When it comes to filing your Income Tax Return, one area that many taxpayers overlook is interest income. Whether it’s from a savings account, fixed deposit (FD), recurring deposit (RD), or other schemes, banks report every rupee of interest earned under your PAN. As a result, correctly reporting Interest Income & ITR in 2025 is crucial to avoid mismatches, notices, or additional tax demands.

This complete guide explains how banks report your interest income, how you should disclose it in ITR, common mistakes people make, and how to avoid penalties.

⭐ What Is Interest Income & Why Must It Be Reported?

Interest income is the amount you earn from:

• Savings account interest

• Fixed deposit (FD) interest

• Recurring deposit (RD) interest

• Sweep-in account interest

• Corporate FD interest

• NRO account interest

• Post office deposit interest

Under Indian tax laws, all types of interest income are taxable unless specifically exempted.

When filing Interest Income & ITR, taxpayers must disclose this income to avoid mismatches with bank reporting.

⭐ How Banks Report Your Interest Income to Income Tax Department

Banks and financial institutions report all interest earnings under your PAN to the Income Tax Department through:

✔ Form 26AS

This form includes all TDS deducted and interest credited.

✔ AIS (Annual Information Statement)

This shows detailed financial transactions—interest from savings accounts, FDs, RDs, etc.

✔ TIS (Taxpayer Information Summary)

Summarizes the transactions for easier filing.

This means the government already knows your interest income before you file your return. That’s why reporting Interest Income & ITR correctly is extremely important.

⭐ Types of Interest Income You Must Report in ITR

1️⃣ Savings Account Interest

Taxable under “Income from Other Sources.”

You can claim deduction under Section 80TTA (up to ₹10,000).

2️⃣ Fixed Deposit (FD) Interest

Fully taxable. No deductions allowed.

Banks deduct 10% TDS if interest exceeds ₹40,000 (₹50,000 for senior citizens).

3️⃣ Recurring Deposit (RD) Interest

Fully taxable; reported under Other Sources.

4️⃣ Post Office Interest

• Post office FDs: taxable

• Savings account interest: exempt up to ₹10,000

5️⃣ NRO Account Interest

Taxable at 30% TDS.

6️⃣ Corporate FD/NBFC Interest

Also taxable and reported in AIS.

Whenever you file your return, ensure all these are included under Interest Income & ITR to avoid mismatch issues.

⭐ How Banks Deduct TDS on Interest Income

Banks deduct TDS at:

✔ 10% if interest > ₹40,000 (₹50,000 for senior citizens)

If PAN is missing, TDS = 20%

✔ No TDS deduction on savings interest

TDS applies only on FD/RD/Post Office TD interest.

⭐ How to Check Interest Income Reported by Banks

Before filing your return, always verify the interest income shown in:

✔ Form 26AS

Shows TDS deducted by banks.

✔ AIS (Annual Information Statement)

Shows interest credited—even if TDS wasn’t deducted.

✔ Bank Statements & Passbook

Cross-check interest earned quarterly or yearly.

This helps you file accurate Interest Income & ITR and prevents mismatches.

⭐ How to Report Interest Income in ITR (Step-by-Step)

Here is the correct method to report Interest Income & ITR in India:

Step 1: Collect All Documents

• AIS

• Form 26AS

• Bank statements

• FD/RD interest certificates

Step 2: Add Savings Interest Under “Income From Other Sources”

Savings bank interest is taxable.
But you can claim deduction under Section 80TTA (up to ₹10,000).

Step 3: Add FD & RD Interest Separately

Do NOT reduce TDS directly.
Instead:

• Add full interest income

• Then claim TDS credit separately

Example:

FD interest earned: ₹25,000
TDS deducted: ₹2,500

Add ₹25,000 to income, and claim ₹2,500 TDS.

Step 4: Report Interest From All Banks

Many people forget to include interest from:

• Multiple savings accounts

• Older FDs

• Auto-renewed deposits

IRS (Income Tax Department) compares your AIS data with your Interest Income & ITR filings. Mismatch leads to notices.

Step 5: Claim Deduction Under Section 80TTA/80TTB

• 80TTA: ₹10,000 deduction for savings interest (non-senior citizens)

• 80TTB: ₹50,000 deduction for senior citizens (covering savings + FD interest)

Step 6: Match Income With AIS & TIS

Make sure:

• Interest income matches

• TDS amounts match

• No missing entries

• No double entries

⭐ Common Mistakes People Make While Filing Interest Income & ITR

❌ Not reporting savings account interest

Many think it’s tax-free. Only up to ₹10,000 is deductible.

❌ Ignoring auto-renewed FD interest

Banks report it in AIS even if you don’t check your FD history.

❌ Not matching AIS with ITR

Most notices are issued because of mismatches.

❌ Assuming interest is exempt

Only specific schemes (PPF/EPF) are exempt.

❌ Not checking multiple bank accounts

Even ₹50 interest is reported in AIS.

❌ Incorrect TDS claim

Claiming TDS without adding corresponding income triggers scrutiny.

To avoid these issues, always report Interest Income & ITR accurately.

⭐ How Senior Citizens Benefit When Reporting Interest Income

Senior citizens get special benefits:

✔ Section 80TTB deduction: ₹50,000

Covers both savings & FD interest.

✔ No TDS up to ₹50,000

Banks do not deduct TDS for senior citizens if interest income is below ₹50,000.

This simplifies Interest Income & ITR filing for them.

⭐ How to Reduce Tax on Interest Income Legally

Here are simple tax-saving options:

✔ Submit Form 15G/15H to avoid TDS

If your taxable income is below exemption limit.

✔ Open tax-free accounts

Like PPF or Sukanya Samriddhi.

✔ Use Section 80TTA & 80TTB deductions

To reduce tax burden.

✔ Spread FDs across financial years

To keep annual interest below TDS limits.

✔ Use SCSS or Senior Citizen Schemes

Better interest + tax benefits.

⭐ What Happens If You Don’t Report Interest Income?

Income Tax Department may:

• Issue notice under Section 143(1)(a)

• Demand extra tax + interest

• Levy penalties

• Mark your case for future scrutiny

Because banks already report everything, hiding interest income is risky.
Always file Interest Income & ITR correctly.

⭐ Final Summary

Reporting Interest Income & ITR correctly is essential for smooth filing and avoiding unwanted notices. Banks already report all interest earned through AIS, TIS, and Form 26AS, so make sure your ITR matches that data. Include savings interest, FD/RD interest, post office schemes, and corporate deposits. Avoid common mistakes, claim available deductions, and file accurately.

This will ensure error-free filing and peace of mind during tax season.