Tax on savings account interest: 80TTA, 80TTB and what to declare

Interest is income

All interest you earn from banks, post offices and co-operative banks is added to your total income under the head "income from other sources" and taxed at your slab rate. That includes savings account interest, FD and RD interest, and interest on post office deposits. The fact that the bank did not deduct tax does not make it exempt.

Your Annual Information Statement (AIS) on the income tax portal shows the interest that banks have reported against your PAN, so the tax department already sees it. Missing it from your return can lead to a notice.

The deduction for savings interest (80TTA)

Under the old regime, individuals below 60 and HUFs have been able to deduct savings account interest of up to ₹10,000 a year. It applies only to interest on savings accounts, not to FDs or RDs. Under the Income-tax Act, 2025, in force from 1 April 2026, this deduction sits within section 153 together with the senior citizens' deduction; the limits are reported to have carried over, but check the current text before you rely on them.

Example: a 35-year-old with ₹18,000 of savings interest in the old regime can deduct ₹10,000, so ₹8,000 is added to taxable income. The deduction is not available in the new regime, where all ₹18,000 is taxable.

The deduction for senior citizens (80TTB)

Resident senior citizens aged 60 and above have been able to deduct up to ₹50,000 of interest from deposits, covering savings accounts, fixed deposits, recurring deposits and post office deposits, again under the old regime only. Senior citizens claim this instead of the savings-only deduction, not in addition to it.

Example: a retired couple each earning ₹70,000 of FD and savings interest in the old regime can each deduct ₹50,000, so only ₹20,000 each is added to taxable income.

TDS: why the bank deducts on some interest

Banks do not deduct tax on savings account interest. On FD and RD interest, they deduct TDS once the year's interest from that bank crosses a threshold, which is higher for senior citizens, at the time of writing. TDS is an advance payment of your tax, not an extra tax: it is adjusted against your final liability when you file, and any excess is refunded.

If your total income is below the taxable limit, you can submit Form 15G, or Form 15H if you are a senior citizen, at the start of the year to stop TDS. These forms carry a declaration, so submit them only if you genuinely qualify. Without a PAN on record with the bank, TDS can be deducted at a higher rate.

FD interest accrues every year

Interest on a cumulative FD is taxable each year as it accrues, not only when the FD matures. If you have a five-year cumulative FD, you should declare that year's accrued interest each year, even though you receive it all at the end. Banks report accrued interest for TDS purposes, so your AIS will usually show it.

How to report interest correctly

• Download your AIS and Form 26AS from the income tax portal before filing, and match the interest shown with your bank statements and interest certificates.
• Declare savings interest and deposit interest separately in the income from other sources section.
• Claim the savings or senior citizens' deduction only if you are filing under the old regime.
• Add the TDS shown in Form 26AS so it is credited against your tax.
• Keep interest certificates from each bank for your records.

Planning around the tax

For people in higher tax slabs, the tax on deposit interest noticeably lowers the real return. Options include spreading deposits within the family where it is genuinely their money, using tax-free options such as PPF for long-term safe savings, and choosing growth options where the tax applies only on redemption. Match these to your goals rather than chasing tax savings alone.

Accounts for NRIs and for children

Non-resident Indians usually hold NRE and NRO accounts, which are taxed differently. Interest on NRE accounts has generally been exempt from tax for those who qualify as non-residents, while interest on NRO accounts is taxable in India and has TDS deducted at a higher rate. A tax treaty with the country of residence can affect the final tax, so NRIs should check their status and the current rules each year.

Interest earned in a minor child's account is generally clubbed with the income of the parent who earns more and taxed in that parent's hands, subject to a small exemption per child. Once the child turns 18, the interest becomes the child's own income. Keep this in mind when opening deposits in a child's name for tax reasons, because it often does not reduce the family's tax.

Quick answers

Is interest on a savings account tax-free up to ₹10,000? Only as a deduction in the old regime, and only for savings account interest; in the new regime it is fully taxable.

Do I pay tax on FD interest even if TDS was deducted? TDS counts towards your tax. If your slab rate is higher than the TDS rate, you pay the difference; if lower, you can claim a refund.

Is interest from a joint account taxed for both holders? It is generally taxed in the hands of the holder whose money it is, usually the first holder, unless the money genuinely belongs to both.

What about interest on a tax refund? It is also taxable as income.

The bottom line

Interest is income, the tax department already sees it, and you should declare all of it. Deductions for savings interest and for senior citizens can reduce the tax in the old regime, so check which regime you are in and the current limits. This guide is general information, not tax advice; consult a tax professional for your situation.