Many Indians earn interest income from fixed deposits, savings accounts, recurring deposits, and debt funds. Understanding the tax rules for each type of interest income-and the available exemptions-is important for accurate tax filing and planning.

Fixed Deposit (FD) Interest

  • Fully taxable as \u2018Income from Other Sources\u2019 at your applicable slab rate
  • TDS is deducted at 10% if annual interest exceeds \u20b940,000 (\u20b950,000 for senior citizens) from a single bank
  • If your total income is below the taxable limit, submit Form 15G (non-senior) or 15H (senior citizen) to avoid TDS
  • No benefit under old or new regime-FD interest is always taxable

Savings Account Interest: Section 80TTA

  • Savings account interest up to \u20b910,000/year is exempt under Section 80TTA (old regime)
  • Applies to accounts in banks, post offices, or co-operative societies
  • FD interest is not covered-only savings account interest
  • Not available under the new tax regime

Senior Citizens: Section 80TTB

  • Senior citizens (60+) get a higher exemption of up to \u20b950,000/year under Section 80TTB
  • Covers interest from savings accounts, fixed deposits, and recurring deposits
  • Section 80TTA is not applicable if 80TTB is claimed (they are mutually exclusive)

Debt Mutual Fund Interest

From April 1, 2023, debt mutual fund gains (held for any duration) are taxed at slab rates-no indexation benefit. This effectively makes debt funds similar to FDs from a tax perspective for most investors.

Use the SaveTaxNow Calculator to incorporate interest income into your total tax computation.