According to the revised provision in income tax rules, interest from savings bank account up to Rs 10,000 will be exempted for computation of taxable income. If any one has more than one savings bank account, will the exemption be allowed up to Rs 10,000 for each of these accounts? Or the interest for all the accounts in banks and post offices will be clubbed together?

M. Biswas, Barasat

ance minister Pranab Mukherjee has introduced Section 80TTA in the income tax act that will provide for deduction in interest on savings accounts with banks, co-operative societies and post offices. Under this section, the exemption up to Rs 10,000 is available on interest income from all savings bank accounts that a taxpayer might have in banks, cooperative societies or post offices. You cannot have multiple deductions for multiple savings bank accounts. In 2005, the government withdrew Section 80L, under which exemption up to Rs 12,000 was available on interest income from bonds, fixed deposits, savings account in post offices. However, the new section provides for deduction only in respect of savings accounts. Now, savings bank accounts will compete with fixed deposits where interest is fully taxable. The deduction available under Section 80TTA makes the scheme of non-filing of returns by salaried taxpayers in case of salary income plus savings bank interest up to Rs 5 lakh more friendly.

Interest on NSC

Does the accrued interest that is deemed invested in the National Savings Certificates (NSC) qualify for deduction under Section 80C? Are investment in post office time deposits for five years eligible for deduction from total income under Section 80C?

Suresh Thakker, Calcutta

terest on NSC is not exempted under Section 80C, but the reinvestment of the interest is eligible for deduction. Interest income on NSC gets accrued on yearly basis. So, while calculating your interest income from NSC, you shall have to first consider the interest income as taxable income and then you can claim deduction of the interest amount for reinvestment under Section 80C. Yes, investments in 5-year Post Office Time Deposits are eligible for deduction up to Rs 1 lakh from the total income under Section 80C.

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