If you maintain multiple savings accounts, it is easy to overlook the interest earned from each while filing your Income Tax Return (ITR).
Many taxpayers overlook savings account interest while filing their ITR, but failing to report the combined interest from all bank accounts can lead to incorrect deductions, data mismatches, and refund delays.
Before filing your return, it is important to understand how savings account interest is taxed, the deductions available, and the correct reporting requirements. If you are preparing to file your ITR for the financial year 2025-26, here’s how multiple savings account interest is taxed and the correct way to report it in your ITR.
How are multiple savings accounts’ interest rates taxed?
Savings account interest is fully taxable under Income from Other Sources, and it is added to your total annual income and taxed at your applicable income tax slab rate, according to the Income Tax Department.
While savings account interest is taxable, eligible taxpayers can reduce their taxable income by claiming deductions under the Income Tax Act up to Rs 10,000 under Section 80TTA (for individuals and HUFs below 60 years) and up to Rs 50,000 under Section 80TTB (for eligible senior citizens).
These deductions under Chapter VI-A can only be claimed if you opt for the old tax regime. They are not available under the new default tax regime.
“The interest must still be reported in your ITR under Income from Other Sources, even if the total is within the deduction limit. When filing your Income Tax Return (ITR), taxpayers should compile their annual interest statements and report the gross interest under the “Income from Other Sources” schedule while claiming the respective deduction,” said CA Chandni Anandan, Tax Expert at ClearTax.
The deduction is applied to the combined interest, not on an account-by-account basis.
Which ITR forms require reporting of savings account interest?
Any ITR form used by an eligible taxpayer must include the savings account interest in the relevant income schedule.
The exact ITR form depends on the taxpayer’s overall income sources and filing category, but the interest itself should not be left out, stated CA Chandni Anandan.
What are the common mistakes taxpayers make while reporting bank interest?
CA Chandni Anandan says common mistakes include:
– Reporting only one bank account and missing others.
– Treating the Rs 10,000 limit as a full exemption instead of a deduction.
– Forgetting to report the interest before claiming the deduction.
– Mixing up Section 80TTA and Section 80TTB.
– Not reconciling bank statements with AIS/Form 26AS.
– Ignoring small amounts of interest because they seem insignificant.
What documents should taxpayers keep ready to accurately compute total savings account interest before filing their ITR?
Taxpayers should keep:
– Savings account statements or passbooks.
– Bank-issued interest certificates, if available.
– AIS information.
– Form 26AS, if relevant.
– Records of all savings accounts held during the year.
These help ensure the total interest is correctly computed and reported before claiming the deduction.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws and regimes are subject to frequent changes by the government. Readers should verify details with official Income Tax Department notifications or consult a Chartered Accountant before making any financial decisions.
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