Any income earned on accrual of savings is taxed as “Income from Other Sources”.
Interest on PPF
Interest earned on Public Provident Fund is tax-free. Any withdrawal after the five years from PPF shall also be tax-free.
Interest on Saving Bank Account
Interest earned on saving bank account is taxable. However, deduction upto Rs.10,000 is available against such income. In case you are above 60 years of age, the deduction upto Rs. 50,000 is available.
Interest on Bonds, Fixed Deposits, Post office MIS and Recurring Deposits
Interest on bonds, fixed deposits, post office MIS, and Recurring deposit is taxable. It is the choice of the assessee to consider it as income either in the year in which it is accrued/due or in the year of receipt. However, the choice of the assessee should remain consistent over the years.
There is no tax on withdrawal of FD, RD and post office MIS. However, in case of sale/redemption of bonds, capital gain shall be computed.
Dividend on Shares and Mutual Funds
Dividends received on shares, and mutual funds are to be included in taxable income of the investor. TDS may be deducted by the company while paying dividends. The investor can claim the benefit of the TDS in its return of income.
On sale/redemption of mutual funds or shares, capital gain shall be computed and included in taxable income.
Interest on Senior Citizens’ Saving Scheme
The interest earned in senior citizen saving scheme (SCSS) account is fully taxable. However, deduction upto Rs. 50,000 can be claimed by the investor. Withdrawal of amount from the SCSS account does not attract any tax liability.
Interest on Sukanya Samriddhi Yojana The interest earned on the Sukanya Samriddhi Yojna account is tax-free. The maturity amount is also exempt from tax.