Section 80TTB: Tax Deduction for Senior Citizens on Interest Income

What is Section 80TTB?

Section 80TTB is a section that deals with the interest deduction for senior citizens. Under this section, senior citizens can claim a deduction of upto Rs.50,000 interest on income earned from various types of deposits. This section bestows the right to senior citizens to claim a 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. Section 80TTB has certain limits and eligibility criteria that should be followed in order to gain the benefits from the same. However, there are certain limits and eligibility criteria that need to be followed to avail of section 80TTB deduction.

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 of deduction. Moreover, there are also other interests earned with other types of offices. These include 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.

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:

• HUFs and individuals below 60 years of age.
• Non-resident Indians (NRIs)
• Entities like associations of persons (AOP), bodies of individuals (BOI), or firms.
• Senior citizens cannot claim deduction under section 80TTB for the interest earned on investments like fixed deposits with companies, bonds, or NCDs.
• Individuals opting for an alternative tax regime under section 115BAC cannot claim section 80TTB deduction.

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.

For example:

• 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. However, you need to file an ITR to claim this exemption. So make sure you file your ITR by the ITR filing deadline.

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.-

Documents Required for Claiming Deductions under Section 80TTB

Senior citizens are not required to furnish any special documents for claiming a deduction under section 80TTB. They can claim their section 80TTB deduction by furnishing their PAN number, interest certificate, and bank statement.

• 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.

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 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.Section 80TTB is dedicated towards the senior citizens who need special attention by the government for their decreasing health and property. If you are a senior citizen, make sure to file your ITR by 31st july and claim the deductions you are eligible for. And if you find ITR filing complicated, don’t worry! You can simply connect with our tax experts who can help you with your tax filing journey to make sure you pay minimum tax and stay stress-free. Book an eCA Now!