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Section 80TTB: Tax Deduction for Senior Citizens on Interest Income
Section 80TTB is a provision under the Indian Income Tax Act that offers tax benefits to senior citizens on their interest income. Introduced in the Union Budget of 2018, this section aims to provide relief to senior citizens who depend on interest earned from their savings.
As per the Income Tax Act, a “senior citizen” is one who is resident individual of age 60 years or above at any time in the relevant financial year. As per this newly introduced section, any senior citizen as a resident individual in India can claim a deduction of up to Rs 50,000 from the interest income earned on deposits (saving or fixed) during the concerned financial year. However, there are certain limitations and exceptions to this section. The following article provides detailed information on Section 80TTB and will help you navigate its clauses and conditions.
What is Section 80TTB?
This section bestows the right to senior citizens to claim a larger deduction of Rs 50,000 on the interest income earned on deposits (saving or fixed). It is designed to help the senior citizens to maintain a decent lifestyle after the retirement phase, many of whom depend on their interest income for these expenses. The aim is to convey strong support to the senior citizens such that they are able to maintain a decent economic status after retirement and thereby, support a cheerful existence and healthy livelihood. The senior citizens are also in the risk of mental and physical illnesses which make it more necessary to save their money for such unpredictable medical expenses. Section 80TTB has certain limits and eligibility criteria which should be followed in order to gain the benefits from the same.
Deduction available through Section 80TTB
The amount deducted should be the amount specified below from the gross total income and it should be upto Rs 50,000. specified income is any of the following sources of income in aggregate -
- Interest on bank deposits; either savings , recurring or fixed deposits.
- Interest on deposits at the post office.
- Interest on the deposits held in co-operative society mainly engaged in the business of banking. This may include a co-operative land mortgage bank or a co-operative land development bank.
One must note that the interest earned on savings accounts and fixed or recurring deposits held with the above three entities will be considered for the purpose deduction. Moreover, there are also other interests earned with other types of offices. These include titles like Senior Citizen Savings Scheme accounts, post office time deposits, five-year recurring deposits and Post Office Monthly Income Schemes. These will also be eligible for deduction. Thereby, one may conclude that Section 80TTB specifically mentions only the sources of interest income which are perfectly eligible for deduction. However, interests received from any other schemes and sources like interest from a company FD won’t be eligible for the said deduction. Also, interest earned on bonds and debentures will be disqualified for the deduction under this Section.
The interest incomes are usually added to the gross total income of the individual and taxed at the rates specified for the person.
What is the eligibility for Section 80TTB deduction?
The senior citizens as per the definition prescribed in the Income Tax Act, 1961 are the eligible candidates for the applicability for Section 80TTB. The following are the legitimate eligibility criteria-
- A resident senior citizen
- Age should be 60 years or above at any time during the relevant Financial Year (FY)
What are the exceptions to Section 80TTB?
It should be noted that Section 80TTB is applicable only to senior citizens who are residents of India and not NRIs (Non-resident Indians).
The Exception to section 80TTB include:
- Non-senior citizens and HUFs.
- If the interest income is derived from the deposit held by, or on behalf of a firm then an Association of Persons (AOP) or a Body of Individuals (BOI), Section 80TTB deduction is not available for the partner of any such firm or any member of such an AOP or BOI while computing their total income.
How to Calculate Your Deductions Under Section 80TTB?
To calculate your deductions under Section 80TTB of the Income Tax Act, which pertains to interest income for senior citizens, you can follow these steps:
- Determine the eligible interest income: Calculate the total interest income earned from specified sources, such as bank deposits, fixed deposits, savings accounts, or post office deposits during the financial year.
- Identify the maximum deduction limit: Under Section 80TTB, the maximum deduction available for senior citizens is Rs. 50,000. However, if your total interest income is less than Rs. 50,000, you can claim the actual interest income as the deduction.
- Compare interest income with the maximum limit: If your interest income is equal to or less than Rs. 50,000, you can claim the entire interest income as a deduction under Section 80TTB. If your interest income exceeds Rs. 50,000, you can claim a maximum deduction of Rs. 50,000.
- Calculate the deduction amount: If your interest income is higher than the maximum limit of Rs. 50,000, the deduction will be capped at Rs. 50,000. If your interest income is less than or equal to Rs. 50,000, you can claim the actual interest income as the deduction.
- If your interest income is Rs. 40,000, you can claim Rs. 40,000 as a deduction under Section 80TTB.
- If your interest income is Rs. 60,000, you can claim a deduction of Rs. 50,000 under Section 80TTB.
Report the deduction in your income tax return: When filing your income tax return, report the eligible deduction under Section 80TTB in the appropriate section. Ensure that you retain the necessary documentation, such as bank statements or interest certificates, to substantiate your claim if required.
Section 80TTB deduction is specifically available to senior citizens, aged 60 years or above. You can consult a tax expert to now the calculation around Section 80TTB and to claim the expenses.
What are the key differences between Section 80TTA vs 80TTB?
As has already been made clear, there is quite an up-gradation of benefits for the senior citizens in Section 80TTB as compared to Section 80TTA.
- Section 80TTA has similar specifications as Section 80TTB except that it provides deductions of interests only on savings account held in the bank, co-operative bank or a post-office. The amount specified is INR 10,000 from the gross total income of the individual taxpayer or a Hindu Undivided Family (HUF). Therefore, it was available to everyone irrespective of their age holding a deposit. However, the benefits of Section 80TTA were blocked for senior citizens once Section 80TTB came into force from the financial year 2018-2019.
Now that Section 80TTB is exclusive for senior citizens, Section 80TTA is not available to senior citizens anymore. One may easily mark the following distinctions between the two sections.-
|Section 80TTA||Section 80TTB|
|Section 80TTA is applicable to individuals and HUFs except for senior citizens.||Section 80TTB is exclusive for senior citizens.|
|The quantum of deduction specified for Section 80TTA is up to INR 10000||In Section 80TTB, the quantum of deduction enlarges up to INR 50000.|
|The specified type of income for the eligibility of Section 80TTA is the interest on Savings account.||Section 80TTB is more open to counting the interest income on all kinds of deposits.|
Here are some common documents that are typically requested:
- Bank Statements: You may need to provide bank statements or passbook entries that show the interest income earned from specified sources like bank deposits, fixed deposits, savings accounts, or post office deposits. These statements should clearly indicate the interest earned during the financial year.
- Interest Certificates: Some financial institutions or banks provide interest certificates specifically for tax purposes. These certificates outline the interest earned on your deposits and can be used as supporting documentation for claiming the deduction under Section 80TTB.
- Fixed Deposit Receipts: If you have invested in fixed deposits, you might need to provide the fixed deposit receipts or certificates as evidence of the interest earned.
- Savings Account Statements: If you have earned interest on savings account balances, you may be required to provide statements from your bank that clearly show the interest income credited to your savings account.
- Post Office Deposit Documents: If you have investments in post office deposits, you may need to provide relevant documents such as deposit certificates or statements that indicate the interest income earned.
- Any other Supporting Documents: Depending on the tax authority's requirements, you may need to provide additional supporting documents that validate your interest income and claim under Section 80TTB. This could include documents related to other interest-earning instruments like recurring deposits or bonds.
Several clauses had been introduced to amend the Section 80TTA such that it became the Section 80TTB, which has been launched exclusively for senior citizens. For full benefits, one must be sure to provide their bank documents carefully, the PAN card becoming extremely important. The bank deducts TDS (Tax deducted at Source) at the rate of 10% if the PAN is provided by the depositors. If it is not provided, the rate increases to 20% resulting in loss of the depositor. Section 80TTB with being in effect from the assessment year 2019-20 has been a big relief for senior citizens. It doesn’t become a harmful fact that Section 80TTA has been prohibited from them. In fact, the segregation of the Sections for the normal and senior citizens does make the taxation procedure more convenient. Section 80TTB becomes more considerate towards the senior citizens who need special attention by the government for their decreasing health and property. The procedure to gain the benefits is also fairly easier with the new methods of e-filing of tax return and deposits. Thereby, the amendment does become a saviour which should be respected as a decision by every citizen.
Frequently Asked Questions
Q- How can one understand the tax savings for senior citizens through Section 80TTB?
Tax savings for the senior citizens has come off as being much simpler than before since the introduction of Section 80TTB. In fact, compared to the normal taxpayer, the senior citizen is able to have a greater saving through their interest incomes on various fixed and savings deposits.
Therefore, the total income of senior citizen is less than normal citizen by Rs.40000/- with the introduction of 80TTB if he/she opts for old tax regime.
The tax computation above is a dynamic one based on the financial year and other rebates and cess rates. Nonetheless, it becomes very noticeable on how Section 80TTB does benefit the senior citizens by a significant margin.
Q- How can senior citizens save more through Section 80TTB?
The tax break is advised to be used for the maximum benefit. The senior citizen must use the tax break to invest in such deposits with entities specified such that the total interest income on deposits comes to Rs 50,000 per financial year. It becomes a great saving strategy through investments since the interest income becomes tax-free for senior citizens upto Rs 50,000 . This is because the interest becomes deductible from their income before taxes are levied.
Q- What is the amount of deduction under section 80TTB for the FY 2021-22 and FY 2022-23?
The deduction is up to Rs.50,000 in view of the interest from the deposits held by senior citizens. Senior Citizens holding the FDs, savings account at Banks, Co-operative Banks, and Post Offices, earning interest from such deposits, are eligible to have the deduction under section 80TTB.
Q- What are the benefits of Section 80TTB of Income Tax Act?
It provide extra benefit to senior citizens in the form of deduction of up to Rs. 50000 on interest on FD etc.
Q- Is deduction of interest income from deposit up to Rs.50,000/- under section 80TTB available to senior citizens is over and above deduction up to Rs.1,50,000 available under section 80C?
Yes, it is over and above the limit of Rs 1.5 lakhs u/s 80C. the benefit under section 80TTB will only be available under the old tax regime and taxpayers opting for new tax regime cannot claim this benefit while filing ITR.
Q- How is the interest earned on a senior citizen saving scheme taxable? Is the deduction under Section 80TTB applicable even if he/she comes under the 20% tax bracket?
The interest received under the scheme is taxable in the hands of the depositors, Yes. Interest earned can be claimed as deduction u/s 80TTB.