Get Extra Tax Exemption with a Post Office Savings Account: Here’s How to Avail the Benefit

Additional tax exemption is available on the post office savings account, making it more beneficial than a bank savings account. This extra exemption applies to the interest earned on the savings account. Let’s understand the income tax rules in detail.

Rules for Deduction on Savings Account

Under Section 80TTA of the Income Tax Act, 1961, you can claim a deduction on interest up to Rs 10,000 earned from savings accounts. This deduction is available for both bank and post office savings accounts. This means if you earn Rs 10,000 or less in interest from savings accounts in a financial year, you won’t have to pay tax on it.

Higher Deduction for Senior Citizens

Senior citizens enjoy a higher tax deduction on money deposited in banks. Under Section 80TTB of the Income Tax Act, 1961, senior citizens can claim a deduction of up to Rs 50,000 on interest earned from savings and fixed deposits. Senior citizens are defined as taxpayers aged 60 years or older. This deduction applies to interest from bank accounts, co-operative societies, and post office accounts.

Additional Deduction for Post Office Savings Account

An additional deduction is available for post office savings accounts under Section 10(15)(i). This deduction is in addition to the Rs 10,000 deduction under Section 80TTA for general taxpayers and the Rs 50,000 deduction under Section 80TTB for senior citizens. The best part is that this deduction is also available under the new income tax regime. A taxpayer can claim a deduction of up to Rs 3,500 on the interest of a post office savings account in a financial year for a single account. For joint accounts, the limit is Rs 7,000.

How to Avail the Higher Deduction

Tax experts suggest that if a taxpayer keeps money in a post office savings account, they can claim a deduction under both Section 80TTA and Section 10(15)(i). This means a taxpayer under 60 years old can claim a total deduction of up to Rs 13,500 on the interest earned from a post office savings account. Keep in mind, this additional deduction is only available for post office savings accounts.