InvestorQ : How to report interest on bank deposits when I file my income tax returns?
Dawn Cherian made post

How to report interest on bank deposits when I file my income tax returns?

Mitali Bhutta answered.
2 years ago

One of the common mistakes made by people while filing returns is in not reporting the interest earned on bank savings account. That is mandatory. Interest on savings bank account over the deduction limit is taxed as Income from other source, but even otherwise disclosure is mandatory.

You must be aware that interest on savings bank account up to Rs.10,000 exempt annually under Section 80TTA of the Income Tax Act. However, this limit of Rs.10,000 encompasses interest from all savings accounts with banks, co-operative banks, and post offices. Only interest above Rs.10,000 on savings is taxable at the peak applicable rate.

One thing to note is that the benefit under Section 80TTA is not on a per-bank account basis but the total interest earned on all your bank and PO accounts. It is an aggregate limit and that is tracked through PAN. Section TTA is not applicable to time deposits, FDs or RDs.

It needs to be remembered that Section 80TTA is not applied to senior citizens above the age of 60. They automatically are eligible for higher tax benefit up to Rs.50,000 earned under Section 80TTB. This includes all deposits including FDs, savings, RDs, PO accounts etc.

By understanding these nuances you can avoid getting notices from the IT department and you will not end up paying huge penalties.