What Happens If You Don’t Report Savings Account Interest in ITR?

Taxpayers may hold more than one savings account, including salary savings accounts, secondary accounts, or accounts that are rarely used. They may also earn interest from fixed deposits and recurring deposits, which needs to be considered separately while filing the ITR.

Banks and other reporting entities may report interest income to the Income Tax Department through PAN-linked reporting systems such as SFT/AIS. Therefore, even where TDS is not deducted on savings account interest, the income may still appear in the taxpayer’s tax records.

How Is Savings Account Interest Reported in ITR?

Interest earned on the balance maintained in a savings account during a financial year is reported under “Income from Other Sources” while filing the ITR. The total interest earned across all savings accounts held by a taxpayer needs to be considered during filing, including interest from inactive or secondary accounts.

What Happens If Interest from Savings Account Is Not Reported in ITR?

If interest from a savings account is not reported in the ITR, the impact may depend on factors such as the interest earned, the total taxable income, and whether the applicable taxes on it were already paid.

1. Income mismatch may arise

Savings account interest reported by banks may also appear in records such as the Annual Information Statement (AIS) linked to the taxpayer’s PAN. If the interest disclosed in the ITR does not match these records, it may create an income mismatch during verification.

2. You may receive a tax notice or compliance communication

If the interest from savings bank accounts reported in the ITR does not match the information available with the Income Tax Department, you may receive a notice or compliance communication asking for clarification.

3. Additional tax and interest may become payable

If savings account interest was missed during ITR filing and the omission results in additional tax payable, the taxpayer may need to pay the pending tax along with applicable interest. Section 234A applies where the return itself is filed late or not filed. Depending on the facts, interest under Sections 234B and 234C may also apply for default or deferment in advance tax payment.

Under the Income-tax Act, 2025, the corresponding provision for interest for default in furnishing return is Section 423.

4. You may miss eligible deductions (if you have opted for the old tax regime)

Savings account interest may qualify for deduction under Section 80TTA or Section 80TTB, subject to the applicable conditions and limits, if the taxpayer has opted for the old tax regime. Non-senior individuals and HUFs may claim deduction under Section 80TTA up to ₹10,000 on eligible savings account interest. Resident senior citizens may claim deduction under Section 80TTB up to ₹50,000 on eligible deposit interest.

Can You Be Penalised for Not Reporting Savings Account Interest?

In many cases, missing savings account interest may be corrected through a revised return, updated return where applicable, or payment of pending tax along with applicable interest. However, if the omission results in under-reporting or misreporting of income, penalty provisions may become relevant. The Income Tax Department lists the penalty for under-reporting at 50% of the tax payable on under-reported income and 200% where under-reporting is due to misreporting. 

If the ITR itself is not filed within the prescribed due date, a late filing fee may apply under Section 234F. The fee is ₹1,000 where total income does not exceed ₹5 lakh and ₹5,000 in other cases. Under the Income-tax Act, 2025, the corresponding provision is Section 428. 

Can Non-Reporting of Savings Account Interest Lead to Prosecution?

A simple accidental omission of savings account interest does not automatically lead to prosecution. However, the seriousness may increase where the case involves wilful tax evasion, wilful failure to file a return, false reporting, larger unreported income, or continued non-compliance after receiving notices from the Income Tax Department.

What to Do If Savings Account Interest Was Missed in ITR?

If you have missed savings account interest during ITR filing, first verify the interest details through bank statements, AIS records, or annual interest certificates. This can help identify whether the missed income affected the total taxable income reported in the return.

If required, you can correct the omission later through a revised return, subject to the timelines allowed under the Income Tax Act. Any pending tax, applicable interest charges, or late filing fees, if relevant, may also need to be cleared/paid during the correction process.