Tax on saving account

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Querist : Anonymous

Querist : Anonymous (Querist)

11 March 2012 I am having saving account in SBI 4% P.A. I am earning interest 10,000/- p.a. Is the tax will apply? How much will be the tax? What is the basis of calculation? Do i need to reduce my bank balance to overcome the tax? Already, I am earning 8,000/-p.a interest in FD Account. P

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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11 March 2012 If you are not having taxable income including the above interest income You may submit Form 15G or 15H, as may be applicable to you,
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no TDS will be deducted on your interest income by the banker.
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Banks deduct TDS when Interest Amount is likely to exceed Rs. 10000/- and for that FD Interest and SB A/c Interest both are to be taken into account by the branch in which you are having account.
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Querist : Anonymous

Querist : Anonymous (Querist)

12 March 2012 Many thanks for the reply Mr. CV Paras Bafna.. Thanks again!!

Querist : Anonymous

Querist : Anonymous (Querist)

12 March 2012 Both FD interest and SB a/c interest should not exceed 10,000/-. Is it right? You mean that 5000/- with SB A/c and 5000/- with FD Ac. please clarify...

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 Great question! Let me clarify this for you:

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### Tax on Savings Account Interest

* **Interest rate:** 4% p.a.
* **Interest earned:** Rs. 10,000 per annum.
* **Tax applicability:** Yes, interest earned on a savings account is **taxable under Income from Other Sources**.

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### TDS (Tax Deducted at Source) Rules:

* Banks **deduct TDS only if total interest from all your accounts in that bank exceeds Rs. 10,000 in a financial year.**
* This means **interest from savings accounts + fixed deposits + recurring deposits in the same bank branch is aggregated** for TDS purposes.
* If total interest ≤ Rs. 10,000, **no TDS is deducted**.
* If total interest > Rs. 10,000, TDS is deducted at 10% (currently, plus cess).

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### Form 15G / 15H:

* If your **total taxable income is below the taxable limit**, you can submit **Form 15G (for individuals below 60 years) or Form 15H (for senior citizens)** to the bank.
* This prevents TDS deduction even if interest exceeds Rs. 10,000.

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### Tax Liability:

* The interest income is **added to your total income** and taxed according to your income tax slab.
* There is a **separate exemption of Rs. 10,000 per year under Section 80TTA** on interest income from savings accounts only (not FD interest).
* So, if your **interest income from savings accounts is up to Rs. 10,000, it's exempt from tax**.
* Interest on Fixed Deposits is fully taxable and **no exemption** is available.

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### Example for Your Case:

* Savings account interest: Rs. 10,000

* FD interest: Rs. 8,000

* Total interest: Rs. 18,000

* **TDS deduction trigger:** Since total interest exceeds Rs. 10,000, bank may deduct TDS.

* **Tax payable:** Interest income (10,000 + 8,000 = Rs. 18,000) is added to your income and taxed per your slab.

* But Rs. 10,000 from savings account is exempt under Section 80TTA.

* So effectively, taxable interest = Rs. 8,000 (FD interest only).

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### To answer your question on splitting Rs. 10,000:

* **There is no fixed split like Rs. 5,000 in SB and Rs. 5,000 in FD.**
* The bank adds all interest together. If total interest > Rs. 10,000, TDS applies.
* But only savings account interest up to Rs. 10,000 is exempt for tax purposes (80TTA).

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### To reduce tax liability or TDS:

* Submit Form 15G / 15H if eligible.
* Invest in tax-saving instruments for FD interest (like Tax-saving FDs under 80C).
* Plan your investments and withdrawals to keep interest income below threshold.

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If you want, I can help draft Form 15G or explain how to file tax return showing these incomes. Would you like that?

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