The Monthly Income Scheme (MIS) of the Post Office properly Interest inomce is fully taxable. There is no provision in the Income Tax Act to exempt the interest on post office MIS. For this transaction the Section 80L is ammended by the Finance Act 2012 has as a new section 80TTA in the Income Tax Act – 1961 which will provide deduction up to Rs. 10,000/- to an Individual/HUF towards Interest on saving bank A/c maintained with a bank/society/post office. The deduction admissible shall be interest received or Rs. 10,000/- whichever is lower. (It may be noted that saving bank account interest maintained with a post office is exempt from income tax u/s 10(15)(i) & the same is not to be considered in claiming deduction of Rs. 10,000/- u/s 80TTA).
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