Section 80TTA and 80TTB – Income Tax Deduction on Interest Income
Section 80TTA: Income Tax Deduction of Rs 10,000 on interest income and Section 80TTB: Income Tax Deduction for Senior Citizens
Section 80TTA – All about Claiming Deduction on Interest
Section 80TTA provides a deduction of Rs 10,000 on interest income. This deduction is available to an Individual and HUF.
This deduction is allowed on interest earned –
- From a savings account with a bank
- From a savings account with a co-operative society carrying on the business of banking
- From a savings account with a post office
This deduction is NOT allowed on interest earned on time deposits. Time deposits mean deposits repayable on expiry of fixed periods. It shall not be allowed for –
- Interest from fixed deposits
- Interest from recurring deposits
- Any other time deposits
Maximum Deduction – The maximum deduction is limited to Rs 10,000. If your interest income is less than Rs 10,000, the entire interest income will be your deduction. If your interest income is more than Rs 10,000, your deduction shall be limited to Rs 10,000. (You have to consider your total interest income from all banks where you have accounts).
How to claim the deduction – First add your total interest income under the head ‘Income from Other Sources’ in your Return. The deduction is shown under section 80 Deductions under section 80TTA.
Section 80TTB Deduction for Senior Citizens – Budget 2018
Old age is often associated with health concerns, both physical and mental for the senior citizens, which in turn takes a heavy toll on their finances. Therefore, it is necessary to provide them with adequate relaxations in the form of tax deductions.
Having this in mind, the government in the Finance budget 2018 has chosen to introduce a good number of benefits for our senior citizens. One such important amendment in Budget 2018 (for senior citizens) is the introduction of a new section – Section 80 TTB.
1. Applicability of Section 80TTB
Section 80TTB is a provision whereby a taxpayer who is a resident senior citizen, aged 60 years and above at any time during a Financial Year (FY), can claim a specified amount as a deduction from his gross total income for that FY. This section is applicable w.e.f 1 April 2018.
2. Quantum of deductions available
A deduction of lower than Rs 50,000 or an amount from a specified income is allowed from the gross total income. Specified income is any of the following income in aggregate:
- Interest on bank deposits (savings or fixed);
- Interest on deposits held in a co-operative society engaged in the business of banking, including a co-operative land mortgage bank or a co-operative land development bank; or
- Interest on post office deposits
3. Exceptions to Section 80TTB
If the specified deposits are held by or on behalf of a partnership firm, an association of persons (AOP) or a body of individuals (BOI), Section 80TTB deduction is not available for the partner of such a firm or for any member of such an AOP or BOI, while computing their total income.
4. Section 80TTA vs 80TTB
Section 80TTA provides deductions similar to Section 80TTB. However, it provides deductions of interest only on savings account held in a bank, co-operative bank or a post office, from the gross total income of the individual taxpayer or a hindu undivided family upto Rs 10,000.
With the introduction of Section 80TTB exclusively for senior citizens, deductions under Section 80TTA is not available to senior citizens.
Difference between Section 80TTA and Section 80TTB
|Particulars||Section 80TTA||Section 80TTB|
|Applicability||Applicable to individuals and HUF except for senior citizens||Applicable to senior citizens|
|Specified income||Interest on savings account only||Interest on all kinds of deposits|
|Quantum of deduction||Upto Rs 10,000||Upto Rs 50,000|
5. Illustration on tax savings by senior citizens
Senior citizens already enjoy a higher basic exemption limit compared to normal taxpayers. The introduction of Section 80TTB further aids tax savings for senior citizens. Let us see how with the following example.
Let us consider the following incomes for a taxpayer:
- Savings interest of Rs 5,000
- Interest on fixed deposits of Rs 200,000
- Other income of Rs 150,000
Now, the following table will help you understand how a senior citizen stands to benefit (as against a normal taxpayer) with the provisions of Section 80TTB
(Amount in Rs)
|Particulars||Normal taxpayer||Senior Citizen|
|Gross total income||3,55,000||3,55,000|
|Less: Deduction under Section 80TTA||5,000||Not Applicable|
|Less: Deduction under Section 80TTB||Not Applicable||50,000|
|Tax (before 87A rebate)||5,000||250|
|Less: Rebate under section 87A||2,500||250|
|Tax payable including cess @ 4%||2,600||NIL|
NOTE: For the AY 2020-21, the rebate under section 87A is available up to Rs 12,500 (for a total income up to Rs. 5,00,000). Hence, the above tax computation would change accordingly.
In the above example, the senior citizen ends up paying no taxes in comparison to an ordinary taxpayer, below 60 years of age, who pays Rs 2,600.