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CMA Intermediate · Direct and Indirect Taxation · Taxation of Individuals (including AMT) and HUF

Mr. Arjun Mehta, a resident individual aged 40, earns Rs. 14,000 interest on a savings account with a scheduled bank and Rs. 20,000 interest on a bank fixed deposit. Under the deduction for interest on deposits in the Income-tax Act, 2025, what deduction is allowed from his gross total income?

The deduction is Rs. 10,000. A non-senior individual gets a deduction only for savings account interest, capped at Rs. 10,000, and fixed deposit interest is excluded. The savings interest of Rs. 14,000 is therefore limited to the cap.

  1. ARs. 10,000Correct
  2. BRs. 14,000
  3. CRs. 24,000
  4. DRs. 34,000

Explanation

For an individual who is not a senior citizen, the deduction covers the whole of the interest on savings account deposits, up to Rs. 10,000. Time deposits are excluded. Savings interest is Rs. 14,000, so the deduction is capped at Rs. 10,000. Rs. 14,000 ignores the cap, and Rs. 34,000 wrongly includes the fixed deposit interest.

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