Income tax on savings account interest
Section 80TTA in the Income-tax Act, 1961 has been implemented from the assessment year 2013-14. Under this section, interest up to R10,000 earned from all savings bank accounts is exempt from tax. The account can be with either a bank, a co-operative society engaged in carrying out the business of banking (including a co-operative land mortgage bank or a co-operative land development bank), or a post office.
In case interest earned is more than R10,000 in a financial year, the difference will attract tax. So, if your interest income from the savings accounts is R9,000, you don't have to pay any tax on it. But if it is R18,000, you need to pay income tax on R8,000 according to your tax slab. Remember, deduction under section 80TTA is not available on interest earned on fixed deposits or term deposits with a bank or post office.
It is the responsibility of the account holder to evaluate her interest income and pay the tax accordingly. Interest income from a savings bank account is considered under the head "income from other sources". You can either disclose or declare the interest earned from different savings accounts to your employer and ask it to deduct the TDS on your income, or you can pay the taxes on your own. If the amount is substantial, you may also need to pay advance tax on it. You should evaluate your tax liability on interest earned before the advance tax due dates and make the payment accordingly. You do not have to attach an interest certificate while filing income tax returns. However, you should retain the original certificate to show it to the assessing officer in case of a tax scrutiny.
Usually, tax filers do not evaluate or disclose their interest earnings from savings accounts and the taxes due on it while filing income tax returns. But it would be sensible to do so; one should take advantage of the available deduction limit specified specially for such income and file the return accordingly. Not only is it incorrect to avoid or ignore savings account interest while filing tax return, but may also be penalised. You may have to file a revised return.
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