Saving Account Tax: According to Section 80TTA of the Income Tax Act, all persons can get tax exemption of up to Rs 10,000. If the interest earned is less than Rs 10 thousand then tax will not have to be paid. Let us know about it in detail.
Saving Account Tax: Having a savings account in a bank is important because it acts as an emergency fund. Money can be withdrawn from this whenever needed. But if this money is invested in schemes like FD, NSC, then it cannot be withdrawn for a fixed time. Therefore it is important to have a savings account. Banks also pay interest in return for keeping money in these savings accounts. This interest can be from 2.7 percent to 4 percent or even more in some banks. Generally, most of the major banks are offering interest between 2.7 percent to 4 percent. This interest in IDFC Bank is 7 percent.
But many people do not know how interest is being accrued on the money kept in their savings account. Many people are not able to pay much attention to when and how much interest is added to their account. Actually, now banks calculate interest on savings account on daily basis. Some banks add it to your account on quarterly basis and some banks add it to your account on half yearly basis. You get to know about this by viewing your balance through net banking or viewing the passbook entry. Therefore it is important for you to know how interest is added.
How to add interest on savings
Every bank present in India gives interest between 4 to 6 percent annually. This interest is added by the bankers on daily basis and added to your account on quarterly basis, about which you get to know by checking the passbook entry or balance.
Suppose on the first day of the month you have Rs 50 thousand in your savings account. This balance remained from 1st to 5th. So 50,000 (deposit amount) X 4 (interest rate)/100 divide this amount (2000) by 365 (days of the year) and you get 5.57 which is your interest per day. Now multiply it by 5 to get interest for five days. That means you earned interest of Rs 27.35 in your account in 5 days.
Now suppose you have withdrawn Rs 4 thousand from the bank. So in the coming days, interest will be added on the remaining Rs 46 thousand. After this, suppose 14 thousand rupees are deposited in the account on 10th. With this the balance will become Rs 60 thousand and interest will be added on that money.
Income tax has to be paid on interest
The bank account holder has to pay tax on the interest earned on the amount kept in the bank’s savings account. The bank deducts 10 percent TDS on interest. Balwant Jain says that tax has to be paid on interest but tax deduction can be availed on this also. According to Section 80TTA of the Income Tax Act, all persons can get tax exemption of up to Rs 10,000. If the interest earned is less than Rs 10 thousand then tax will not have to be paid.