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.
Summary
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.
August 16, 2011 at 10:04 am
Will it be TDS? Can we use 15H form to prevent TDS.
August 30, 2011 at 5:41 pm
Sir,
It is mentioned in above article that from this fiscal to remove the maximum limit of deposit in post office saving account:-
“From this fiscal, it is planned to remove the maximum limit for deposits. That means account holders can deposit more than Rs.1 lakh.”
Please inform the notification/circular number of above changes.
thanks,
J N RAI
October 22, 2011 at 12:28 am
With the investigation completed, that change has now been made permanent.
Stamp Duty
July 9, 2012 at 12:15 am
A person investing in postal M.I.S. and also Senior Citizen Saving Scheme even after filling 15H form annually still lyable to pay income tax on the interest of these scheme