Most of us earn some interest from deposits in banks or post offices. From Assessment Year 2019-20, tax-payers are required to submit a break-up of interest income from different sources in the new ITR forms as compared to a consolidated amount earlier. According to income tax rules, interest on deposits up to ₹10,000 in savings account(s) with a bank or a cooperative bank or a post office is eligible for deduction u/s 80TTA during a year.
And senior citizens can are eligible for deduction u/s 80TTB up to a maximum limit of ₹50,000 on interest from fixed deposits with a bank or a co-operative bank or a post office. This includes interest from savings accounts. Deductions under Section 80TTA are not available to senior citizens.
On the other hand, interest income from some sources like PPF and EPF are fully exempted from tax without any limits.
The income tax department has started providing pre-filled ITR forms with details such as deductions and interest income. These forms can be downloaded from the e-filing website of the Income Tax Department.
Tax experts suggest that the tax payer should verify the details before submitting the form.
The interest income has to be reported under “Income from other Sources". These include interest from savings bank account, interest from deposit (bank/post office/ cooperative society), interest from income tax refund and family pension. For example, in ITR-1, the tax payer has to select the nature of income from a drop down and enter the amount of income. In case multiple items of income are to be reported, details of each income have to be reported as separate line item.
"Interest income has to be reported in 'Schedule OS' if the taxpayer is filing ITR-2 in which several heads are provided to disclose this income. Otherwise, in ITR-1, it is to be reported in where it is to be disclosed against several drop-downs," says Sandeep Sehgal, director of tax and regulatory at Ashok Maheshwary & Associates LLP.
"Taxpayers are required to check the interest income from their statements or interest certificates reported by bank and these should tally with the Form 26AS wherever any tax deduction has been made. Further, interest which are exempt are also required to be disclosed and should not be avoided just because these do not affect the taxability of income," he added.
Remember that exempted income (for reporting purpose) like proceeds from EPF and PPF and NPS (partial) have to be reported under Exempt Income.