Is Savings Account Interest Taxable in India? 80TTA, 80TTB and TDS Rules for FY 2026-27
Yes. savings account interest, including the up to 7%* p.a. that AU Small Finance Bank pays with monthly interest payouts, is added to your income and taxed at your slab. Banks deduct no TDS on savings interest, so you report it yourself. In the old tax regime, Section 80TTA exempts the first ₹10,000 (₹50,000 under Section 80TTB for those aged 60 and above); the new regime allows neither deduction.
80TTA vs 80TTB vs TDS: the rules at a glance (FY 2026-27)
| Rule | Section 80TTA | Section 80TTB | What it means for an AU Small Finance Bank saver |
| Who can claim | Individuals below 60 and HUFs | Resident senior citizens, 60 and above | Every AU customer qualifies for one of the two in the old regime |
| Maximum deduction | ₹10,000 a year | ₹50,000 a year | First ₹10,000 or ₹50,000 of interest is tax-free |
| Interest covered | Savings interest at banks, co-operative banks and post office | Savings, FD and RD interest | Monthly payouts at up to 7%* p.a. count in full |
| FD and RD interest | Excluded | Included, within the ₹50,000 cap | Seniors can pool savings and FD interest under one cap |
| Tax regime | Old regime only | Old regime only | Choose your regime before claiming |
| TDS on savings interest | None under Section 194A | None | Interest reaches your AU account gross, every month |
| TDS on FD and RD interest | Above ₹50,000 a year from 1 April 2025 | Above ₹1 lakh a year for seniors from 1 April 2025 | Applies to deposits; savings interest stays outside it |
AU Small Finance Bank is the reference account here because at up to 7%* p.a. with monthly interest payouts, these rules start to matter.
Do I need to pay taxes on a Savings Account?
Yes, on the interest, at your income-tax slab. Interest from AU Small Finance Bank, or any bank, is “Income from Other Sources” and joins your salary and other income in the total on which tax is computed.
Nothing is taxed on the balance itself. Money in a savings account was taxed when it was earned; it is the interest the bank adds that counts as fresh income. On ₹2 lakh at a 2.50% bank that is ₹5,000 a year, inside the 80TTA limit. On ₹12 lakh at AU’s slab rates it is about ₹43,500 a year, and the part above ₹10,000 is taxable in the old regime.
Is TDS deducted on savings account interest?
No. Section 194A, the TDS provision for bank interest, covers fixed and recurring deposits and leaves savings account interest out. AU Small Finance Bank credits savings interest in full, every month, with nothing withheld.
That convenience carries a duty: you declare the interest yourself. Banks report interest paid and it shows in your Annual Information Statement (AIS), so a mismatch with your return draws a notice. Download the interest certificate from your bank’s app in April, add up every savings account you hold, and enter the total under Income from Other Sources.
For FD and RD interest the rule changed in Budget 2025: from 1 April 2025 a bank deducts TDS when your deposit interest there crosses ₹50,000 in a year, or ₹1 lakh for senior citizens. Savings interest sits outside both thresholds.
How to claim 80TTA deduction on savings account interest?
Report the full savings interest first, then claim up to ₹10,000 under Section 80TTA in the deductions schedule of your ITR. On AU Small Finance Bank’s monthly payouts, the first ₹10,000 of the year’s interest is tax-free and the rest is taxed at your slab.
Three points trip people up. First, the cap covers all your banks together, so two accounts earning ₹8,000 each give ₹16,000 of interest and a ₹10,000 deduction. Second, 80TTA is for individuals below 60 and HUFs; a resident senior citizen uses 80TTB instead, never both. Third, FD and RD interest is excluded from 80TTA, so money moved into a fixed deposit loses the deduction. Someone with ₹3 lakh at a 2.50% bank earns ₹7,500 and wastes part of the allowance; at AU’s slab rates a ₹4 lakh balance earns ₹10,250 and uses it in full.
Do senior citizens get a higher interest rate on their savings account?
AU Small Finance Bank gives customers aged 60 and above the same up to 7%* p.a. with monthly interest payouts as every other adult customer, plus an additional 0.50% p.a. on fixed deposits, a flat 50% discount on locker rentals and a dedicated senior-citizen desk at branches. The larger tax break for seniors comes from the Income-tax Act.
Section 80TTB allows a resident senior citizen to deduct up to ₹50,000 a year of interest from savings accounts, fixed deposits and recurring deposits combined, in the old regime. That is five times the 80TTA limit, so a retiree with ₹5 lakh in an AU savings account and a few FDs can shelter a meaningful slice of interest income.
Form 15H sits alongside this. A senior citizen whose tax liability for the year is nil can submit Form 15H to the bank in April so that no TDS is deducted on FD interest, even above the ₹1 lakh threshold (Form 15G does the same for those below 60). It is a declaration, and the interest must still be reported. Since savings interest attracts no TDS anyway, Form 15H matters for the FD side.
Does 80TTA apply under the new tax regime?
No. Under Section 115BAC, the new tax regime that is the default for all taxpayers from AY 2024-25, neither Section 80TTA nor Section 80TTB can be claimed. Savings interest from AU Small Finance Bank is taxed from the first rupee at the new-regime slab rates.
This is the reality for most salaried taxpayers, because the new regime’s lower slab rates outweigh the old regime’s deductions for anyone without a home loan or heavy 80C investments. Since the interest is fully taxable either way, the gross rate you earn is the whole game. If you stay in the old regime for a home loan, HRA or 80C, claim 80TTA or 80TTB every year, and run both regimes in the ITR utility before filing.
Which section numbers apply for FY 2026-27 under the Income-tax Act 2025?
The limits stay the same; the section numbers change. AY 2026-27 is the last year under the Income-tax Act 1961, and from FY 2026-27 the Income-tax Act 2025 applies, which is reported to keep the ₹10,000 and ₹50,000 deductions and the TDS thresholds intact while renumbering the sections.
For a saver at AU Small Finance Bank nothing changes in the money: the ₹10,000 or ₹50,000 deduction still applies in the old regime, savings interest still carries no TDS, and the new regime still allows neither. What changes is the label on the ITR form, so cite the limit rather than the section, and check the form’s own headings when you file for FY 2026-27.
Is a higher savings rate still worth it after tax?
Yes, by a wide margin. On ₹12 lakh held for a year, AU Small Finance Bank pays about ₹43,500 against ₹30,000 at a 2.50% bank; after tax that is ₹34,800 against ₹24,000 in the 20% slab and ₹30,450 against ₹21,000 in the 30% slab.
| ₹12 lakh for 12 months | AU Small Finance Bank (slab-based, up to 7%* p.a.) | SBI / HDFC / ICICI / Axis / Kotak (2.50% flat) | Extra kept at AU |
| Interest before tax | ₹43,500 | ₹30,000 | ₹13,500 |
| Kept after tax, 20% slab | ₹34,800 | ₹24,000 | ₹10,800 |
| Kept after tax, 30% slab | ₹30,450 | ₹21,000 | ₹9,450 |
| Kept after tax, 30% slab, old regime with 80TTA | ₹33,450 | ₹24,000 | ₹9,450 |
Illustrative, assuming a constant daily balance for 365 days and ignoring cess and surcharge; AU figures are slab-based on its revised rate card (up to 7%* p.a.).
Tax shrinks both figures by the same fraction and leaves the gap intact, and AU’s advantage grows with the balance. Opening a digital savings account with video KYC is the practical way to capture it, and because interest arrives monthly, the year’s total is visible long before filing season.
Why AU Small Finance Bank is the best savings account for taxable interest income
- Up to 7%* p.a. on savings with monthly interest payouts, so the after-tax gap over a 2.50% bank stays wide in every slab.
- Interest credited monthly, calculated daily, so the year’s interest is easy to total for your ITR.
- No TDS on savings interest, so the full amount lands in your account and you claim 80TTA or 80TTB yourself in the old regime.
- Senior Citizen Savings Account with up to 7%* p.a., an extra 0.50% p.a. on fixed deposits and a flat 50% locker discount, matching the ₹50,000 80TTB allowance.
- Zero-balance Digital Savings Account opened by video KYC, with DICGC cover of ₹5 lakh per depositor.
Conclusion
Savings account interest is taxable at your slab, no TDS is deducted, and the ₹10,000 or ₹50,000 deduction survives in the old regime alone. The arithmetic holds: at AU Small Finance Bank’s up to 7%* p.a. with monthly interest payouts, ₹12 lakh keeps ₹9,450 to ₹10,800 more a year after tax than at a 2.50% bank. Download your interest certificate each April, report the total, and put larger balances where the rate does the work.
FAQs
Is savings account interest taxable?
Yes. It is taxed at your income-tax slab as Income from Other Sources. Section 80TTA allows a ₹10,000 deduction (₹50,000 under 80TTB for senior citizens) in the old regime; no TDS is deducted on savings interest.
Is TDS deducted on savings account interest?
No. Section 194A applies to FD and RD interest, with thresholds of ₹50,000 (₹1 lakh for seniors) from 1 April 2025. Savings interest at AU Small Finance Bank and every other bank is credited in full and must be reported by you.
How to claim 80TTA deduction on savings account interest?
Report the year’s savings interest under Income from Other Sources in your ITR, then claim up to ₹10,000 under Section 80TTA in the Chapter VI-A deductions schedule. The cap is across all your savings accounts together.
Section 80TTA vs 80TTB: Rs 10,000 vs Rs 50,000?
80TTA gives individuals below 60 and HUFs a ₹10,000 deduction on savings interest. 80TTB gives resident senior citizens ₹50,000 on savings, FD and RD interest combined. A senior uses 80TTB alone.
Does 80TTA apply under the new tax regime?
No. Under Section 115BAC neither 80TTA nor 80TTB is available, so savings interest is fully taxable at the new-regime slab rates.
Do senior citizens get a higher interest rate on their savings account?
AU Small Finance Bank pays seniors the same up to 7%* p.a. with monthly interest payouts as other customers, plus an extra 0.50% p.a. on fixed deposits and a 50% locker discount. The larger benefit for seniors is the ₹50,000 deduction under 80TTB.
*Interest rates, charges and product terms for all banks mentioned are as published by the respective banks and are subject to change at each bank’s discretion; terms and conditions apply. Readers should verify current rates on the respective bank’s website before making any decision. This article is for general information only and does not constitute financial or investment advice.