Tax-free interest upto Rs 7000: Post Office Savings Accounts still offer relief under new tax regime; Here's how to claim it This is due to the new income tax slabs introduced from April 1, 2025. The new tax regime does not offer many exemptions and interest. However, the new tax regime does not offer many exemptions and deductions. Still, taxpayers can claim an exemption on a post office savings account. Here's how
Since the introduction of the new tax regime in the Union Budget 2020, the government has been making it more and more attractive for taxpayers. This has been done by introducing several changes, such as allowing standard deduction under the new tax regime and hiking the amount, increasing the tax break for employers' contributions to the employees' NPS account, and increasing tax rebates, among others. In the recently concluded Budget, the government introduced new slabs under the new tax regime.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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However, not many people are aware that they can claim tax exemption for the interest earned on their post office savings accounts even under the new tax regime.
This is despite the fact that the new tax regime does not offer Section 80TTA and Section 80TTB deductions that are available under the old tax regime. Section 80TTA deduction can be claimed, up to Rs 10,000, on the interest earned from savings account balances held with banks or post office, by individuals. Similarly, Section 80TTB can be claimed, up to Rs 50,000, by senior citizens for interest earned from deposits held with banks and post offices. The deposits include savings accounts, fixed deposits, recurring deposits, etc.
ET Wealth online outlines the process for claiming tax exemption on interest earned on your post office savings account balance under the new tax regime.
What is maximum tax exemption on post office savings account interest?
The tax exemption on interest earned from post office savings accounts is available as per a notification issued by the government in 2011.a:hover{text-decoration:none;} .liveEventMain_widget{margin-top:15px;padding-top:24px;border-top:2px solid #000;position:relative;font-family:Montserrat;} .liveEvent_slider{position:relative;overflow:hidden;} .liveEvent_slider ul{white-space:nowrap;list-style:none;margin-top:12px;} .liveEvent_slider ul.sliderContainer{margin-bottom:30px;} .liveEvent_slider ul li{white-space:normal;width:282px;vertical-align:top;display:inline-block;margin-right:12px;border-radius:12px;box-shadow: 0px 4px 12px 0px #2407461F;background-color:#fff;overflow: hidden;} .images_wrap{position:relative;} .images_wrap .cover_img{object-fit:cover;object-position:center;border-top-left-radius:4px;border-top-right-radius:4px;} .images_wrap .author_img{position:absolute;left:10px;top:13px;border-radius:10px;} .images_wrap::before{background-image: linear-gradient(180deg, rgba(11, 11, 46, 0) 20.31%, rgba(11, 11, 46, .6) 61.46%, #0b0b2e);content: "";height: 100%;left: 0;position: absolute;right: 0;width: 100%;} .liveEventMain_widget .details{padding:12px;} .liveEventMain_widget .category{font-size:12px;line-height:14px;font-weight:700;color:#6a11b0;margin-bottom:8px;} .liveEventMain_widget .course_name{font-size:16px;line-height:20px;font-family:Faustina;-webkit-line-clamp:2;overflow:hidden;height:40px;display:-webkit-box;-webkit-box-orient:vertical;font-weight:600;color:#000;} .liveEventMain_widget .details .author_name{font-size:13px;line-height:16px;color:#333;font-weight:400;margin-top:4px;-webkit-line-clamp:2;overflow:hidden;height:32px;display:-webkit-box;-webkit-box-orient:vertical;} .liveEventMain_widget .view{border: 1.5px solid #D51131; display: block; padding: 8px 0; text-align: center; border-radius: 4px; font-size: 14px; line-height: 16px; color: #D51131; margin-top: 12px; width: 100%; font-family: Montserrat; font-weight: 600; cursor: pointer;} .liveEventMain_widget .view span{display: inline-block; width: 6px; height: 6px; border-top: 1.5px solid #ed193b; border-left: 1.5px solid #ed193b; transform: rotate(90deg); position: relative; left: 5px; top: -2px;} .liveEventMain_widget .view span::after{content: ''; display: inline-block; width: 11px; border-top: 1.5px solid #ed193b; transform: rotate(45deg); position: absolute; top: 3px; left: -2px;} .liveEventMain_widget .arrow_btn{width: 26px; height: 25px; position: absolute; z-index: 11; background-size: 312px; cursor: pointer;} .liveEventMain_widget .nextprev-btn{display:inline-block;width: 100%; position: absolute; top: 59%;} .liveEventMain_widget .prev-btn{background-position: -212px -2px;left: -12px;} .liveEventMain_widget .next-btn{background-position: -241px -2px; right: -3px;left:unset;} .liveEventMain_widget .arrow_btn.disable{opacity:0.5;} .liveEventMain_widget .ts-dots{display:inline-block;position:absolute;top:34px;right:10px;} .liveEventMain_widget .ts-dots ul{display:inline-block;} .liveEventMain_widget .ts-dots li{width:7px;height:7px;border-radius:50%;background-color:#cdcdcd;margin:0 2px;display:inline-block;} .liveEventMain_widget .ts-dots li span{display:none;} .liveEventMain_widget .ts-dots li.active{background-color:#ed193b;} .liveEventMain_widget .topContain { display: flex; align-items: center; gap: 6px; } .liveEventMain_widget .topContain .imgBox { max-width: 40px; } .liveEventMain_widget .topContain .logoTitle { font-family: "Montserrat", "Verdana"; font-weight: 700; font-size: 20px; line-height: 100%; } .liveEventMain_widget .topContain .logoSubTitle{ position: relative; font-size: 18px; font-weight: 500; line-height: 1.2; color: #747474; margin-left: 24px; } .liveEventMain_widget .topContain .logoSubTitle:before{ content:''; position: absolute; left: -13px; top: 0; width: 1px; height: 100%; background-color: #838383; } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer{ } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer .liveEventCard{ display: flex; } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer .liveEventCoverImg{ }
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Naveen Wadhwa, Vice President of Research at Taxmann.com, says, "An individual can claim exemption on the interest earned on the post office savings account. The tax exemption is available under Section 10(15) of the Income Act. The exemption was made available by the government by a way of notification No. SO 1269(E), dated 3-6-2011 issued in 2011."
S Sriram, Partner, Lakshmikumaran & Sridharan Attorneys, says, "Under Section 10(15)(i) of the Income-tax Act, 1961, the central government is empowered to notify certain securities, bonds, certificates, and deposits, the interest income from which is exempt from tax, subject to specified conditions and limits. In exercise of this power, the Central Board of Direct Taxes (CBDT) issued Notification No. SO 607(E) dated 09.06.1989, granting a full tax exemption on interest earned from any post office savings bank account. However, this exemption was later restricted through Notification No. SO 1296(E) dated 03.06.2011, which limited the exemption to Rs 3,500 for a single account and Rs 7,000 for a joint account."
Claiming tax exemption under the new tax regime
According to tax experts, interest earned from balances in a post office savings account is exempt under both the old and the new tax regimes subject to the limits mentioned above. It is important to understand that the new tax regime bars certain deductions that are available under the old tax regime under Section 10 of the Income Tax Act. However, interest earned on post office savings account balance is eligible for tax exemption.Suresh Surana, a practising chartered accountant, says, "Section 115BAC, governing the new tax regime, specifies that an assessee cannot avail of the following exemptions specified under section 10 of the Income Tax Act, which includes:
Section 10(13A) - House Rent Allowance Section 10(5) - Leave travel Concession Section 10(14) - Covers special allowances detailed in Rule 2BB (such as children's education allowance, hostel allowance, transport allowance for other than especially abled, uniform allowance, etc.) Section 10(17) - Income by way of daily allowances/any other allowances received by MP (Member of Parliament), member of state legislature, etc. Section 10(32) - Clubbing benefit of Rs 1,500 per minor child Further, Section 115BAC of the IT Act also restricts the below mentioned deductions as follows:
Section 24(b) - Interest on borrowed loan for a Self-Occupied property or Vacant Property u/s 23(2)Section 32(1)(iia) - Additional DepreciationSection 32AD - Investment Allowance for investment in Andhra Pradesh / Telangana / Bihar / West Bengal33AB - Tea / Coffee / Rubber Development33ABA - Site Restoration Fund 35(2AA) - Deduction for Payment to National Laboratory or University or IIT35AD - Deduction in respect of specified business35CCC - Expenditure on agricultural extension project57(iia)- Family pensionAny provision of chapter VI-A, - section 80C, 80D, etc. However, Section 80CCD(2) (employer contribution on account of employee in a notified pension scheme) can be claimed.However, the restrictions imposed under Section 115BAC make it evident that if an assessee files the Income Tax Return (ITR) under the new tax regime, he has to forgo the aforementioned deductions and exemptions. However, Section 10(15) which provides for exemption towards specified interest income is not included within these restrictions, allowing taxpayers to avail themselves of its benefits regardless of the tax regime under which they choose to file their ITR."
Tax exemption along with Section 80TTA, Section 80TTB
Interest earned on post office savings accounts is also exempted subject to same specified limits, under the old tax regime. Further, along with the tax exemption, deductions can be claimed under Section 80TTA and Section 80TTB under the old tax regime.Wadhwa says, "Taxpayers opting for the old tax regime and earning interest from deposits in the post office savings bank account can also claim a deduction under Section 80TTA/80TTB, as the case may be, only from eligible interest remaining after claiming exemption under Section 10(15). However, remember, the deduction of Section 80TTA/80TTB is not available under the new tax regime."
How to claim tax exemption on Post Office Savings Account interest in new tax regime
Surana says, "Individuals can claim a tax exemption of Rs 3,500 on interest earned from a single account and Rs 7,000 on interest earned from a joint account for post office savings account. Taxpayers are not required to add the income to their gross taxable income. However, as per the income tax rules, the exempted income must be reported in the ITR form at the time of filing ITR. Taxpayers also should remember that if the interest income exceeds the specified amount, the excess amount will be taxable under the head income from other sources."Is the tax exemption on post office savings account interest mentioned under new Income Tax Bill, 2025?
In February 2025, the government tabled the new Income Tax Bill. The new tax Bill is being brought in to simplify the language of the law for clarity and coherence. The new tax Bill tries to eliminate the intricate language to enhance readability, removing redundant and repetitive provisions for better understanding of the law and reorganising sections logically to facilitate ease of reference.Sriram says, "The exemption on the post office savings account interest is also retained in the new Income-tax Bill, 2025, under Section 11, read with Schedule II, at Sr. No. 11 of the Table. Additionally, as per Clause (j) of Section 536 of the Income-tax Bill, 2025, all notifications issued under the 1961 Act continue to apply under the new law until fresh notifications are issued. Consequently, the existing exemption on interest from post office savings bank accounts remains in force."
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This story originally appeared on: India Times - Author:Faqs of Insurances
