When filing your income tax returns (ITR) for the financial year 2018-19, you will have to give a break up on the interest income earned in the form ITR-1. The new change will enable the Income Tax Department to detect any claims wrongfully made by individuals, easily.
The last date for an individual or HUF taxpayer, without any business income, to file their ITR for the FY 2018-19 is 31 July 2019. Check Which ITR Form Applies To You For FY 2018-19.
Up to last year, under the head "income from other sources," one could simply enter a consolidated amount in the e-form.
Under this head, an individual taxpayer can declare any income earned from interest on savings or fixed or recurring bank or post office accounts to claim an exemption on the tax charged to an extent allowed by the Income Tax Act.
The section also requires one to declare any income made from winnings at a lottery, game show, etc or pension earned on behalf of a deceased person.
The new change
When you reach the "Income from Other Sources" part in the ITR-1 form, you will see drop down option activated by the new software utility function in the "Nature of Income" column.
The options you will see are:
- Interest from Savings Account
- Interest from Deposit (Bank/Post Office/Cooperative Society)
- Interest from Income Tax Refund
- Family pension
- Any Other
You have to choose an option to specify your source of income. If you choose the "any other" option, you will have to provide details of the income earned.
The change appears to have been introduced to prevent the tax deduction claims wrongly made under section 80TTA and 80TTB.
Tax deduction claims under section 80TTA and 80TTB
Deductions can be claimed on interest income earned under section 80TTA and 80TTB. While section 80TTA pertains to individuals less than 60 years of age, deductions under section 80TTB are applicable on senior citizens.
A total deduction of Rs 10,000 can be claimed on interest income and is available to individuals and HUF less than 60 years of age.
The deduction is only allowed on interest earned from savings account with a bank, post office or co-operative society and not on fixed deposits or recurring deposits or any kind term deposits.
If you have earned interest on an FD, banks will deduct 10 percent tax at source on this if the combined interest earned at all its branches in a given year exceeds Rs 10,000.
Note that the limit has been increased to Rs 40,000 for FY 2019-20 and not FY 2018-19 (for which you will file ITR before 31 July).
However, if your total income is below taxable limit, you can avoid paying taxes by submitting Form 15G or Form 15H (senior citizens) to the bank, which is form requesting the bank to not charge TDS.
In Budget 2018, section 80TTB was introduced with focus on interest income earned by citizens aged 60 years and above.
On any interest income earned from bank deposits (savings or fixed) and deposits at post office or co-operative society, senior citizens can claim up to Rs 50,000 on such income in the ITR for FY 2018-19.