In finance budget 2018, government has introduced section 80TTB to provide tax benefits to senior citizens getting interest from banks, co-operative banks and post offices. This means Section 80TTB is applicable with effect from financial year 2018-19 (AY 2019-20).
If you are a senior citizen, then for the financial year 2023-24 (assessment year 2024-25) you can claim tax deduction under section 80TTB for interest from deposits.
In this article, let use discuss when an individual is eligible for section 80TTB tax deduction and what are the conditions to be fulfilled, the amount of tax deduction a senior citizen can claim for interest from deposits and how to claim tax deduction for interest from deposits under section 80TTB. At the end you will also learn the difference between section 80TTA and 80TTB.
Who is eligible for tax deduction U/S 80TTB
A senior citizen can claim tax deduction for Interest on deposits earned from a bank, co-operative society engaged in banking business and post office deposits. Conditions to this tax deduction is specieid in section 80TTB of income tax act 1961.
A person will be considered as senior citizen if at any time during the financial year he/she is aged 60 years or above. This means to claim tax deduction under section 80TTB for the financial year 2023-24 (assessment year 2024-25), the taxpayer must attend the age of 60 years at any time during the financial year 2023-24.
A partnership firm, company, AOP, BOI are not allowed to claim tax deduction under section 80TTB. Benefits of this section is also not applicable to a senior citizen who is non-resident in India for the financial year.
Conditions to be fulfilled
If you fulfill following conditions then up to a maximum limit of Rs 50,000 can be claimed as tax deduction under section 80TTB from your gross total income.
- You must be a senior citizen during the financial year.
- Interest income is from deposits held on banks, co-operative societies engaged in the banking business or post offices.
- The senior citizen is a resident in India.
This means, a resident senior citizen can claim tax deduction under section 80TTB for Interest income from bank saving account, fixed and recurring deposits.
Similarly, interest income from post office saving account and other deposits such as NSC, senior citizen saving scheme, monthly income scheme and recurring deposits are eligible for 80TTB deduction.
Please remember, interest received on deposits with a company will not be eligible for tax deduction under section 80TTB.
Quantum of tax deduction on interest on deposits-Section 80TTB
In simpler term least of the following will be allowed as tax deduction to a resident senior citizen under section 80TTB:
- interest income from bank, co-operative society engaged in banking business and/or post office deposits, or
- Rs 50,000
This means if interest is from deposits of a bank, co-operative society engaged in banking business or post office is less than Rs 50,000, then deduction under section 80TTB will be restricted up to the amount of interest incurred.
For instance, if you being a resident senior citizen has received interest from fixed deposit held in bank amounting to Rs 35,000 during the financial year 2023-24 (assessment year 2024-25), then tax deduction under section 80TTB will be restricted to Rs 35,000, as its lower than the maximum limit of Rs 50,000.
Similarly, if instead of Rs 35,000, you have received Rs 65,000 as interest from bank fixed deposit for the financial year 2023-24 (assessment year 2024-25), then tax deduction under section 80TTB will be restricted to Rs 50,000.
Section 80TTA Vs 80TTB
Section 80TTA provides similar tax benefits for interest on saving account held in a bank, co-operative bank rendering banking business or post office up to a maximum limit of Rs 10,000. However, its not available on interest from fixed, recurring and time deposits.
With effect from financial year 2018-19, section 80TTA is not available to those person who are eligible for taking benefits of section 80TTB. This means section 80TTA will not be applicable to resident senior citizen with effect from financial year 2018-19 as the new section 80TTB has been introduced for it.
For the financial year 2023-24 (assessment year 2024-25), you can claim tax deduction under section 80TTB of the income tax act, 1961, if you are a senior citizen and satisfied all other conditions of section 80TTB.
If you are resident senior citizen then as discussed above, up to a maximum limit of Rs 50,000 tax deduction can be claimed on interest on deposits. You can not avail benefit of Section 80TTA as section 80TTB is applicable to you.
However, Section 80TTB is not applicable to a senior citizen who is non-resident in India for the financial year. Such non-resident senior citizen can claim section 80TTA benefits as section 80TTB is not applicable to him.
How to claim tax deduction under section 80TTB
You need to include the total interest amount to your annual tax return under the head “income from other sources” before claiming tax deduction under section 80TTB. It will be part of your Gross total income.
Before claiming tax deduction on interest, we suggest you to check form 26AS and AIS online to know if any TDS amount has already been deducted from your interest income.
If tax has been deducted, then match the actual interest income calculated by you with the amount shown in form 26AS and AIS. After arriving at the final interest income, include it under the head “income from other sources” before claiming tax deduction under section 80TTB.
Refund can be claimed while filing return of income if you are not taxable but tax has been deducted (TDS) from your interest.
You need to file your annual return of income on or before the due date of filing or else late filing fee will be charged on you based on the date of filing.
If as a pensioner, your pension and interest income is more than Rs 5,00,000 per year, then you can easily reduce your taxable income up to Rs 5,00,000 or less by taking tax benefits of section 80TTB in addition to other eligible tax deductions.
You can take help of a chartered accountant or tax expert to file your income tax return according to the provisions of income tax act 1961 based on your eligibility.
Key Takeaways
- A resident senior citizen (60 years or older) is eligible to claim tax deduction under section 80TTB.
- Section 80TTB allow you to claim tax deduction up to Rs 50,000 on specified interest income.
- Interest income from various deposit allowed as tax deduction under section 80TTB includes interest from savings accounts, fixed deposits, recurring deposits, registered co-operative society and post office.
- Interest from corporate deposits is not eligible for section 80TTB tax deduction.
- Taxpayer need to file their income tax return for the financial year in order to claim tax deduction U/S 80TTB.
- Interest income should be first shown under the head income from other sources before claiming tax deduction.
- Taxpayer need to keep supporting documents such as interest certificates and bank statements in case they are asked to produce before the AO.
