Tipping point

Last Updated: Mon, Feb 04, 2013 05:50 hrs

Does the savings account balance get tax benefit?
Interest income earned by a savings account balance can get a tax benefit. Budget 2012 introduced Section 80 TTA, which allows tax deduction for interest income of up to Rs 10,000. This will be applicable for savings accounts held in all banks - public sector, private sector, foreign banks - and co-operative banks or India Post

Aren’t fixed deposits (FDs) more tax-friendly?
That will depend on the interest you earn on your savings account. If you earn four per cent, the FD will work out better. Say you invest in SBI's one-year deposit paying nine per cent. For the highest tax bracket, post-tax returns will work out to be 6.3 per cent. It would be the same case if the bank pays 5.5 or 6 per cent on the savings account. Interest income of seven per cent on the savings account will work out better than an FD. You can make the most of this deduction if you have parked emergency funds in savings banks accounts

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