By making it mandatory for individuals to declare investments in their tax returns, I-T department has brought all such deposits under its scanner.
In an attempt to monitor all deposits made under post office schemes and bring them at par with bank interest earnings, the Central Board of Direct Taxes (CBDT) has notified that income from post office savings schemes will be taxed from the current financial year.
A CBDT notification said a declaration to this effect has to be made in the income tax returns filed by an individual. Any income earned beyond Rs 3,500 annually in case of individuals and Rs 7,000 in case of joint accounts will be taxable, the notification said.
By setting a minimum limit of Rs 3,500 on interest earnings, the I-T department has exempted small depositors who get 3.5% interest. Thus, a small depositor with a maximum saving of Rs 1 lakh, and Rs 2 lakh in case of joint account holders, won’t have to pay any tax.
“This is done to minimize and phase out tax deductions and exemptions,” CBDT spokesperson Shishir Jha said. The government is slowly moving towards the Direct Tax Code which seeks to phase out tax deductions.
Small and marginal farmers who generally invest in post office schemes would thus be exempt from the new levy. Tax will be applicable for only those who invest in post office instruments more than the prescribed limit.
Interest earnings from bank savings account are taxed by the government. This will also bring post office earnings at par with earnings from banks. Post office deposits had swelled over the years both from small and large investors. All such deposits were going under the radar of the tax investigators. There was no mechanism to keep a check.