Joint Bank Account Tax Rules for Interest on Saving, Fixed Deposit

| 2 years ago


Getting a joint bank account is common financial planning among us.

In this type of bank account, the account holders are named as:

  1. Primary account holder, and
  2. Secondary account holder

While opening the bank account, the account holders can choose any of the prescribed modes of operation like “self only”, “Jointly” etc.

Interest earned on these accounts are taxable in the hands of both primary and secondary account holder.

In this article, we will cover the taxation of all income arising from a joint bank account.

Income tax on Joint Saving or Fixed Deposit (FD) Account 

Bank account balance consists of:

  1. Principle Component [Deposits]
  2. Interest Component

Both these components have different taxation rules.


Principle Component of Bank Account 

Principle component is taxable equally in the hands of all the account holders.

In other words,  the deposit amount is divided equally among the account holder as their income.

The non-depositing person will consider his portion as a gift which is taxable as “Income from other sources”.

Whereas the depositing person doesn’t need to add his portion of contribution anywhere if he had already considered the whole deposit amount as the income.


Mr.Umesh monthly deposit R.28,000/- in a joint saving bank account held by him and his friend Mr Neil.

This deposit becomes the asset of both Umesh and Neil equally and by that mean both of them should show that as their income.

For Mr.Umesh his deposit will not increase his tax liability but for Mr.Neil Rs.14,000/- p.m [50% of Rs.28,000] will be added to his taxable income as the gift.

Interest Component of Bank Account 

Just like principle component, interest accrued on a joint account will be taxable equally in the hands of all the account holders.

This income will be disclosed under the income head of “Income from other Sources”.

However, for saving account each account holder will get an exemption Rs.10,000/- under section 80TTA.

Whereas for a fixed deposit account, a senior citizen can get an exemption of Rs.50,000/- under section 80TTB. [Applicable from FY 2018-19]



  1. Principle component for a non-depositing party is considered as a gift and an annual gift of Rs.50,000/- is exempted from tax.
  2. Further gift received from relatives or during marriage ceremony is also exempted.
  3. Interest component can’t be taken as the gift.
  4. If the secondary account holder is a spouse or minor child, clubbing of income rule attracts.

Disclaimer: The above article is only for educational purpose and nothing else.

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