Deduction in respect of interest on deposits in case of senior citizens
Section 80TTB of the Income Tax Act, 1961, offers tax benefits to senior citizens in India on their interest income from various sources. Let’s break down the key points in simple terms with examples:
1. Who is Eligible?
- If you are an individual aged 60 years or above during the relevant financial year, you qualify as a “senior citizen” under this section.
2. What Income is Covered?
- This section applies to interest income earned from the following sources: a) Interest from deposits in a bank covered by the Banking Regulation Act, 1949 (including major banks). b) Interest from deposits in cooperative banks that do banking business. c) Interest from deposits in the Post Office.
3. Deduction Amount:
- If your total interest income from these sources is up to ₹50,000, you can deduct the entire amount from your taxable income.
- If your interest income exceeds ₹50,000, you can still claim a fixed deduction of ₹50,000.
For Example:
- Let’s say Mr. Sharma, a senior citizen, earns ₹40,000 in interest from his savings account in a nationalized bank and ₹15,000 from a fixed deposit with a cooperative bank. His total interest income is ₹55,000.
- Since his total interest income is more than ₹50,000, he can claim a deduction of ₹50,000.
- His taxable income will be calculated after deducting ₹50,000 from his total interest income. So, only ₹5,000 of interest income will be taxable.
4. Special Note for Business and Partnership:
- If the interest income is earned through a firm, partnership, or association of persons, the individual partners or members cannot claim this deduction. Only the entity as a whole can claim the deduction.
In summary, Section 80TTB of the Income Tax Act provides a tax benefit to senior citizens by allowing them to deduct a certain amount of interest income from specified sources before calculating their taxable income. This can lead to reduced tax liability for senior citizens.
Complete legal text of section 80TTB of Incomec Tax Act, 1961
(1) Where the gross total income of an assessee, being a senior citizen, includes any income by way of interest on deposits with—
(a) a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act);
(b) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or
(c) a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898),
there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction—
(i) in a case where the amount of such income does not exceed in the aggregate fifty thousand rupees, the whole of such amount; and
(ii) in any other case, fifty thousand rupees.
(2) Where the income referred to in sub-section (1) is derived from any deposit held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of the association or any individual of the body.
Explanation.—For the purposes of this section, “senior citizen” means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.
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