auto sweep interest under U/s TTA or not..

    thanking you

    • Kirti says:

      Interest income from auto sweep is considered as Income from FD so you need to treat it as Income from Other sources.
      It does not come under Sec 80TTA which is for plain saving bank account.

  17. Sunil says:

    Dear Be Money Aware,

    Would this mean the amount that is Auto Swept into FD will also be considered as Svaings Bank Interest (Since there is no particualr lock on the FD). Or it will be taxed as per one’s tax slabs.

    Please clarify.

    • Kirti says:

      Sunil a very good question. If you can tell us which bank Autosweep facility you use we will be able to throw more light on it.
      In General terms :
      Auto sweep accounts have two parts :
      1. Saving bank account.
      2. FD part.
      Interest on Saving bank account is treated like normal bank interest ,what is covered here.
      FD interest is added to you income for the year and taxed accordingly

      How does the auto sweep facility work?
      You decide the maximum amount that you want in your account. This is also called the threshold limit.
      You decide the amount for which the FDs need to be created.
      You decide the tenure of these FDs. The interest rate offered on these auto sweep FDs is the same as the rate offered on regular FDs of that duration.

      Whenever the amount in your account becomes more than the sum of the maximum amount you specified (point 1 above) and the FD amount (point 2), an FD is created for the specified amount and the specified tenure (in point 3). (This is called Sweep-in)

      If the amount that you want to withdraw is more than the amount in your account, one of the FDs would be broken immediately (this happens automatically), and you would get the money. (This is called Sweep-out or reverse-sweep)
      Which FD is broken and penalty charged depends on bank policy. Some banks follow the FILO (First In Last Out), . Thus, if an FD has to be broken to provide for a withdrawal, the most recent FD is broken first. some banks follow First in First Out (FIFO) some LIFO(Last in First Out) approach for breaking the FDs

  18. My Bank always request me to keep big amounts in Term Deposits so that I can earn more interest.I now understand how interest on the amounts in SB a/c is calculated. Thanks for the info.

    • Kirti says:

      Thanks Easwar you are welcome anytime. Yes keeping in Term deposits is a good idea, a safe no risk idea and earns more interest :-)
      But each kind of investment has a purpose in life.Saving Bank Account is used to meet daily needs nd emergency funds because of good liquidity.
      Term deposits should be part of one’s investment plan

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Disclaimer : This is an information based website, meant for providing assistance to it's readers. We do not hold any responsibility for mis-information or mis-communication.