Short answer: Savings account interest is taxable in India, added to your income under “Income from Other Sources” and taxed at your slab rate. However, under the old tax regime, you can claim a deduction of up to ₹10,000 a year on savings interest under Section 80TTA (₹50,000 for senior citizens under Section 80TTB, which also covers FD interest). Banks do not deduct TDS on savings interest, but you must still report it in your tax return.
Many people assume savings interest is tax-free. It is not, though a good chunk of it can be. Here is exactly how it works.
Is savings account interest taxable?
Yes. The interest your savings account earns is taxable. It is added to your total income under the head “Income from Other Sources” and taxed at your applicable income tax slab rate. So do not assume the interest you receive is free of tax, it must be reported.
The good news is that a deduction lets you shield a chunk of it, if you file under the old tax regime.
Section 80TTA: up to ₹10,000 tax-free
Under Section 80TTA, individuals (below 60) and HUFs can claim a deduction of up to ₹10,000 per financial year on interest earned from savings accounts.
A few key points:
- It applies to savings account interest only, not fixed deposit or recurring deposit interest.
- The ₹10,000 limit is across all your savings accounts combined, not per account.
- If your total savings interest is below ₹10,000, the entire amount is effectively deductible. Above ₹10,000, only ₹10,000 is deductible and the rest is taxable.
- It is available only under the old tax regime. The new (default) regime does not allow it.
Section 80TTB: up to ₹50,000 for senior citizens
Senior citizens (aged 60 and above) get a more generous benefit under Section 80TTB. They can claim a deduction of up to ₹50,000 per year, and crucially, this covers interest from savings accounts, fixed deposits, and recurring deposits combined, not just savings.
Note that senior citizens claim 80TTB instead of 80TTA, not both. Like 80TTA, this is available only under the old tax regime.
What about TDS?
Here is a common point of confusion. Banks do not deduct TDS on savings account interest. TDS (tax deducted at source) applies to fixed and recurring deposit interest above certain thresholds, but not to regular savings interest.
However, no TDS does not mean no tax. The interest remains taxable, and it is your responsibility to report it in your income tax return and pay any tax due. Ignoring it can cause a mismatch and scrutiny later.
How to report savings interest correctly
- Add up all your savings interest across every bank, post office, and co-operative account for the year.
- Report the total under “Income from Other Sources” in your ITR.
- Claim the deduction (₹10,000 under 80TTA, or ₹50,000 under 80TTB if you are a senior), if you are on the old regime.
- Pay tax on the remainder, if any, at your slab rate.
A quick note: from the 2026-27 tax year, these provisions are being consolidated under the new Income Tax Act, though the deduction limits remain the same.
Frequently asked questions
Is savings account interest taxable in India?
Yes. It is taxable under “Income from Other Sources” at your slab rate. However, under the old regime, up to ₹10,000 (₹50,000 for seniors) can be claimed as a deduction.
How much savings interest is tax-free?
Under the old tax regime, up to ₹10,000 a year is deductible under Section 80TTA for those below 60, and up to ₹50,000 under Section 80TTB for senior citizens (covering FD interest too).
Is there TDS on savings account interest?
No. Banks do not deduct TDS on savings account interest. But it is still taxable and must be reported in your income tax return.
Does Section 80TTA cover fixed deposit interest?
No. Section 80TTA covers only savings account interest. Senior citizens, however, can claim FD interest under Section 80TTB, up to ₹50,000.
Can I claim 80TTA under the new tax regime?
No. Both Section 80TTA and 80TTB are available only under the old tax regime. The new default regime does not permit these deductions.
With Jupiter: a savings account shows your interest clearly, and Pots help you organise your money by goal. Related reading: joint savings account and how to open a savings account for your child.
Bank smart, and stay tax-aware
Understanding how your interest is taxed helps you plan and report correctly. With Jupiter, you can track your savings and interest clearly in one app, making it easier to stay on top of your finances. Jupiter is the 1-app for everything money.
Tax rules, deduction limits, and regime conditions are subject to change and depend on your circumstances. This article is general information, not tax advice. Consult a qualified tax professional for guidance specific to your situation.
