In todays scenario, where we observed various frauds related to banks, in such situation many people & mainly senior citizens are moving towards post office for secure their hard core money. Though the rate of interest is sometimes little less but the security and trust with post office is very high in the market.
At the same time, many people are under wrong impression that the interest earned from post office saving bank account is fully exempt in the hands of receiver. Which is not true at all. Hence today I am writing this short and simple article just to enlighten all the readers who are under this wrong impression regarding interest earned on post office saving bank account.
The core reason of this confusion in the minds of people is due to various amendments with respect to taxation of interest of post office saving bank account. Earlier it is fully exempt u/s 10(15)(i) vide notification no. G.S.R. 607(E) dated 9 June 1989. Then the said notification is amended in 2011 to provide partial exemption i.e. upto Rs 3,500.
Currently, the interest from post office saving bank account is 1st taxable under income from other sources and then eligible for deduction u/s 80TTA upto Rs 10,000 for person other than senior citizen and deduction u/s 80TTB upto Rs 50,000 alongwith other saving bank account interest. And whatever will be the amount of interest over and above that deduction will be taxable in the hand of the receiver.
I hope the above clarification will help you to understand the tax perspective with respect to interest earned on post office saving bank account.
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(Republished with Amendments by Team Taxguru)