### How to Calculate the interest earned in a financial year from Saving Bank A/c for Tax calulation

POSTED BY ON June 4, 2013 7:59 pm COMMENTS (5)

I have following details mentioned below, please help me calculate the total interest which i should use for filling of tax for financial yr (12-13). This is only for the interest incurred in the Saving Bank A/c I have.
S.no | Date of Deposit in Bank | Period for which interest | Amount
1 | 1-Sep-2012 | 1-Mar-2012 to 31-Aug-2012 (ICICI) | Rs.101
2 | 1-Mar-2013 | 1-Sep-2012 to 28-Feb-2013 (ICICI) | Rs.102
3 | 1-Apr-2012 | 1-Oct-2011 to 31-Mar-2103 (HDFC) | Rs.103
4 | 30-Sep-2012 | 1-Apr-2012 to 30-Sep-2013 (HDFC) | Rs.104
5 | 1-Apr-2013 | 1-Oct-2012 to 31-Mar-2103 (HDFC) | Rs.105
Which logic should we use:
1. Check the date of Interest Deposit in Bank (Easy enough )
2. Check the Period of Interest and ignore the date of deposit, In this case certain banks calculate the interest in different periods which span two financial years(ICIC Bank)
Thanks,
Rakesh

## 5 replies on this article “How to Calculate the interest earned in a financial year from Saving Bank A/c for Tax calulation”

1. bemoneyaware says:

The Finance Bill or Budget 2012 inserted a new section 80TTA in the Income Tax Act of 1961 which provides

Deduction up to Rs. 10,000 to an Individual / HUF from Gross Total Income towards Interest on saving bank Account (not being time deposits)
If interest earned is more than 10,000 then balance amount will be taxable as before i.e considered as Income from Sources and taxed as per your slab rate.
The deduction is in addition to deduction of Rs. 1 Lakh of section 80C of the Income Tax Act-1961.
You need to report the interest exempted under section 80TTA in IncomeTax return form.
Our article Interest on Saving Bank Account : Tax, 80TTA discusses it in detail.

2. bemoneyaware says:

In Apr 2010 RBI moved to calculation of interest on saving bank account on daily basis.
Say on 1st Aug Rs 70,000 is credited into your account.
On 5th August after some withdrawls balance in your account is Rs 55000.
You had Rs 70,000 for 4 days at 4% per annum.
So how much interest did you earn? The formulis:
Interest = Principal or amount in the account * Number of days * Daily Interest Rate

Daily Interest Rate = Interest rate per annum /365 days
At 4% Daily Interest Rate is: 4%/365 = 0.010958%

At present, each bank follows its own schedule including monthly, quarterly and and half yearly for paying interest rates on savings accounts. The Reserve Bank of India(RBI) wants banks to pay the interest to depositors at uniform period of three months.

Our article Saving Bank Account:Do you know how interest is calculated and more discusses it in detail.

3. Dear Rakesh, why did you opt not to disclose actual interest in your original query?

Please do note any interest in excess of 10K combined for all your Sb accounts ‘ll be taxable as usual. For that 1 month of March 2012 for ICICI bank, please check your account balance & calculate manually.

Thanks

Ashal

4. Rakesh Kumar says:

@Ashal Jauhari – Thanks for your response, actually i did not knew the policy which you mentioned. It was nice to know. The amount in Rs which i mentioned was just a susbsitute for actual amount.
What would happen if amount exceeds 10k and if you still can asswer my earlier question how to calculate the total interest of SB A/c’s based on (a) Date of Deposit of Interest , (b) Period in which the interest is acumulated

5. Dear Rakesh, as the combined interest from all your SB accounts is less than 10K Rs, you can happily ignore this interest as your taxable income under section 80TTA.

As per section 80TTA for FY 2012-2013 & onwards the interest from SB account upto the limit of 10K is taxfree.

Thanks

Ashal

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