Many people who do are risk averse, park their money in banks and post offices. with effect from Financial Year 2012-13, the government introduced Section 80TTA under the Income Tax Act to provide deduction up to Rs 10,000 from interest earned from deposit accounts. Most of the people are aware of this provision in the Act, however, not many know that they can claim the interest received from post office savings account as exempt from income tax along with claiming the tax benefit under section 80TTA separately for savings account interest. Which means that if an individual claims tax relief under section 80TTA for Rs 10,000 on savings account interest, he can claim further benefit of upto Rs 3,500 on interest earned in Post office savings account and upto Rs. 7,000 if it is joint account. The interest earned from post office savings account can be claimed exempt from income tax under section 10(15)(i) of the Income Tax Act. This was notified under a government notification, dated June 3, 2011
According to tax experts, an individual can claim deduction of interest income from saving account held with post office as per section 80TTA of the Income Tax Act to the extent of Rs 10,000 or, in case the individual is a senior citizen, up to Rs 50,000 under section 80TTB. Plus he can claim the exemption benefit (under section 10(15)(i) on interest income from saving account with post office to the extent of Rs 3,500 in case of individual account and Rs 7,000 in case of joint account in addition to the deduction under section 80TTA or 80TTB.
For example, if an individual earns Rs. 9,900 as interest from bank saving account and he earns Rs 3,600 as interest from post office saving account, then his total income from interest is Rs 13,500. So he can claim exemption upto Rs 3,500 under section 10(15)(i) on interest income from saving account with post office, thus bringing his income from interest to Rs 10,000, which again he can claim exemption under 80TTA and will not have to pay any tax on it.
