Is savings account interest taxable in India?

By Vijay Singh Sinhmar · Fintech automation specialist, 8 years in finance · Published 2026-10-11

Yes. Interest on a savings account is added to your income and taxed at your slab rate. In FY 2026-27 the old regime lets you deduct up to ₹10,000 of it a year, or up to ₹50,000 including deposit interest once you are 60. The new regime allows no deduction, so ₹30,000 of interest on a ₹15,00,000 salary adds ₹4,680 to the tax.

Educational information, not investment advice · Muktify is not SEBI-registered

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How it is taxed

Interest is income from other sources. It is added to everything else you earn and taxed at the rate of the slab it lands in, so the same ₹10,000 of interest costs different people different amounts.

It is taxable whether or not you withdraw it and whether or not anything is deducted at source. It is also reported in your annual information statement, so leaving it out of a return is easy to spot.

The old-regime allowance, below 60 and from 60

Below 60, the old regime deducts savings-account interest up to ₹10,000 a year under Section 80TTA. Interest on fixed and recurring deposits does not count towards it. On a ₹15,00,000 salary with ₹8,000 of savings interest, the whole ₹8,000 is deducted and the old-regime tax does not move; in the new regime the same ₹8,000 adds ₹1,248.

From 60, Section 80TTB replaces it with a deduction of up to ₹50,000 that covers deposit interest as well. A 65-year-old with an ₹8,00,000 pension and ₹60,000 of interest deducts ₹50,000 of it; the old-regime tax rises from ₹62,400 to ₹64,480, and the new regime charges nil either way because the total stays inside the rebate.

A worked example in both regimes

On a ₹15,00,000 salary with ₹30,000 of savings interest and nothing else, the old regime deducts ₹10,000 of the interest and taxes the other ₹20,000 at 30% plus cess: tax rises from ₹2,57,400 to ₹2,63,640. The new regime taxes all ₹30,000 at 15% plus cess: tax rises from ₹97,500 to ₹1,02,180.

The extra tax is smaller in the new regime here because its slab rate on this income is lower, not because of any allowance. Which regime is lower overall depends on your whole set of figures.

Frequently asked questions

How much savings interest is tax-free?

In the old regime, up to ₹10,000 a year below 60, or up to ₹50,000 including deposit interest from 60. In the new regime none of it is tax-free, though it may still fall inside the rebate.

Is fixed deposit interest covered by the ₹10,000 deduction?

No. Below 60 the ₹10,000 deduction is for savings-account interest only. From 60 the ₹50,000 deduction covers fixed and recurring deposit interest as well.

Do I have to declare savings interest if no tax was deducted?

Yes. Interest is taxable income whether or not anything was deducted at source, and it appears in the information the tax department already holds about you.

Is savings interest tax-free in the new regime?

There is no deduction for it in the new regime. If your total taxable income stays within ₹12,00,000, the rebate brings the tax to nil in FY 2026-27, but the interest still counts towards that total.

Last updated 2026-10-11. Figures reflect FY 2026-27 and are educational estimates, not advice. Muktify is not SEBI-registered and never recommends or ranks any instrument.

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