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

Which statement best describes the tax position of the interest on a savings bank account for a resident individual under the Income-tax Act, in terms of deduction available?

Savings bank interest is taxable as income from other sources, but eligible individuals can claim a limited deduction on it, such as Section 80TTA or 80TTB under the old regime. It is neither wholly exempt nor taxed only on withdrawal.

  1. AIt is wholly exempt for every individual
  2. BIt is taxable, with a limited deduction available for eligible individuals on such interestCorrect
  3. CIt is taxed only when withdrawn
  4. DIt is taxed as long-term capital gain

Explanation

Savings account interest is taxable as Income from other sources, accrued yearly, but a limited deduction (Section 80TTA for non-seniors, 80TTB for seniors, under the old regime) can reduce it. It is not wholly exempt and is not a capital gain.

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