You must know how the interest earned via different sources qualify for income tax deduction is taxed. Remember, not all investments that are eligible for tax deduction under Section 80C has EEE status for income tax. There are significant impacts on your net income returns via your assets because of the taxation. Read below to understand how the other interest income is taxed.
Taxation of Savings Bank Account Interest
Interest on your savings bank account is taxed under income from other sources according to the tax slab rate applicable to the taxpayer. Interest earned up to 10,000 per year is allowed for deduction under section 80TTA. Moreover, the limit include interest from all savings accounts with banks, co-operative banks, and post offices. If the interest-earning is more than 10,000 INR, the additional amount is taxable.
Taxation of Interest on Fixed Deposits at Bank
It is imperative to know that interest income from a bank FD is fully taxable as income from other sources as per the applicable tax rates. Furthermore, banks also deduct TDS of 10% when they credit the interest in your account.
Taxation of Public Provident Fund Interest
Your PPF account qualifies for income tax deduction under section 80C of the Income Tax up to 1.5 lakh INR in a fiscal year. However, the interest received from the fund is tax-free. Since it enjoys EEE status, there is no tax on the amount received at the account maturity.
National Savings Certificate Interest
Your amount under NSC is eligible for deduction under Section 80C of the IT Act. Notably, you receive annual interest on your NSC account, which gets reinvested. Hence there is no yearly tax liability. However, at the time of maturity, the part you receive is liable for tax under income from other sources. It is subject to the income tax slabs applicable to an individual.
Taxation on KVP Interest
People also know KVPs, as double your money in 10.4 years. However, they do not have any taxation incentives. Interest in KVP is taxable under income from other sources. Notably, there is no source tax deduction, and it does not qualify under Section 80C.
Taxation on Sukanya Samriddhi Yojana
Like PPF, the Sukanya Samriddhi Yojana (1) is an exceptional investment scheme by the government for a girl child. It also falls under the EEE investment category. It means you do not have to pay any tax on your investment, interest, and maturity.