Budget 2024: Will savings account interest up to Rs 25k get tax exempt?
As per reports, the government is considering increasing the tax exemption limit to Rs 25,000.
Savings account is something almost every person possesses in a bank. It is anticipated that Modi government may provide major relief to savings account holders in Budget 2024. As per reports, Finance Ministry is considering proposals to increase tax exemptions on interest earned from savings accounts. Finance Minister Nirmala Sitharaman will present Union Budget 2024-25 on July 23. Taxpayers may receive several reliefs.
One of it could be the government providing relief on tax on interest earned on savings accounts received from banks. This means that if in Budget 2024 the government reduces the scope of taxes applicable to interest income, it would be a kind of ‘gift’ for bank customers and savings account holders. As per sources cited in the Economic Times, the government is considering increasing the tax exemption limit to Rs 25,000.
Last week, meetings were held with bank officials from the Finance Ministry. It was proposed in the meeting to increase the tax exemption on interest income from savings accounts, which is under evaluation. A final decision will be made in the budget.
A win-win situation?
Increasing the tax exemption limit on savings account interest could be beneficial for taxpayers and banks. Nowadays, almost every taxpayer has a savings account in some bank. Banks pay interest on the money kept in savings accounts. However, compared to other investment options, interest earned on savings accounts is relatively low. But if the decision limit is increased in the budget, people may be encouraged to keep money in savings accounts. This will also be a win-win situation for banks because they will have more deposits. Having more deposits will reduce the need for banks to raise money externally to distribute credit.
Currently, under Income Tax Act Section 80TTA, interest up to Rs 10,000 in a financial year from savings accounts is tax-free. Above Rs 10,000, tax must be paid at slab rates. Those over 60 years of age, senior citizens under Section 80TTB can take advantage of tax exemption up to Rs 50,000. This includes interest earned on savings accounts and fixed deposits. Tax exemption on interest income is only available in the old tax regime.
Under the new tax regime, taxpayers do not get tax exemption on interest earned on savings accounts. According to sources cited in the report, discussions are underway regarding two issues: increasing the old limit on deductions on savings account interest and allowing exemptions on interest earned from savings accounts under the new tax regime’s existing rules.
If Finance Minister Nirmala Sitharaman expands the scope of tax exemption on savings account interest in Budget 2024, ordinary taxpayers could benefit significantly. Currently, income tax returns filing is ongoing. If you have earned income from savings accounts, be sure to show it in your returns. The deadline for filing returns is July 31, 2024.