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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products

Under the Income-tax Act as applicable for the current assessment framework, interest earned on a savings bank account with a scheduled bank is taxed by a resident individual under which head of income?

Interest on a savings bank account is taxed under the head Income from Other Sources. It is neither business income nor a capital gain for an ordinary investor, so the residuary head applies and the amount is taxed at the individual's slab rate.

  1. AProfits and gains of business or profession
  2. BIncome from other sourcesCorrect
  3. CIncome from house property
  4. DCapital gains

Explanation

Interest on savings bank deposits, fixed deposits and similar debt instruments is not business income for an ordinary investor and is not a capital gain. It falls under the residuary head, Income from Other Sources, and is taxed at the individual's slab rate. A deduction for savings interest may be available under a specific section, but the head remains the same.

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