Budget 2012: Tax Exemption on Interest Up To Rs.10,000 From Savings Deposits

The Finance Minister recently announced that individual taxpayers will be allowed a deduction of up to Rs.10,000 on interest earned on savings bank deposits. He said that this move would help a large number of small taxpayers with salary incomes up to Rs.5 lakh.

Depending on the rate that your bank pays, balances of savings deposits around Rs.1.66 lakhs (at 6 % interest rate) to Rs.2.5 lakhs (at 4 % interest rate) will enable you to take advantage of the tax exemption on interest earnings of Rs.10,000 earned on Savings Bank deposits.

The move on Saving Bank deposits in the Budget is somewhat attractive. However, there will be no rush from customers/depositors to maintain higher balances in Savings Bank deposits given, FDs fetch higher post-tax return.