What is Section 80TTB?

This section bestows the right to senior citizens to claim a larger exemption of Rs 50,000 from income tax on the interest income earned. 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 money 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.


When was this section introduced?

Section 80TTB was held to be effective from 1st April 2018 which entitled senior citizens to receive the benefits from the financial year 2018-2019. This Section acts like an up-grade of the Section 80TTA, as the threshold limit of the tax deduction on interest income was raised from INR 10,000 to INR 50,000.


Deduction available through Section 80TTB

The amount deducted should be the amount specified from the gross total income and it should be lower than Rs 50,000. Among the specified income, any of the following sources of income are counted in their 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 the quantum of deduction. Moreover, there are also interests earned on 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. 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)

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-regional Indians). However, NRIs are still eligible for the deduction available for interest earned from the savings account for a maximum sum of INR 10,000 as per the Section 80TTA.

What are the exceptions to Section 80TTB?

As per Section 80TTB, the said deduction on interest income is applicable to all senior citizens. However, there’s a small exception. Section 80TTB deduction won’t be applicable for the partner of any firm or any member of an Association of Persons, or Body of Individuals if the specified deposits are being held with the senior citizen on behalf of them. Other exceptions include:

  • Non-senior citizens and HUFs not eligible.
  • If the interest income is derived from the deposit held by, or on behalf of a firm, an Association of Persons (AOI) or a Body of Individuals (BOI) by a certain “senior citizen”, then the deduction under Section 80TTB won’t be applicable.

Section 80TTA vs 80TTB - Key Differences explained

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 to 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 to senior citizens.
The quantum of deduction specified for Section 80TTA is up to INR 10000 In Section 80TTB, the quantum of deduction enlarges 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.

Conclusion

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 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 2018 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 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.

Income Normal Citizen Senior Citizen 
1. Savings interest Rs.20000 Rs.20000
2. Interest on FD Rs. 100000 Rs. 100000
3. Additional  Rs. 250000 Rs. 250000
Gross Incomes  Rs. 370000 Rs. 370000
Deduction  Rs. 10000 under 80TTA Rs. 50000 under 80TTB
Taxable  Rs. 360000 Rs. 320000

Therefore, the total income if senior citizen is less than normal citizen by Rs.40000/- with the introduction of 80TTB.

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 falls above Rs 50,000 per financial year. It becomes a great saving strategy through investments since the interest income becomes tax-free for senior citizens. 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 F.Y.2018-19 and 2019-20?

The tax deduction is up to Rs.50,000 in view of the interest from the fixed deposits held by senior citizens. Senior Citizens holding the FDs at Banks, Co-operative Banks, and Post Offices, earning interest from such deposits, are eligible to have the deduction under section 80TTB.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.