How to Report Savings Account Interest in ITR

Savings account interest is taxable under the head ‘Income from Other Sources,’ even though it appears small. Many taxpayers missreport it in their Income Tax Return (ITR), leading to AIS mismatches or notices from the Income Tax Department. Understanding how to disclose it correctly ensures transparency and prevents penalties. Whether the interest is from a single account or multiple banks, it must be included before claiming deductions under Section 80TTA.

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Table of Contents

• Understanding Savings Account Interest and Its Taxability

• How to Report Savings Account Interest in ITR

• Is Savings Account Interest Taxable Under the New Tax Regime?

• How Savings Account Interest Is Reported Under the Old Tax Regime

• Step-by-Step Process to Report Savings Account Interest in ITR-1 and ITR-2

• How to Claim Deduction Under Section 80TTA

• Difference Between Section 80TTA and Section 80TTB (For Senior Citizens)

• Common Mistakes While Reporting Savings Interest

• Example of Reporting and Claiming Savings Interest Deduction

• TaxBuddy’s Role in Simplifying Savings Interest Reporting

• Conclusion

• FAQs

Understanding Savings Account Interest and Its Taxability

Interest earned on savings bank accounts is considered taxable income under the head "Income from Other Sources." While the interest is not subject to Tax Deducted at Source (TDS), it must still be declared while filing an Income Tax Return (ITR). The rate of tax applied depends on the individual’s income tax slab. However, deductions are available under Section 80TTA or 80TTB (for senior citizens), which can reduce the taxable portion of this income. Proper disclosure of savings account interest ensures compliance and prevents discrepancies in the Annual Information Statement (AIS) or Form 26AS.

How to Report Savings Account Interest in ITR

Taxpayers must include total savings account interest in their ITR under the head “Income from Other Sources.” This information is usually pre-filled in Form 26AS or AIS if reported by the bank. To ensure accuracy, taxpayers should verify the total interest credited to all bank accounts during the year and enter the sum in the relevant field of ITR-1 or ITR-2. Once entered, the deduction under Section 80TTA or 80TTB can be claimed to reduce the tax burden.

Is Savings Account Interest Taxable Under the New Tax Regime?

Yes, savings account interest remains taxable under the new tax regime as well. However, taxpayers opting for the new regime cannot claim the deduction under Section 80TTA or 80TTB, as most exemptions and deductions are disallowed. The entire amount of interest earned must be added to taxable income and taxed as per the applicable slab rate. Therefore, individuals earning significant interest often find the old regime more beneficial.

How Savings Account Interest Is Reported Under the Old Tax Regime

Under the old tax regime, taxpayers can claim a deduction of up to ₹10,000 under Section 80TTA on savings interest from banks, post offices, or cooperative societies. Senior citizens, on the other hand, can claim up to ₹50,000 under Section 80TTB. The deduction is applied after including the full amount of savings interest under “Income from Other Sources.” The balance income after deduction is taxed as per the taxpayer’s slab rate.

Step-by-Step Process to Report Savings Account Interest in ITR-1 and ITR-2

• Collect annual bank statements or interest certificates from all savings accounts.
  

• Calculate the total interest earned during the financial year.
  

• Enter this total under “Income from Other Sources” in your ITR form.
  

• Under “Deductions,” claim Section 80TTA (or 80TTB for senior citizens).
  

• Verify that the reported amount matches details in Form 26AS and AIS.
  

• Submit your return and retain supporting documents in case of verification.
  

How to Claim Deduction Under Section 80TTA

Section 80TTA allows a deduction of up to ₹10,000 on savings account interest for individual taxpayers below 60 years and Hindu Undivided Families (HUFs). This deduction applies only to interest from savings accounts, not fixed or recurring deposits. The deduction is claimed after including the total interest income in the return, ensuring transparency in reporting.

Difference Between Section 80TTA and Section 80TTB (For Senior Citizens)

Section 80TTA applies to individuals below 60 years and HUFs, providing a deduction of up to ₹10,000. Section 80TTB, however, applies exclusively to senior citizens (aged 60 years or above) and offers a higher limit of up to ₹50,000. The key difference lies in the type of accounts covered — Section 80TTB allows deductions for both savings and fixed deposit interest, while Section 80TTA is limited to savings accounts only.

Common Mistakes While Reporting Savings Interest

• Forgetting to include interest from multiple savings accounts.
  

• Claiming deductions under both Section 80TTA and 80TTB simultaneously.
  

• Reporting net interest instead of gross interest before deduction.
  

• Failing to verify interest details with AIS or Form 26AS. Such mistakes can lead to mismatch notices from the Income Tax Department. Using a reliable filing platform like TaxBuddy helps avoid these errors through automatic data validation and AI-powered checks.
  

Example of Reporting and Claiming Savings Interest Deduction

Suppose a taxpayer earns ₹8,000 as interest from one bank and ₹3,000 from another, totaling ₹11,000.

• Total savings interest = ₹11,000 (reported under “Income from Other Sources”)
  

• Deduction under Section 80TTA = ₹10,000
  

• Taxable portion = ₹1,000 added to total income. This ensures compliance while maximizing the benefit allowed under the Income Tax Act.
  

TaxBuddy’s Role in Simplifying Savings Interest Reporting

TaxBuddy simplifies income reporting through automated detection of interest income directly from your AIS or bank statements. Its smart filing system calculates eligible deductions under Sections 80TTA or 80TTB and applies them accurately. With expert-assisted plans, every claim is verified for compliance, ensuring you pay only what’s necessary without missing out on legitimate deductions.

Conclusion

Savings account interest may appear small, but ignoring it can trigger mismatches or scrutiny. Accurate reporting under “Income from Other Sources,” coupled with claiming the rightful deduction, helps maintain compliance while minimizing tax outflow. TaxBuddy makes this process effortless through AI-driven accuracy and professional guidance for all types of taxpayers.

For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.

FAQs

Q1. Is savings account interest taxable every year? Yes, savings account interest is taxable every financial year under the head “Income from Other Sources.” Even if the bank doesn’t deduct TDS, the taxpayer is responsible for including the interest income while filing their ITR. This applies to all savings accounts held with banks, post offices, and cooperative societies.

Q2. How much deduction can be claimed on savings account interest? Individuals and Hindu Undivided Families (HUFs) can claim a deduction of up to ₹10,000 on savings account interest under Section 80TTA. Senior citizens, however, can claim a higher deduction of up to ₹50,000 under Section 80TTB. These deductions are available only under the old tax regime.

Q3. Can both 80TTA and 80TTB be claimed together? No, both sections cannot be claimed simultaneously. Section 80TTA applies to individuals below 60 years, while Section 80TTB applies exclusively to senior citizens aged 60 or above. A taxpayer can only claim one of these based on their age during the financial year.

Q4. Is savings account interest exempt from tax? Savings account interest is not entirely exempt from taxation. Only the portion covered by Section 80TTA or Section 80TTB is deductible from taxable income. Any interest exceeding the prescribed limit is fully taxable and must be reported in the income tax return.

Q5. Where should savings account interest be shown in ITR? Savings account interest should be reported under the head “Income from Other Sources” in the ITR form. The deduction under Section 80TTA or 80TTB can then be claimed separately under the “Deductions” section (Chapter VI-A). TaxBuddy’s guided filing automatically categorizes this income to ensure accuracy.

Q6. How to calculate total savings account interest? To calculate total savings account interest, add up the interest amounts credited across all your savings accounts during the financial year. You can refer to your annual bank statements or interest certificates issued by banks. It’s important to include all accounts, even if the interest amount is small, to avoid mismatches with AIS or Form 26AS data.

Q7. Is savings account interest taxable under the new tax regime? Yes, savings account interest is taxable under the new tax regime. However, taxpayers opting for the new regime cannot claim deductions under Section 80TTA or Section 80TTB. The entire amount of interest earned becomes part of total taxable income.

Q8. What if I forget to report savings account interest? Omitting savings account interest while filing an ITR may lead to mismatches with data available in the Annual Information Statement (AIS) or Form 26AS. The Income Tax Department may issue a notice for underreporting of income. It’s advisable to review AIS before filing to ensure all interest income is accurately disclosed.

Q9. Can minors claim deductions on savings interest? Interest earned on a minor’s savings account is clubbed with the income of the parent whose total income is higher. The parent can claim a deduction under Section 80TTA up to ₹10,000 for the minor’s savings interest. Additionally, a ₹1,500 exemption per child can be claimed under Section 10(32).

Q10. Can NRI savings account holders claim Section 80TTA deduction? No, Non-Resident Indians (NRIs) are not eligible for deductions under Section 80TTA. The section applies only to resident individuals and HUFs. Moreover, NRE (Non-Resident External) account interest is fully exempt from tax, while NRO (Non-Resident Ordinary) account interest is taxable without any deduction benefit.

Q11. How does TaxBuddy assist in claiming savings interest deductions? TaxBuddy simplifies the filing process by automatically fetching income details from Form 26AS or AIS. It identifies savings interest, applies the correct deduction limits under Sections 80TTA or 80TTB, and ensures proper reporting under “Income from Other Sources.” This minimizes errors and ensures maximum eligible deductions.

Q12. Is there any penalty for not disclosing savings account interest? Yes, failure to disclose savings account interest can result in penalties or interest under the Income Tax Act. The department may issue a notice for underreporting income or levy additional interest under Sections 234B and 234C. Filing accurately through platforms like TaxBuddy helps ensure compliance and avoids unnecessary penalties.