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Taxability of Interest Incomes

Interest incomes are very common source of income for majority of individuals. Interest income whether from bank deposits, NSCs, PPF or from any other source have their own tax implications. Like interest from PPF is exempt from tax, NSC interest is taxable as per applicable slab rate but is allowed as deduction U/s 80C, Interest from bank deposits is taxable at normal slab rate except for savings bank interest which is allowed as deduction u/s 80TTA & u/s 80TTB (for senior citizens) So we need to keep ourselves updated about all these tax implications.

Interest incomes are taxable as income from other sources. The most common interest incomes are Savings Bank interest and FD interest. Lets read about  the tax implications of different interest incomes.

  • Savings Bank interest: Interest  from Savings bank account is a taxable income but a deduction upto Rs. 10000 is available on savings bank interest income u/s 80TTA. 
Click here to understand the taxability of interest earned from Savings Bank Accounts
  • Recurring Deposit(RD) interest: Interest from RD is taxable however there is no TDS by banks on the same.
Click here to understand the taxability of interest earned from Recurring Deposits
  • Fixed Deposit(FD) interest: FD interest is also taxable and banks are required to deduct tax if total interest for a year exceeds Rs. 10000. Total taxable income of a person shall be calculated by adding this interest income, credit of TDS shall be claimed against the final tax liability.
Click here to understand the taxability of interest earned from Fixed Deposit Accounts

  • Public Provident Fund(PPF) interest: Interest earned from PPF accounts is fully exempt. There is no tax on interest earned from PPF. 
Click here to know more about PPF
  • National Savings Certificate(NSC) Interest: Interest earned from NSCs is a taxable income and it is taxed at applicable slab rates. However NSC interest can be claimed as deduction u/s 80C as tax saving investment.
Click here to know more about NSCs
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