Interest earned on a savings account is taxable, but individuals can claim a deduction of up to Rs 10,000 a year on it under Section 80TTA — a simple way to reduce the tax on idle cash.
How the deduction works
The deduction applies to interest from savings accounts held with a recognised public or private bank, or the post office. Interest above Rs 10,000 is added to total income and taxed at the applicable slab rate. (Senior citizens get a larger benefit on both savings and deposit interest under a separate provision.)
Make your savings work harder
Savings-account rates vary widely between banks, so comparing the latest rates can meaningfully lift returns on money you keep liquid. For balances you don't need immediately, sweep-in deposits or short-term FDs may offer better yields while keeping funds accessible.
Sources: BankBazaar, Income Tax provisions (Section 80TTA).