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Interest from Different Sources -
What is exempt and what will be taxable?

Interest incomes are very common incomes for majority of individuals infact we can say alomst for everyone. If I have a Savings Bank account atleast there will be some interest income in the form of savings bank interest.

Interest income whether from bank deposits, NSCs, PPF or from any other source have their own tax implications.
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).
As each Source of interest is treated differently we need to keep ourselves updated and aware about all these tax consequences.

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

  • Savings Bank interest: Interest  from Savings bank account is a taxable income however a deduction upto 10000 is available on savings bank interest income u/s 80TTA. For senior & super senior citizens a total of ₹50000 is deductible for interest on deposit accounts.
Click here for a details on interest on Savings Bank Accounts and the amount exempt u/s 80TTA

Click here for a details on interest for Senior Citizens on Deposit Accounts and the amount exempt u/s 80TTB

  • Recurring Deposit(RD) interest: Interest from RD is taxable however there is no TDS by banks on the same.
Click here to know the taxability of interest on 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 10000. Total taxable income of a person shall be calculated by adding this interest income correspondingly credit of TDS shall be claimed against the final tax liability.
Click here to know the taxability of interest on 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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