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

Which of the following is the correct treatment of interest on a savings bank account for a resident individual under the Income-tax Act?

Savings bank interest is taxable under Income from Other Sources, but individuals can claim a limited deduction, under section 80TTA or 80TTB for senior citizens, under the old regime. It is neither capital gains nor wholly exempt.

  1. AIt is fully taxable with no deduction available
  2. BIt is taxed as capital gains
  3. CIt is exempt only for senior citizens
  4. DIt is taxable under Income from Other Sources, with a deduction available up to a specified limit for individualsCorrect

Explanation

Savings bank interest is income from other sources. Resident individuals and HUFs can claim a deduction (section 80TTA, or 80TTB for senior citizens) up to the prescribed limit under the old regime, so it is not fully taxable without relief.

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