Bank account holder? Budget 2019 made your bank deposits interest income tax free! Limit hiked; Small savings schemes row solved; Modi govt makes you richer

Currently, for banks, the pressure arises from government’s small savings schemes, which forced the lenders to aggressively hike deposit rates beyond their ability to keep up with the Centre’s investment tools.

Currently, all interest earned from fixed deposits and recurring deposits are taxable. Photo: Reuters

Budget 2019: A good news has knocked on the doors of both banks and depositors in Budget 2019, as interim finance minister Piyush Goyal has extended the taxable limit on interest income! That is a huge benefit for those who save money and put it in banks. Currently, for banks, the pressure arises from government’s small savings schemes, which forced the lenders to aggressively hike deposit rates beyond their ability to keep up with the Centre’s investment tools. Currently, there is a massive a gap between interest rates offered by banks on their deposits and government on their small saving schemes.

Piyush Goyal in his Budget 2019 speech said, " All interest income above Rs 40,000 from bank deposits will now get taxed, and not Rs 10,000."

This will be music to the ears of the bank deposit holders who now get income tax relief on this too. Currently, all interest earned from fixed deposits and recurring deposits are taxable, however, on interest received on savings account and post office deposits there are certain claims that are allowed in Income Tax Act. A customer must show income from these deposits in their Income Tax Return (ITR) filing under section of ‘income from other sources’.

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In case of fixed deposits, a tax deducted at source (TDS) is levied by banks on interest income which a customer earns. A bank is needed to deduct tax when interest income from deposits held in all bank branches cumulatively is more than Rs 10,000. If a PAN detail is available, then a 10% TDS is deducted, however, if this identity proof is not available then 20% TDS is charged. However, this move still comes as a surprise to experts! They suggest that bank deposits should be made entirely tax free! That would truly be a dream come true for bank deposit holders, if it were to come true.

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Meanwhile, only Rs 10,000 is allowed for tax claim on interest income from savings account under section 80TTA of IT Act. For instance, if your interest income in savings account comes at Rs 15,000 in a year, then only Rs 10,000 can be claimed as tax benefit, remaining Rs 5,000 will be taxable.

Now this means, that you can save more taxes on your interest income on bank deposits as earlier every interest income above Rs 10,000 was taxable, which now gives a breather of another Rs 30,000 from this fiscal.

SBI stated that, it is imperative that, the government make bank deposits attractive by making them tax free.
The banks' aggregate deposits have witnessed a growth rate of 9.9% worth Rs 10.85 lakh crore and advances have surged by 14.5% valuing Rs 11.85 lakh crore as on fortnight January 04, 2019.

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