The answer to your question is covered in Section 80-TTA of the Income Tax Act, 1961. As per this section, interest on the Savings account is exempted from Income Tax up to the limit of ₹ 10,000 (ten thousand). Up to this limit, the interest on Savings account is not included in the gross income of the assessee. However, interest beyond ₹ 10,000 on Savings account will be included in the gross income for the purposes of taxation. For example, if the interest earned on Savings account is ₹ 25,000, then ₹ 15,000 only will be added to the income after accounting for the above deduction.
The above exemption / deduction is allowed to an individual or HUF. It is not available to a firm, an association of persons or a body of individuals.
The savings account can be in any bank, co-operative bank or in post office.
However, the above exemption / deduction is not available in respect of interest earned on the fixed deposits or time deposits, i.e., the deposits repayable on expiry of fixed periods.
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