Having a savings account is common, but did you know that it can also help you save on taxes? If you opt for the old income tax regime, you can claim tax exemption on the interest earned from your savings account.

How Does Savings Account Interest Work?

Banks provide interest on the balance maintained in a savings account. This interest is calculated daily but credited quarterly. The rate of interest varies:

• Government banks typically offer 2.5% to 4% interest.
• Some private banks provide up to 7% interest.

The interest earned is taxable, but certain exemptions can help you save.

Tax Exemption Under Section 80TTA

As per Section 80TTA of the Income Tax Act, individuals can claim tax exemption on interest earned from savings accounts. While filing your Income Tax Return (ITR), you need to mention the interest income, and you can avail of a tax exemption of up to ₹10,000 across all savings accounts.

For senior citizens, the exemption limit is higher. They can claim tax exemption on interest income up to ₹50,000 under Section 80TTB.

TDS Deduction & Refund Process

Banks deduct 10% TDS on interest before crediting it to your account. However, if your total income falls below the taxable limit, you can claim a refund of the deducted TDS by submitting Form 15G (for individuals) or Form 15H (for senior citizens) at your bank. Additionally, ensure that this information is correctly mentioned in your ITR form to process the refund smoothly.

Conclusion

While filing your ITR, don’t forget to claim tax exemptions on your savings account interest under Section 80TTA or 80TTB (for senior citizens). This simple step can help you reduce your tax liability and maximize your savings.