Is Savings Interest Deductible Under New Tax Regime?
- Dipali Waghmode
- Dec 19, 2025
- 8 min read
The new tax regime removes most deductions, raising a common question for taxpayers earning interest from savings accounts: is any part of this interest deductible? With 80TTA and 80TTB restricted to the old tax regime, savings interest now falls under fully taxable income when opting for Section 115BAC. Since the Finance Act 2024 made the new regime the default, understanding this shift is essential for planning taxable income accurately and avoiding incorrect claims during ITR filing. Platforms like TaxBuddy simplify these choices by helping compare regimes and correctly report interest income.
Table of Contents
How Savings Interest Is Taxed Under Section 115BAC
Section 115BAC taxes savings interest at slab rates without offering linked deductions. The taxable amount includes:
Interest earned across all savings accounts
Interest credited during the financial year, even if not withdrawn
Interest reported by banks in AIS or Form 26AS
Since the new regime is free from most exemptions, the system treats the interest as a straightforward taxable inflow, clubbed with other income sources. The rebate under Section 87A still applies if the total income after all eligible reductions falls within the specified limit.
Is 80TTA Allowed in the New Tax Regime?
80TTA is not allowed under the new tax regime. The deduction is available only when filing under the old regime and applies to:
Individuals and HUFs
Savings account interest up to ₹10,000
No part of 80TTA’s benefit can be claimed once Section 115BAC is selected. Even if interest is earned from multiple accounts, the new regime does not permit aggregation for deduction.
Is 80TTB Allowed in the New Tax Regime?
80TTB is not available under the new regime. This deduction is exclusive to senior citizens opting for the old regime and offers relief up to ₹50,000 on:
Savings interest
FD interest
RD interest
The new regime excludes the entire deduction, making the interest fully taxable irrespective of age.
How Savings Interest Is Treated in the Old Tax Regime
Under the old tax regime, savings interest enjoys structured relief:
Section 80TTA allows deduction up to ₹10,000 for individuals below 60.
Section 80TTB allows senior citizens to claim up to ₹50,000 on broader interest categories.
If total savings interest exceeds the deduction limit, the excess becomes taxable at slab rates. The deduction applies after calculating gross total income and before computing taxable income.
New Tax Regime vs Old Tax Regime: Key Differences in Interest Deductions
Aspect | New Regime | Old Regime |
80TTA | Not allowed | Allowed up to ₹10,000 |
80TTB | Not allowed | Allowed up to ₹50,000 (senior citizens) |
Applicability | Default for FY 2024–25 onwards | Optional |
Impact on Savings Interest | Fully taxable | Partially exempt |
The new regime removes complexity but eliminates interest-related deductions. The old regime allows savings interest relief but may lead to higher taxable income due to fewer slab concessions.
How to Report Savings Interest in ITR Under the New Regime
Reporting must follow these steps:
Collect interest details from AIS, TIS, and bank statements.
Aggregate interest from all savings accounts.
Enter the total amount under “Income from Other Sources.”
Verify that no deduction under 80TTA or 80TTB is claimed.
Cross-check auto-filled data with actual statements to avoid mismatches.
TaxBuddy’s automated ITR preparation tool categorises interest correctly and handles common reporting discrepancies flagged during CPC processing.
Savings Interest From Multiple Bank Accounts: Reporting Rules
Interest across all savings accounts must be combined into a single figure for ITR reporting. Key points include:
AIS auto-reports interest from every linked bank account.
Even dormant account interest must be included.
Differences between AIS and self-calculated figures require reconciliation before filing.
Under the new regime, no cap or deduction applies—entire interest is taxable.
Missing even small amounts from older accounts can trigger notices, making complete disclosure important.
Savings Interest for NRIs Under New Tax Regime
NRIs follow these rules:
NRE account interest remains tax-free, independent of the regime.
NRO account interest is fully taxable at slab rates or TDS provisions.
No deduction under 80TTA or 80TTB is available when opting for the new tax regime.
FATCA/CRS declarations ensure all accounts reflect correctly in AIS.
NRIs switching between regimes through Form 10-IEA must ensure interest treatment aligns with the chosen regime.
Common Errors While Claiming Savings Interest Deductions
Frequent issues include:
Claiming 80TTA or 80TTB under the new regime
Reporting only interest credited in passbooks, ignoring cumulative AIS entries
Excluding interest from older, lesser-used accounts
Filing under the wrong regime due to outdated employer declarations
Not adjusting AIS discrepancies before submitting the return
Errors like these often result in Section 143(1) adjustments or demand notices.
How TaxBuddy Helps With Reporting Savings Interest
TaxBuddy simplifies the entire process of reporting savings interest by combining automation, intelligent data checks, and regime guidance. The platform begins by reading AIS and TIS entries directly from the income tax portal, pulling in every transaction reported by banks and financial institutions. This prevents situations where interest from older or lesser-used accounts gets missed simply because it wasn’t manually reviewed.
Once the data is imported, TaxBuddy runs an automated reconciliation process. This step compares AIS entries with actual bank statements or passbook data, identifying any mismatches caused by delayed reporting, partial interest credits, or discrepancies in quarterly postings. The system then highlights the differences so they can be corrected before the return is filed, avoiding adjustments during CPC processing.
The platform also calculates the combined interest earned across all savings accounts, ensuring that the amount is consolidated correctly under the income from other sources category. This helps eliminate errors that occur when interest is calculated only from a primary account while ignoring balances in joint or dormant accounts.
If the selected tax regime does not allow deductions under 80TTA or 80TTB, TaxBuddy automatically flags any attempt to apply these claims. The system checks the user's age, chosen regime, and interest structure to ensure that no ineligible deduction is applied. This prevents incorrect filings that often lead to notice generation under Section 143(1).
Regime comparison is another area where the platform offers clarity. TaxBuddy analyses total income, eligible deductions, and interest earnings to determine which regime results in lower tax liability. This comparison is presented in a simple summary format to help users make informed decisions.
By combining automated data extraction, intelligent error detection, and guided tax optimisation, TaxBuddy reduces mistakes and ensures that savings interest is accurately captured and reported before submission. This leads to cleaner filings, fewer mismatches, and smoother processing during assessment.
Conclusion
Savings interest does not qualify for any deduction under the new tax regime, making accurate reporting essential for avoiding mismatches and notices. While the old regime offers relief through 80TTA and 80TTB, individuals must evaluate the overall tax impact before choosing a regime. Tools like TaxBuddy assist in comparing both regimes and reporting interest income precisely, ensuring smooth compliance. 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. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy provides both self-filing and expert-assisted filing options. The self-filing system is designed for individuals who prefer using an automated interface, with features such as AIS import, pre-filled data validation, income categorisation, and tax computation under both regimes. For those who want deeper support, the expert-assisted plan assigns a trained tax professional who reviews financial documents, ensures accuracy, resolves discrepancies, and prepares the final return. This dual approach helps ensure that taxpayers with simple or complex income profiles can choose a method that matches their comfort level and compliance requirements.
Q2. Which is the best site to file ITR? The best platform is one that combines accuracy, automation, and support. Tools that can read AIS, TIS, and Form 26AS directly reduce the risk of missing information. Platforms like TaxBuddy integrate automated error detection, regime comparison, and expert review, which helps reduce notices and mismatches raised by CPC. Traditional filing on the Income Tax Department’s portal is also available for users confident in manual data handling, but third-party platforms often provide a more guided and seamless experience.
Q3. Where to file an income tax return? Income tax returns can be filed on the official portal of the Income Tax Department, which is suitable for individuals comfortable with manually entering data, uploading schedules, and resolving validation errors. Many taxpayers prefer using a dedicated tax platform such as TaxBuddy that offers automated data import, guided workflows, and professional support. These platforms streamline the filing journey and reduce errors that typically occur during manual entry.
Q4. Is savings interest fully taxable under the new tax regime? Yes. Under the new tax regime, savings interest from all bank accounts is fully taxable without any deductions. Since Sections 80TTA and 80TTB are not available when filing under Section 115BAC, the entire interest amount must be included under “Income from Other Sources.” Taxation follows slab rates applicable under the new regime, and rebate benefits under Section 87A may still reduce the final tax liability if total income falls within the eligible threshold.
Q5. Can senior citizens claim 80TTB while choosing the new tax regime? No. Senior citizens cannot claim Section 80TTB if the new tax regime is selected. The deduction of up to ₹50,000 on interest from savings accounts, fixed deposits, and post office deposits applies exclusively to the old tax regime. Once Section 115BAC is chosen, the benefit is removed entirely, and all interest becomes fully taxable.
Q6. How should savings interest from multiple bank accounts be reported? Interest from all savings accounts must be aggregated and reported as a single figure in the ITR under “Income from Other Sources.” AIS captures interest from every linked account, including dormant or forgotten accounts. Any mismatch between AIS and self-calculated totals must be reconciled before filing. Reporting each account separately is unnecessary, but omitting even small amounts may lead to automated adjustments or 143(1) notices.
Q7. Is AIS data enough for reporting savings interest accurately? AIS data is generally reliable but may occasionally show delays or partial reporting. Banks credit interest quarterly or annually, and the reflected amount in AIS may not always match the passbook figure for the same period. Cross-verifying AIS entries, passbook totals, and Form 26AS ensures accurate disclosure. TaxBuddy automatically reconciles these sources to eliminate inconsistencies.
Q8. Do NRIs receive any deduction on savings interest under the new tax regime? NRIs do not receive any deduction on savings interest under the new regime. Interest on NRE accounts remains exempt, but NRO account interest is fully taxable at slab rates or as per applicable TDS rules. Since 80TTA and 80TTB are unavailable in the new regime, NRIs must report all taxable interest without any deductions. FATCA/CRS-linked reporting ensures that these amounts appear in AIS for accurate filing.
Q9. What happens if savings interest is under-reported in the ITR? Under-reporting leads to discrepancies when CPC compares the declared income with AIS and TIS. This usually results in automatic adjustments, demand notices, or messages requiring clarification. Repeated mismatches may also trigger further scrutiny. Using tools like TaxBuddy prevents such errors by matching the reported value with AIS entries and highlighting missing components before submission.
Q10. What is the tax treatment of savings interest for minors? Savings interest earned in a minor’s bank account is clubbed with the income of the parent whose taxable income is higher. The amount becomes part of “Income from Other Sources” for the parent, and the new regime does not offer deductions like 80TTA or 80TTB. However, an exemption of ₹1,500 per child under Section 10(32) is allowed under both regimes, although the interest beyond that remains taxable.
Q11. Do co-owned or joint bank accounts affect savings interest taxation? Savings interest from joint accounts is taxed in proportion to each holder’s contribution to the account. If no clear contribution pattern exists, interest is often attributed equally. Under the new regime, no deduction applies regardless of the share of interest earned. Proper documentation or a simple declaration of contribution helps avoid attribution disputes during tax verification.
Q12. Can incorrect deduction claims under 80TTA or 80TTB trigger notices? Yes. Claiming 80TTA or 80TTB while filing under the new regime is treated as an incorrect deduction claim, which CPC’s system automatically detects. This usually leads to a 143(1) adjustment removing the deduction, recalculating tax liability, and issuing a demand notice. Correct regime selection and validation through a platform like TaxBuddy prevent such issues by blocking ineligible deductions.
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