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Around 90% of Indians have a savings bank account and earn interest on it. But whether this interest is taxable?
Savings bank interest is taxable under the head “income from other sources” but is exempt under section 80TTA upto a certain threshold. This article will help you understand in detail about section 80TTA, its applicability, savings bank interest exemption threshold, and tax on interest income, how to avoid tax on savings bank interest, etc.
You can refer to the complete section mapping of Income Tax Act 1961 vs Income Tax Act 2025 here.
Section 80TTA of the Income Tax Act, 1961 allows a deduction of up to ₹10,000 on interest earned from savings accounts in a bank, co-operative society, or post office. This benefit is not available for interest earned from fixed deposits or recurring deposits.
Section 80TTA deduction is available to both individuals and HUFs. NRIs can also claim this deduction. However, since NRIs can open only NRE and NRO accounts in India, only interest earned from an NRO savings account qualifies for Section 80TTA. Interest from NRE accounts is already tax-free and therefore not eligible.
Here are some exceptions to the applicability of this section 80TTA
As per the guidelines prescribed by the RBI, the interest on a savings account is calculated on a daily basis on the closing balance each day. This interest from savings bank account is taxable in nature. Though the calculation is done on a recurring basis, but the interest is credited to the account on a monthly, quarterly, or half-yearly basis, whatever the case may be.
Any amount that is credited as interest on the savings bank is income for the taxpayer and needs to be disclosed under his/her Income tax return under the head Income from other sources while filing ITR.
The below formula is used to calculate interest on a general savings account:
Interest per month = Daily closing balance * Rate of interest * Number of days / (Days in a year)
For instance, if the daily balance is Rs. 5 lakh and the interest offered a on savings account is @6% per annum, the interest component shall be calculated as follows:
Interest per month = Rs. 5 lakh * .06 * 30 / 365 = Rs. 2465
The interest that gets accumulated in the savings bank account should always be declared in the tax return under the heading of income from other sources. The banks do not deduct TDS on savings bank interest.
The interest on the savings account is taxable as per the income tax slab rates that apply to the investor. In this regard, it also has to be kept in mind that a deduction under section 80TTA and Section 80TTB can also be allowed on the interest earned from the savings account.
Under Section 80TTA of the Income Tax Act, interest up to Rs 10,000 earned from all savings bank accounts is not taxable. This is valid for cooperative banks, post offices, or savings bank accounts. If the interest earned from all these sources is more than Rs 10,000, then the extra amount comes under tax deduction.
This means that if somebody earns an interest of Rs 20,000, he will have to pay income tax on Rs 10,000. It is always suggested to keep a minimum balance in the savings accounts as the rates of interest are very low and can also be reduced by income tax payable. The rate is around 2.8% p.a. for a person in a 30% tax slab with a 4% interest on the savings account.
In contrast, Section 80 TTB is specifically tailored for senior citizens. It allows them a more substantial deduction of up to Rs. 50,000 per year on interest income earned from Savings Accounts and fixed and recurring deposits. This provision aims to ease their tax burden on interest income, thereby ensuring their financial well-being during retirement.
| Section | Eligibility | Maximum Deduction | Applicable to |
|---|---|---|---|
| 80TTA | Individuals, HUFS | Up to Rs.10,000 per year | Interest income from Savings Accounts |
| 80TTB | Senior Citizens | Up to Rs.50,000 per year | Interest income earned from various Savings Accounts, fixed deposits, and recurring deposits |
For any resident of the country who is aged 60 years or less. Interest earned up to Rs 10,000 in any financial year is not tax-deductible. This deduction is allowed on the income earned as interest from the following sources:
It should be kept in mind that senior citizens cannot avail the benefits of section 80TTA. The tax-exempt limit is Rs 50,000 for the senior citizens u/s Section 80TTB. There is no provision of TDS deduction on the savings account interest. For the NRIs, tax is deducted at source i.e., TDS applies at 30% on interest earned on the Non-Resident Ordinary (NRO) accounts while there is no tax applicable on Non-resident External (NRE) accounts.
Also, section 80TTA exemption is not available under the new tax regime. These are only available under the old tax regime.
Note:- Section 80TTA is meant to incentivize saving in regular savings accounts. Any interest income generated from investments with fixed terms or other interest-bearing instruments outside of savings accounts falls outside the scope of this deduction.
You can claim a deduction on interest income earned from:
The deduction under Section 80TTA does not apply to:
This section is responsible for granting a deduction of up to Rs 50,000 p.a. on interest on fixed deposits and savings accounts to senior citizens who are above 60 years old. The same deduction is valid for interest on fixed deposits. There is a difference between the deductions given to senior citizens and the deductions given to others. The first deduction is valid for both interests from savings accounts and fixed deposits, whereas the latter is only meant for savings accounts.
Note: The Threshold under section 80TTB has been increased to Rs. 50,000 per annum and this increased limit will be applicable from FY 2025-26.
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Given below are the key points of difference between section 80TTA and 80TTB -
| Feature | Section 80TTA | Section 80TTB |
|---|---|---|
| Who can claim | Individuals and Hindu Undivided Families (HUFs) — excludes senior citizens | Resident senior citizens (aged 60 years and above) |
| Deduction limit | Up to ₹10,000 per financial year | Up to ₹50,000 per financial year |
| Eligible interest | Interest from savings accounts only – with banks, post offices, or co-operative societies | Interest from savings accounts, fixed deposits, and recurring deposits held with banks, post offices, or co-operative societies. |
| Overlap allowed? | Not applicable to senior citizens, who must use 80TTB if eligible. | Senior citizens cannot claim Section 80TTA as well—they must choose 80TTB |
Reporting savings bank interest in your Income Tax Return is essential for tax compliance. First, understand that savings bank interest is taxable under “Income from Other Sources,” with an exemption limit of ₹10,000 under Section 80TTA for individuals and Hindu Undivided Families (HUF), and ₹50,000 for senior citizens under Section 80TTB. Gather your bank statements to determine the total interest earned during the financial year. When filling out your ITR, select the appropriate form (ITR-1 or ITR-2 for individuals), and in the “Income from Other Sources” section, enter the total interest income.
If the interest is below the exemption limit, be sure to mention this exemption. After entering the interest income, complete other sections of the ITR form, including additional income details, deductions, and tax payments. Finally, review your form for accuracy before submitting it online.
You can also report your savings bank interest in your ITR with the help of tax2win tax experts, who ensure the correct information is mentioned in the ITR to avoid any future consequences. Additionally, the tax experts help you reduce your taxable income by suggesting the right tax exemptions. File your Income Tax Return today
| Income Tax Act 1961 | Income Tax Act 2025 |
|---|---|
| Section 80TTA | Section 153 |
| Section 80TTB | Section 153 |
Under Section 80TTA, interest earned up to Rs, 10000 from every savings bank account is not taxed. But, if somebody earns more than that, the extra amount will be taxed.
There is no TDS for the interest earned on the savings bank accounts of an individual or a Hindu Undivided Family. It is taxable in the hands of the account holder when it goes above a certain limit.
Section 80TTA is also known as a deduction in respect of interest on deposits in a savings account. As long as the total amount of interest seeking exemption is less than or equal to Rs 10, 000, no tax will have to be paid.
No, Section 80TTA provides deduction on interest on deposits in saving accounts not time deposits with banks, cooperative societies and post office.
No, interest earned on FD is liable for TDS.
Yes, but the collective limit is Rs. 10,000.
The maximum deduction as per section 80TTA is INR 10,000.
Utilize the deduction under Section 80TTA this allows a deduction of up to Rs. 10,000 on the total interest earned from all your savings accounts combined.
