Indialends, 25 Mar 2026

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Income Tax on Saving Bank Interest

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Saving account interest is taxable at your slab rate. Interest earned up to Rs 10,000 is exempted from tax under Section 80TTA. The tax-exempt limit given for senior citizens is Rs 50,000 as per Section 80TTB. For NRIs, tax is deducted at source (TDS) at 30% on interest on Non-Resident ordinary accounts. No tax applies to interest on Non-resident External (NRE) accounts.

Process to calculate interest on savings account

According to the RBI guidelines, interest on the savings account is calculated on per day basis on the closing balance of each day. Although this interest is calculated regularly. The same will credited to your account on a half-yearly, monthly or quarterly basis.

Formula 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)

Example of how to make use of this formula

Daily balance = 500,000

Interest offered on saving account = 6 percent

Interest per month = 5 lakhs * .06 * 30 / 365 = INR 246

Income Tax applicability on Savings Account Interest earned:

• The interest component which is earned on saving account is considered as ‘Income from other Sources’.
• This interest income will be declared in your Income Tax Return and will be taxable as per the applicable slab rate.
• As per Section 19A of the Income Tax Act, 1961, TDS is not liable on a savings account.
• TDS deducted at 30% for the NRIs on interest received on NRO accounts.
• No TDS is deducted on NRE accounts.
• Interest earned on a savings accounts beyond Rs 10,000 attract taxes at your slab rate.
• Interest on a savings account up to Rs 10,000 is technically treated as a deduction. For example, if your gross total income is Rs 10 lakh and you have savings account interest of Rs 25,000 a deduction of Rs 10,000 will be made from your gross total income.

Section 80 TTA

• The deductions given under Section 80 TTA of Income Tax Act, 1961.
• Deduction is allowed only to individuals and HUFs assesses and not for companies or firms.
• Maximum Rs 10,000 deduction allowed for interest earned from all saving accounts held in post offices, banks or co-operative banks.
• Interest earned beyond Rs 10,000 from any of these sources shall be taxable.

Section 80TTB

• This section grants a deduction up to Rs 50,000 per annum to interest on savings accounts and on fixed deposits to senior citizens (those who are above the age of 60).
• The section also grants the same deduction to interest on fixed deposits.
• This is a key distinction that marks out the deduction given to senior citizens from the deduction given to all individuals.
• The former extends to interest from fixed deposits and savings accounts while the latter only extends to interest on savings accounts.