What Is This Tool?

Interest earned from fixed deposits, savings accounts, recurring deposits, and other bank products is a major source of income for millions of Indians — especially retirees and conservative investors. Under the Income-tax Act, 1961, interest is taxable as "Income from Other Sources" under Section 56. The tax treatment of bank interest is often misunderstood, leading people to either overpay taxes or miss valuable deductions. This calculator is specifically designed to help you accurately compute your income tax liability on all interest earned from Indian banks and sources, while correctly applying eligible deductions (Section 80TTA for non-senior residents up to ₹10,000 under the Old Tax Regime only, or Section 80TTB for senior citizens up to ₹50,000 under both regimes) and automatically accounting for TDS (Tax Deducted at Source) under Section 194A. Whether you have a small savings account earning a few thousand rupees or significant FD investments, knowing your exact tax position is essential for proper ITR filing and financial planning.

Why This Can Be Confusing

Bank interest taxation confuses taxpayers for several reasons: First, there's a widespread myth that all bank interest is tax-exempt — it's not. Interest is always taxable under Section 56. The only relief available is a limited deduction: non-senior residents can deduct up to ₹10,000 under Section 80TTA (savings account interest only and only under the Old Tax Regime), while senior citizens (60+ years) can deduct up to ₹50,000 under Section 80TTB from all interest sources. Second, banks automatically deduct TDS under Section 194A — at 10% on interest over ₹40,000 for individuals with PAN (20% if no PAN), or higher thresholds for senior citizens (₹50,000). Many people assume this TDS is their final tax — but it's not. Your actual tax liability depends on your total income and applicable slab rate. Third, people with multiple bank accounts often forget to aggregate interest from all sources, causing incomplete tax calculations and potential ITR discrepancies. NRIs face a flat 30% TDS on Indian-source interest with no threshold. Understanding the interplay between TDS, deductions, and progressive tax slabs requires careful calculation — which is where this tool comes in.

How This Tool Works

This calculator applies FY 2025–26 (AY 2026–27) tax provisions with strict accuracy under the Income-tax Act, 1961. It identifies your residency status (Resident Individual or NRI) and, for residents, your age group. For resident individuals, it aggregates interest income under Section 56 (Income from Other Sources). If you're a non-senior resident, it applies the Section 80TTA deduction (max ₹10,000 on savings account interest only, available only under the Old Tax Regime). If you're a senior citizen (60+ years), it applies the Section 80TTB deduction (max ₹50,000 on all interest types). For NRIs, it applies the prescribed 30% flat rate. It then calculates tax at your applicable slab rate under the Old Tax Regime or using the New Tax Regime rates (if applicable). It automatically factors in the TDS your banks have deducted under Section 194A (at 10% with PAN on amounts over ₹40,000, or 20% without PAN; higher thresholds apply for senior citizens at ₹50,000; flat 30% for NRIs from the first rupee). The result shows whether you owe additional tax, are entitled to a refund, or if TDS fully covers your liability. All calculations comply with the CBDT guidelines and ITR filing rules.

Step-by-Step: How to Use This Tool

1. 1.Select your residency status: Resident Individual or Non-Resident Indian (NRI). This determines which deductions and tax rates apply to your interest income under Indian tax law.
2. 2.If you're a Resident Individual, confirm your age group. Senior citizens (60+ years) qualify for a higher deduction limit of ₹50,000 under Section 80TTB, while non-seniors can claim only ₹10,000 under Section 80TTA (on savings account interest only).
3. 3.Enter your total interest income from all Indian bank sources. Include interest from savings accounts, fixed deposits, recurring deposits, sweep-in accounts, and any other bank products. Aggregate amounts from all banks — the calculation is on combined interest.
4. 4.Input the total TDS deducted by your bank(s) on this interest during the financial year. You'll find this on your bank statements, Form 26AS (available at the I-T Department website), or the TDS certificate (Form 16A) your bank provided.
5. 5.Review the detailed results: gross interest, eligible deduction (80TTA/80TTB), taxable amount, income tax due at your slab rate, TDS already deducted under Section 194A, net tax payable, and refund eligibility (if TDS exceeds actual tax).

Real-Life Situations Where This Tool Helps

• ✓A 65-year-old retiree with ₹30 lakhs in fixed deposits earning ₹1.5 lakhs annual interest — needs to apply the ₹50,000 deduction under Section 80TTB, calculate tax on the remaining ₹1 lakh, verify TDS adjustment under Section 194A, and determine refund eligibility.
• ✓A 45-year-old salaried employee with ₹10 lakhs salary and ₹50,000 interest income — wants to understand whether interest qualifies for the ₹10,000 Section 80TTA deduction (savings account interest only), how it affects total taxable income, and whether TDS of ₹5,000 (at 10%) fully covers the tax liability.
• ✓A 72-year-old senior citizen earning interest from multiple banks (HDFC ₹25k, ICICI ₹20k, Axis ₹15k) — must aggregate ₹60,000 total interest, apply ₹50,000 deduction under Section 80TTB, pay tax on ₹10,000, and adjust TDS deducted at ₹50,000 threshold across all banks.
• ✓A young professional with a savings account earning ₹15,000 interest and FD interest of ₹45,000 (total ₹60,000) — can claim only ₹10,000 deduction under Section 80TTA on the savings account interest portion, must pay tax on ₹50,000, and account for TDS deducted over ₹40,000 threshold.
• ✓An NRI earning ₹80,000 in interest from an Indian bank — faces 30% TDS (₹24,000) from the first rupee under Section 194A, must include full ₹80,000 in ITR, cannot claim 80TTA/80TTB deductions, and receives TDS credit against any surcharge or cess liability.

Common Mistakes

• ⚠Believing all bank interest is tax-free: This is the most common myth. Interest is taxable under Section 56 for all individuals. Non-senior residents can deduct only ₹10,000 under Section 80TTA (savings account interest only), while senior citizens can deduct ₹50,000 under Section 80TTB on all interest types. All other individuals pay tax on 100% of their interest income based on their slab rate.
• ⚠Confusing Section 111A with interest deductions: Section 111A applies ONLY to short-term capital gains on equity, NOT to bank interest. For interest, use Section 80TTA (non-seniors, ₹10,000 max) or Section 80TTB (seniors, ₹50,000 max). Do not reference Section 111A for interest income.
• ⚠Not aggregating interest from multiple banks: Many people calculate tax on interest from their primary account while forgetting interest from other banks and deposits. All interest from Indian sources must be aggregated to avoid ITR discrepancies and possible tax notice.
• ⚠Assuming TDS is final tax: Banks deduct TDS at fixed rates under Section 194A (10% with PAN on amounts over ₹40,000, 20% without PAN; ₹50,000 threshold for seniors; 30% flat for NRIs), but your actual tax liability may differ based on your total income and slab rate. TDS is advance tax; you may owe more or get a refund.
• ⚠Missing the Section 80TTA/80TTB deduction due to incomplete information: Some eligible individuals don't claim the deduction because they don't update their age or savings account status in bank records or ITR. Ensure your residency status and age are accurately recorded.
• ⚠Not understanding different TDS thresholds: Regular individuals with PAN get TDS on interest exceeding ₹40,000 at 10% (or 20% if no PAN). Senior citizens get TDS on interest exceeding ₹50,000. NRIs get 30% TDS from the first rupee of interest. Not knowing these thresholds can lead to unexpected TDS deductions.
• ⚠Not claiming refund of excess TDS: If TDS deducted exceeds your actual tax liability (after applying deductions and slab rates), you're entitled to a refund when you file ITR. Many people don't claim this, leaving refunds unclaimed each year.
• ⚠Confusing interest income with other income types: Interest (Section 56) is taxed differently than salary (Section 15-16), business income (Section 28-44), or capital gains (Section 48-55). Mixing these up when calculating total taxable income leads to incorrect tax calculations.

Benefits

This calculator removes all guesswork and complexity. Instead of manually trying to understand deductions, TDS adjustments, and slab rates, you get an instant, clear breakdown showing exactly how much Indian tax you owe on your bank interest. You'll see the precise impact of Section 80TTA (₹10,000 for non-seniors) or Section 80TTB (₹50,000 for seniors) deductions if you're eligible, understand how your TDS under Section 194A is credited, determine the correct taxable amount, and know whether you're due a refund or owe additional tax. This clarity is invaluable when filing your ITR, planning your FD or savings account investments, or explaining your tax position to a Chartered Accountant (CA).

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