Budget 2026: ₹50,000 tax saving on bank deposits under Income Tax Act, 2025, experts expect

Under Section 80TTA of the Income Tax Act 1961, taxpayers can claim a deduction of up to ₹10,000 against interest income from their savings deposits. However, savings accounts offer very little interest. Therefore, not many taxpayers prefer to park their money in savings accounts. Instead, they prefer to go for fixed deposits and recurring deposits that offer a higher interest rate than savings accounts.

Section 80TTA of the Income Tax Act, 1961 has become Section 153 under Income Tax Act, 2025.

As Budget 2026 approaches, tax experts at the American Chambers of Commerce in India (AMCHAM) have suggested increasing the deduction threshold to ₹50,000 under Section 153 of the Income Tax Act, 2025 and also make all types of bank deposits, including fixed deposits, eligible for deduction.

"Interest on all types of bank deposits (eg. FDRs) should be included within the scope of Section 153 of ITA 2025 . Further, the limit should be increased from ₹10,000 to ₹50,000," AMCHAM said in their pre-budget recommendations.

Reasoning

AMCHAM said that Section 80TTA of Income Tax Act 1961 was inserted by the Finance Act, 2012 to provide deduction of up to ₹10,000 in the hands of individuals and HUFs in respect of interest on savings account with banks, post offices and co- operative societies carrying on business of banking.

However, it said, "It is unlikely that salaried individuals would keep their entire savings in a savings bank account, which earns a much lower rate of interest as compared to term deposits. They are likely to transfer some portion of their savings to term deposits/recurring deposits in banks to earn comparatively better returns."

Finance Minister Nirmala Sitharaman will present Budget 2026 on February 1, 2026.