Tax Filing 2025: How to Report Interest from Joint Bank Accounts
Many families in India use joint bank accounts. They are convenient, but taxation rules often confuse people. The big question is—who pays tax on the interest earned?
Clubbing rule applies
Income tax law says tax liability depends on who owns the money in the account, not on whose name appears first. If the first holder deposited the money, then the interest is taxable in their hands. If both contributed, the interest is split in the same ratio.
Example
Suppose a mother and son open a joint savings account. The mother deposits Rs 6 lakh, and the son adds Rs 4 lakh. If the account earns Rs 50,000 interest in one year, then Rs 30,000 (60 percent) belongs to the mother and Rs 20,000 (40 percent) belongs to the son.
TDS impact
Banks deduct 10 percent TDS if annual interest crosses Rs 40,000 (Rs 50,000 for senior citizens). In joint accounts, TDS is usually cut using the first holder’s PAN. This can create mismatch if the second holder owns part of the money. The correction must be done in ITR.
Reporting in ITR
While filing returns for 2025, first collect the interest certificate from the bank. Then check who deposited the money. Split the income in the same proportion, and report it under “Income from Other Sources.”
Quick steps
- Find out who deposited the funds.
- Collect interest certificate or Form 26AS.
- Split income in right proportion.
- Match with TDS records.
- Report under “Other Sources” in ITR.
- Claim refund if extra TDS is deducted.
Single vs Joint Account Tax Rules
| Account Type | Who Reports Interest Income? | TDS Deducted On | Special Notes |
|---|---|---|---|
| Single Account | Sole account holder | Holder’s PAN | Simple, no confusion |
| Joint Account (one depositor) | Person who deposited money | First holder’s PAN | May need correction in ITR |
| Joint Account (both depositors) | Split in proportion of deposits | Usually first holder’s PAN | Must adjust while filing returns |
Did you know?
Joint accounts give easy access to funds, but for tax purposes, the source of money is more important than the account name.
Correct reporting prevents mismatches and avoids tax notices. With proper records, filing your 2025 tax return becomes stress-free.
