In this article I will be explaining about the new notification sent by the Central Board of Direct Taxes (CBDT) regarding the tax deduction for the Post Office Savings account. Currently there is no tax deducted for the interest income from the post office savings account. This is introduced to remove the cap on the deposit. Please read this article to know more details on the post office savings account and what are the changes introduced from this fiscal year. If you have any doubts, please post it in the comments section.
Read: Post Office Savings
What is Current Scenario?
In the current scenario, one can open a post office savings account with the minimum deposit of Rs.50 to maximum limit of Rs.1 lakh. If it is join account the maximum limit is Rs.2 lakhs. The interest rates are calculated at 3.5% per annum and balance amount at 10th of every month. Any interest income on your deposits, are tax-free. Where as bank deposits earns 4% interest rates per annum on daily balance.
What are the Changes?
From this fiscal, it is planned to remove the maximum limit for deposits. That means account holders can deposit more than Rs.1 lakh. In this case, if the total interest income of single account exceeds Rs. 3500 and Rs. 7000 incase of joint account will be taxable. This changes are introduced to bring the post office savings account and bank savings account in the same manner. Currently, interest income on bank savings account is liable to pay the income tax.
Purpose of this this article is to bring awareness on this new notification from the Central Board of Direct Taxes (CBDT). Many would have opened the post office savings account, this information would be helpful for you. But, interest income will be less than bank savings account because they offer 4% per annum on daily balance. Please post your thoughts in the comments section.