How to Avoid Tax on Savings Account Interest?
Mini Balakrishnan
To avoid tax on savings account interest in India, there are a few options available. One is to utilize the Section 80TTA deduction, which allows individuals to claim up to Rs. 10,000 as a deduction on interest earned from savings accounts. If the interest earned on the account is less than or equal to Rs. 10,000, the entire amount can be claimed as a deduction. However, if the interest earned exceeds Rs. 10,000, only the first Rs. 10,000 can be claimed.
Another option is to invest in tax-saving instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC), or tax-saving fixed deposits. These investments offer higher interest rates than savings accounts, and the interest earned is tax-free. PPF is a popular long-term savings scheme offered by the government of India, and investments made in it are eligible for tax deductions under Section 80C of the Income Tax Act. The interest earned and maturity amount are also tax-free.
NSC is another investment option that offers a fixed rate of interest and has a lock-in period of five years. The interest earned on NSC is eligible for tax deductions under Section 80C, and the maturity amount is tax-free. Tax-saving fixed deposits are also a viable option, offering higher interest rates than regular fixed deposits and a lock-in period of five years. The interest earned is eligible for tax deductions under Section 80C, but it is taxable.
By utilizing Section 80TTA deduction and investing in tax-saving instruments like PPF, NSC, or tax-saving fixed deposits, individuals can effectively reduce their tax liability on savings account interest and earn tax-free returns.
