Deposits in post office savings account: Know the tax implications

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For the common man, small savings schemes are one of the safest options to put their money in. Interest rates are low, but the returns are confirmed. The Union government has left interest rate on small savings untouched for the July-September quarter. Post office savings account is one of the main instruments of small savings schemes. Like bank accounts, post office savings accounts have some tax implication and others. This account currently gives 4% interest annually. Do you know the tax exemption rules of post office savings accounts and how much tax you can save from this savings instruments?

The rule

A person can enjoy tax deduction of up to Rs 10,000 from his or her interest income received from a post office savings account under Section 80TTA. A depositor can also claim the interest from a post office savings account as a tax-free income.

As a result, Section 10(15) (i) of the Income Tax Act allows you to claim interest from a post office savings account as tax-free income.

According to government announcement, post office savings account interest up to Rs 3,500 for single accounts and Rs 7,000 for joint accounts is free from taxation.

“To an extent of the interest of Rs 3,500 in the case of an individual account and Rs 7,000 in the case of joint account is free from taxation,” a government notification has stated.

Points to note

Individuals can seek interest free income from savings accounts with a post office up to Rs 10,000 under Section 80TTA of the Income Tax Act, or up to Rs 50,000 under section 80 TTB if they are elderly citizens.

As a result, a non-senior person can declare Rs 7,000 as tax-free interest on a jointly owned post office savings account, as well as a tax benefit from interest income of up to Rs 10,000 on post office savings account in a surplus of Rs 7,000, respectively.

Keep in mind that you must declare such exemption on your income tax return (ITR) under the heading ‘Exempt Income’.