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How can I avail tax break on interest income earned on RD, monthly income schemes and NSC?

Under Section 80TTA, you can claim a deduction of up to Rs 10,000 on savings bank/post office deposits. Interest earned on post office RD and NSC is eligible for exemption under Section 80C within the overall limit of Rs 1.5 lakh in the years.

ET CONTRIBUTORS|
Nov 11, 2019, 11.20 AM IST
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NSC is eligible for exemption under Section 80C of Income Tax Act.
I have invested in recurring deposits, monthly income schemes and NSC. Will the interest earned be added to my income and tax deducted on the whole amount or I will get tax rebate under Section 80 TTA?
Shubham Agrawal Senior Taxation Advisor, TaxFile.in
replies: Interest earned from RDs, MIS and NSC are taxable as income from other sources. This interest is taxable at the slab rate applicable to you. Tax is always deducted at a flat rate of 10% of the interest earned, if total interest is greater than Rs 40,000. Any exemption needs to be claimed by you while filing your returns.

Under Section 80TTA, you can claim a deduction of up to Rs 10,000 on savings bank/post office deposits, so none of your post office investments qualify for this section. Interest earned on post office RD and NSC is eligible for exemption under Section 80C within the overall limit of Rs 1.5 lakh in the years that it is reinvested back.

I am 68. My total income from pension and rent is less than Rs 5 lakh. I have Rs 20 lakh in FDs, from which TDS is deducted. Am I liable to pay more taxes even after TDS deduction?
Shubham Agrawal Senior Taxation Advisor, TaxFile.in
replies: There is no income tax for senior citizens up to a total income of Rs 3 lakh. Since you are a senior citizen, there will also be an exemption on FD interest up to Rs 50,000 under Section 80TTB. You need to calculate your total income after all exemptions under Section 80S and deductions under salary head (pension is reported in the same) and house property head.

If your income calculated as such exceeds Rs 5 lakh, you will need to pay tax at the rate of 20.8% on income exceeding Rs 5 lakh and 5.2% on income between Rs 3 lakh and 5 lakh. If your total income does not exceed Rs 5 lakh, your tax liability will be nil. In that case, you can claim refund of the TDS on fixed deposit interest. You have not mentioned the interest received from fixed deposits, pension and rent for exact calculation for tax payable.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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