ITR Filing: Savings account interest up to Rs 17,000 per year can become tax-free. Check how
New Delhi: Savings account interest received from bank and post office up to Rs 10,000 per year is deducted from taxable income under Section 80TTA. Similarly for senior citizens, this deduction is available up to Rs 50,000 under Section 80TTB of Income Tax Act.
Although most of us are aware of these income tax rules, only a few people are aware of the tax benefit available under Section 10(15)(i) of the Income Tax Act.
As per a government notification, dated June 3, 2011, interest income up to Rs 3,500 earned from post office savings account is exempt from tax for single accounts and for joint accounts this exemption limit rises to Rs 7,000 per annum. This exemption is over and above the deduction available under Section 80TTA and Section 80TTB for senior citizens.
This means an individual can claim deduction of interest income from saving account held with post office as per section 80TTA of the Income Tax Act to the extent of Rs 10,000 or, in case the individual is a senior citizen, up to Rs 50,000 under section 80TTB. In addition to that, he/she can claim the exemption benefit (as per section 10(15)(i) on interest income from saving account with post office to the extent of Rs 3,500 in case of individual account and Rs 7,000 in case of joint account under section 80TTA or 80TTB.
Worth mentioning here is that as per the provisions of income tax act, if an individual claims exemption under Section 10(15) in respect of interest income from post office, he cannot claim any other deduction for the same income. But interest in excess of this limit (i.e., in excess of Rs 3,500 or Rs 7,000 in case of single and joint accounts, respectively) may be considered for Sections 80TTA or 80TTB deductions.
Hence, both the sections are mutually exclusive without any cross-reference denying or restricting the benefit provided by either section, say tax experts.
How to show interest income in ITR
In case a taxpayer is claiming interest income as a tax deduction under Section 80TTA, he/she will have to show the interest income under the head Income from other sources. However, if the taxpayer is claiming a tax exemption he has to show the same under the head Exempted Income.
From this year it is likely that taxpayers will get all the information on interest income pre-filled in their ITR forms as banks, post offices are required to send these details to the tax department.