Postal savings account: know the interest rate, tax implications and other features
New Delhi: Most of these public savings plans are popular among investors because they are reliable, low risk, and secure. Depositing into a Postal Savings Account is a very good option for those who want to earn extra benefits while saving your hard earned money.
Any resident individual can start with a minimum investment of Rs 500, with no upper investment limit. The interest rate offered is 4 percent per annum. Interest earned on a postal savings account is tax exempt.
The interest rates offered on the Post Office Savings Account are reviewed quarterly by the government and may be changed according to market conditions.
In addition to offering higher interest rates, these accounts also help depositors to save on interest tax of up to Rs 3,500 during a fiscal year. For joint accounts, the exemption goes up to Rs 7,000.
Tax exemption rules
Although it is well known that a person can tax deduct up to Rs 10,000 on his interest income received from a postal savings account under section 80TTA. While also seeking the tax benefit under Section 80TTA, a depositor can also claim interest from a Postal Savings Account as non-taxable income. Therefore, Section 10 (15) (i) of the Income Tax Act allows you to claim interest on a Postal Savings Account as tax-free income.
According to a government announcement dated June 3, 2011, interest on postal savings accounts of up to Rs 3,500 for single accounts and Rs 7,000 for joint accounts is exempt from tax. “To the extent of the interest of Rs. 3,500 in the case of an individual account and Rs. 7,000 in the case of a joint account,” the notification reads. Individuals can claim interest income on savings accounts held with a post office up to Rs 10,000 under Section 80TTA of the Income Tax Act, or up to to Rs 50,000 under Section 80 TTB if they are senior citizens.