Have you checked the amount of interest you earned on your savings accounts during the assessment? Most probably you haven’t. Be warned, it could lead to future problems with tax authorities if your interest income from savings bank crosses the threshold required for reporting.
Our savings bank account is an integral part of our financial portfolio. All of us have money lying in savings bank account in various amounts to meet our day-to-day expenses and for emergency cash needs. Whether by design or pure lethargy to put the money to more productive investment, some of us have huge amounts lying in savings bank.
Savings bank balances do earn interest, with some banks offering a healthy 7 per cent per annum. At times, the cumulative annual interest on an individual’s savings bank deposits may be substantial and could trigger a mention in the income-tax returns for the year.
“Very often tax payers forget to mention the amount of interest earned on savings bank deposits in their tax returns even if it crosses the threhold where it is required to be brought to the notice of the I-T authorities,” Sudhir Kaushik, Co-Founder & CFO, TaxSpanner.com told FeMoney.
There are some more aspects of savings bank that a taxpayer should be aware of while filing annual returns. As the tax filing season approaches, with the help of Sudhir Kaushik we bring you 5 points that you should know about on the tax implication of savings bank account including how you can come to know your total interest earned.
–Interest earned on savings bank account is tax free up to Rs 10,000. This has to be claimed by way of deduction under section 80TTA. Interest earned on any other bank deposits are taxable.
–This interest income needs to be shown in the head “income from other sources” in the income tax return.
–Bank usually deducts TDS on interest income earned on deposits other than savings account.
–An assessee can avoid this TDS deduction on interest income by way of submitting Form 15G/H to the bank for the purpose. This form is a declaration to the bank authorities that the account holder’s total income for the year is below basic exemption limit and hence TDS is not required to be deducted.
–It is mandatory to check Form 26AS to find out the exact interest income earned in the concerned year. This is because the interest earned for March month might be received in the month of April in the bank account but this interest income stands for March (within the financial year for which returns are being filed). This can be found out by checking Form 26AS or contacting the bank officials. An account-holder can also request for an interest certificate from the bank to find out the exact interest income earned for a concerned year.