The Section 80TTB of Income Tax Act, 1961 was introduced in the Budget 2018. This provision is concerned with the deductions applicable to the interest that senior citizens earn on their savings deposits. To enjoy the deductions made available under this provision, senior citizens must make it a point to learn all about the eligibility, limitations and exceptions accompanying it.
In this article
Who Can Claim Deductions Under Section 80TTB?
The tax provision of Section 80TTB states that only resident individuals who are either 60 years or more of age can claim deductions on their interest earnings. Notably, senior citizens with a deposit account like a fixed deposit account, recurring deposit accounts and savings account can claim a deduction of the interest they accrue on their deposits in a fiscal year.
What are the Deductions Under Section 80TTB?
The maximum deduction under Section 80TTB is the lower of these following –
- The total interest amount earned.
- Maximum of Rs. 50,000.
For instance, if the interest accrued on deposits is less than Rs. 50000, then as per this provision, the entire interest earnings are allowed as deductions. Alternatively, in case the accrued interest exceeds Rs. 50000, entities will be eligible to claim deductions of Rs. 50000 under Section 80TTB.
What are the Exceptions Under Section 80TTB?
These following entities are exempted from claiming tax deductions under Section 80TTB of Income Tax Act –
- Residential individuals and HUFs other than senior citizens.
- Non-resident Indians.
- The income generated on savings accounts that are held by entities like – Associate of Persons, a body of individuals or firms.
Nonetheless, one must remember that senior citizens cannot claim deductions on interest accrued on types of deposits. Ideally, interest accrued on savings account held with a banking institution, a post office or a co-operative society can be claimed as tax deduction under this section of ITA.
In other words, the benefits extended under Section 80TTB will not be available on earnings generated through company fixed deposits, NCDs or bonds.
Furthermore, if any senior citizen decides to choose the Alternative Tax Regime that comes under the purview of Section 115BAC, deductions under Sec 80TTB is unavailable from AY 2021-22.
Ways to Avail Deductions under Section 80TTB in ITR
Eligible entities can claim deductions under Section 80TTB of Income Tax Act, 1961 by simply filing their income tax returns. However, before doing so, they must include the interest income generated from different deposit account into their aggregate income in a fiscal year.
One must make it a point to disclose his/her interest earnings under “Income from Other Sources” header while filing ITR online. Subsequently, then can proceed to claim the applicable deductions under Sec 80 TTB of the Income Tax Act.
Benefits of Section 80TTB for Senior Citizens
When compared to general taxpayers, senior citizens already enjoy a higher basic tax exemption limit. On top of it, Section 80TTB of Income Tax Act further facilitates greater tax savings for entities above the age of 60 years.
Example: Suppose, Mr Ravi is a senior citizen who has earned interest on these sources of earnings –
- Interest generated on savings = Rs 5,000
- Accrued on fixed deposits = Rs 2,00,000
- Income from other sources = Rs 1,50,000
This table below helps to gain valuable insight as to how senior citizens benefit with the help of Sec 80TTB –
|Particulars||Senior Citizens (Rs.)||Normal Taxpayers (Rs)|
|Interest on savings||5000||5000|
|Interest on fixed deposit||200000||200000|
|Earnings from other sources||150000||150000|
|Deductions under 80TTA (less)||Not applicable||5000|
|Deductions under 80TTB (less)||50000||Not applicable|
|Taxation before 87A rebate||2500||5,000|
|Rebate available under section 87A||2500||2500|
|Amount of tax to be paid (inclusive of cess @4%)||NIL||2600 (2600 + 4% Cess)|
As per this example, the tax liability for senior citizens is NIL when compared to regular taxpayers as the latter has to pay Rs. 2600 as tax.
It must be noted that for the fiscal year 2020-2021 the rebate amount under Sec 87A is a maximum of Rs 12500 for aggregate earnings of Rs 5 lakh. So, when the same is factored in the computation discussed above is bound to change.
Take a look at this table below to gain valuable insight into the difference between 80TTA and 80TTB –
|Parameters||Section 80TTA||Section 80TTB|
|Introduced on||It is in effect from the assessment year of 2013-14.||It is in effect from the assessment year of 2019-20.|
|Beneficiary||HUFs and individuals can avail the deductions allowed under Section 80TTA.||Only senior citizens can avail the deductions made available under 80TTB.|
|Qualified sources||Only interest on savings accounts qualifies for a deduction under this section.||Deposit accounts like – savings accounts, fixed deposits and recurring deposits qualify for the deductions under this account.|
|Exemption limit||Annually the exemption limit is a maximum of Rs. 10000.||In a fiscal year, the maximum exemption limit is up to Rs. 50000.|
|Eligibility||NRI and NRO accounts are eligible for the deductions under Section 80TTA of ITA.||The deductions under Sec 80TTB do not apply to NRI accounts.|
|Claim process||Eligible entities can avail the deductions under Section 80TTA by filing income tax returns.||One can claim deductions under this tax provision by filing 80TTB.|
Senior citizens must find out about all the aspects of Section 80TTB of Income Tax Act to reduce their tax liability easily. Above all, having a fair idea about the accompanying deduction and claim process will allow individuals to protect their interest income from eroding and in turn, accelerate greater savings. As a direct result, senior citizens will be able to manage their income more efficiently and resultantly achieve financial stability.