Most of us would have claimed a deduction of Rs 10,000 on our savings account interest. An exemption is also available on interest on post office savings account. An amount of Rs 3,500 is allowed as an exemption in addition to a deduction on savings account interest.
A notification issued by the income tax department allows exemption up to Rs 3,500 on interest earned on post office savings account. In case of joint accounts, the total exemption allowed is Rs 7,000.
The deduction allowed under section 80TTA up to Rs 10,000 includes both interests on bank accounts and post office accounts. The deduction available is up to Rs 50,000 for senior citizens (taxpayers who are 60 years and above). In such cases, the individual can first claim an exemption up to Rs 3,500 and then claim the deduction under section 80TTA or 80TTB (senior citizens).
For example, Mr Arjun has earned interest on post office savings account of Rs 4,000. Arjun has also earned interest on savings bank account of Rs 12,000. Here, Arjun can claim exemption and deduction as below:
|Interest on post office savings account||4,000|
|Less: Exemption u/s 10(15)(i)||3,500|
|Interest on the savings bank account||12,000|
|Gross total income||12,500|
|Less: Deduction u/s 80TTA||10,000|
Suppose Arjun jointly holds the post office savings account, he can claim an interest exemption up to Rs 7,000.
The exemption under section 10(15)(i) is allowed at the time of computation of income. And, the deduction under section 80TTA or 80TTB is allowed after arriving at the gross total income. Hence, a taxpayer should be able to claim both the exemption and the deduction.
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I am a Chartered Accountant by profession. I specialise in personal taxes and corporate income tax matters. I am an avid reader and track developments in financial markets, economy and other market developments.