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Section 80TTB: Understanding Tax Benefits for Senior Citizens

Updated: Jul 5


Section 80TTB: Understanding Tax Benefits for Senior Citizens

Section 80TTB under the Indian Income Tax Act presents essential tax benefits for senior citizens in respect of interest income, thereby providing stability to any person who has to survive upon such earnings from deposits as a principal source of income. The 2018 Union Budget introduced Section 80TTB to help the elderly by facilitating a deduction of up to Rs 50,000 on the interest accruing from savings accounts and fixed deposits. Under the Income Tax Act, any person who is of the age 60 years or more during the previous year is considered as a senior citizen. However, there are certain exceptions and limitations in this section that one should know. The present article is an attempt to give an overview of Section 80TTB, elaborating on eligibility and benefits and major considerations for achieving maximum tax savings by senior citizens.

 

Table of Content

 

What is Section 80TTB of the Income Tax Act?

Senior persons can claim an increased deduction of Rs 50,000 on interest income from deposits (saving or fixed) under Section 80TTB. It is intended to assist senior citizens who mainly rely on their interest income for these expenses, in maintaining a respectable standard of living after retirement. 


The goal is to provide elderly citizens with support so they may continue to sustain a healthy lifestyle and happy retirement by maintaining a respectable financial standing. Seniors must save more money for unforeseen medical bills since they are more likely to suffer from physical and mental ailments. There are restrictions and requirements under Section 80TTB that must be met in order to receive its advantages.


Deductions Available under Section 80TTB

A deduction from the gross total income of Rs 50,000, or the income amount, whichever is less, is permitted. Any of the following income, taken as a whole, is considered income here: 

  • Interest on fixed or savings bank deposits 

  • Interest earned on deposits made with a co-operative organisation that conducts banking, such as a co-operative bank for land development or mortgage

  • Post office deposit interest

It is important to remember that the interest paid on fixed or recurring deposits mentioned above and savings accounts, will be taken into account for the purpose deduction. Additionally, there are extra benefits obtained from holding other kinds of offices. These include accounts under the Senior Citizen Savings Scheme, time deposits at the post office, recurring deposits for five years, and monthly income schemes offered by the post office. These are also going to be deducted. 

Thus, it can be inferred that only those sources of interest income that are fully qualified for deduction are specifically mentioned in Section 80TTB. However, the aforementioned deduction will not apply to interests received from any other schemes or sources, such as interest from a company FD. Moreover, interest received on bonds and debentures would not be deducted.


Eligibility for Deduction under Section 80TTB

Section 80TTB benefits can be claimed by those who meet the definition of senior citizens as stated in the Income Tax Act of 1961. They include:

  • An elderly resident

  • The age requirement is 60 years of age or higher at any point in the relevant Financial Year (FY)


Exceptions to Section 80TTB

  • Types of Income Covered:

  • Section 80TTB covers only interest income arising from any depositor, namely Banks, Post Offices, and Cooperative Societies. Savings accounts, fixed deposits, and recurring deposits are all included here.

  • Interest income from any other source, such as bonds, company deposits, or debentures, cannot be claimed as a deduction under this section.

  • Applicability to Taxpayers:

  • The deduction under Section 80TTB is available only to 60 years or more senior resident citizens. NRIs, even senior citizens, cannot claim this deduction.

  • Senior citizens below 60 years are not eligible, and hence in their case, Section 80TTA  will apply providing a deduction up to Rs 10,000 on interest income from a savings account only.

  • Amount of Deduction:

  • The deduction is restricted to Rs 50,000. This is the maximum threshold irrespective of the amount of interest earned. If the interest income happens to be more than Rs 50,000, such excess shall be taxable.

  • While computing the Rs 50,000 limit under Section 80TTB, the deduction limit under Section 80TTA is required to be reduced. Hence, if a senior citizen claims Rs 50,000 under Section 80TTB, no further deduction shall be available under Section 80TTA.

  • Other Deductions:

  • The interest income claimed as a deduction under Section 80TTB cannot be claimed as a deduction under any other provision of the tax laws. Thus, in case the part of the interest on deposits is claimed as business expense, then such part cannot be claimed under Section 80TTB.


Understanding the Difference between Section 80TTA and 80TTB

Like Section 80TTB, Section 80TTA offers deductions. Nevertheless, it only allows interest deductions of up to Rs 10,000 for taxpayers under the age of sixty or to a Hindu Undivided Family (HUF) on savings accounts kept in banks, co-ops, or post offices.  Senior citizens are no longer eligible for the deduction under Section 80TTA due to the creation of Section 80TTB, which is reserved for them.


Understanding the Difference between Section 80TTA and 80TTB

Documents Required

Here is a list of documents required for claiming a deduction under Section 80TTB:

  • Bank Statements: Passbook entries or bank statements demonstrating the interest income from designated sources, such as post office deposits, savings accounts, fixed deposits, or bank deposits, may be required. The interest earned during the financial year should be made very apparent in these statements.

  • Interest Certificates: Particularly for tax purposes, several banks and financial institutions offer interest certificates. These certificates, which show the interest you have accrued on your deposits, might serve as supporting proof when you file your Section 80TTB deduction claim.

  • Fixed Deposit Receipts: As proof of the interest you have accrued, you may be required to present fixed deposit receipts or certificates if you have made investments in them.

  • Savings Account Statements: Your bank may need to furnish statements attesting to the interest income that has been credited to your savings account if you have accrued interest on balances in your savings account.

  • Post Office Deposit Documents: If you own assets in post office deposits, you might be required to present pertinent records, such as interest-earning statements or deposit certificates.

  • Any other supplementary materials: You might also need to submit additional supporting documentation to prove your interest income and Section 80TTB claim, depending on the requirements set forth by the tax authority. Documents pertaining to other interest-earning securities, such as bonds or recurrent deposits, may fall under this category.


How to Calculate Deduction under Section 80TTB

You can use the following procedures to determine your deductions under Section 80TTB of the Income Tax Act, which deals with interest income for older citizens:

  • Calculate the interest income that qualifies: Determine the total interest income received for the fiscal year from the designated sources, including bank deposits, fixed deposits, savings accounts, and post office deposits.

  • Determine the highest allowable deduction: For older citizens, the highest deduction allowed under Section 80TTB is Rs. 50,000. On the other hand, you can deduct the actual interest income if your total interest income is less than Rs. 50,000.

  • Compare interest income to the maximum limit. Under Section 80TTB, you can deduct the whole amount of interest income if it is equal to or less than Rs. 50,000. You can deduct up to Rs. 50,000 if your interest income is more than Rs. 50,000. 

  • Determine the amount of the deduction: Your deduction will be limited to Rs. 50,000 if your interest income exceeds the maximum limit. You are eligible to deduct the actual interest income if it is equal to or less than Rs. 50,000.

For example, you can claim a deduction of Rs. 40,000 under Section 80TTB if your interest income is Rs. 40,000. In case of interest income exceeding Rs. 60,000, the deduction amount under Section 80TTB is Rs. 50,000. 

In the relevant area of your income tax return, record the deduction that qualifies under area 80TTB. Make sure you save any paperwork you might need to support your claim, including interest certificates or bank bills. You can consult a tax expert to understand the process for claiming a deduction under Section 80TTB.


FAQ

Q1. Which clause permits senior citizens to deduct taxes on interest income? 

The Income Tax Act's Section 80TTB provides benefits to all resident older persons. Under the clause, an individual may be exempt up to ₹50,000 in a given fiscal year. Under this clause, deductions are allowed for all FDs, including savings accounts, RDs, and Post Office Fixed Deposits. NRIs cannot, however, take advantage of the reductions offered by it.


Q2. What are the tax savings for seniors under section 80TTB?

Since Section 80TTB was introduced, tax savings for seniors appear to be considerably simpler than they were previously. Senior citizens can actually save more than the average taxpayer because they receive interest on a variety of fixed and savings accounts. 


Q3. What advantages does the Income Tax Act's Section 80TTB offer? 

Senior persons receive additional benefits in the form of interest on FDs deducted up to Rs. 50,000, among other things.


Q4. How do I submit a Section 80TTB deduction claim? 

You must file your income tax return in order to claim the deduction under Section 80TTB. Prior to claiming the Section 80TTB deduction, the income must first be included in your income under the heading "Income from other sources."


Q5. Does Section 80TTB apply to very old citizens? 

Yes, citizens over 60 are covered by this section. Thus, both super senior citizens and senior citizens are included in this.


Q6. How much is the deduction under section 80TTB for the fiscal years 2021–2022 and 2022–2023? 

A deduction of up to Rs. 50,000 is allowed due to the interest earned on senior citizens' deposits. Senior citizens who own FDs or savings accounts at banks, post offices, or cooperative banks and get interest on their deposits are qualified for a deduction under section 80TTB. 


Q7. How can seniors use Section 80TTB to increase their savings? 

It is recommended to make the most of the tax break. The elderly person is required to invest in these accounts with designated entities in order to take advantage of the tax reduction, provided that the total interest income from the deposits equals Rs 50,000 every fiscal year. Since interest income for older adults is tax-free up to Rs 50,000, investing becomes an excellent way to save money. This is so that they can deduct the interest from their income before paying any taxes.


Q8. Is it possible for a senior NRI citizen to seek a deduction under section 80TTB? 

By this clause, a senior NRI citizen is not eligible for a deduction. On the other hand, under section 80TTA, they can deduct interest from a savings account.


Q9. How may I get a deduction under Section 80TTB? 

Under Section 80TTB, you can claim a deduction by filing your income tax return. The money must first be included in your income under the heading "Income from other sources''' before you can claim a Section 80TTB deduction.


Q10. For the AY 2024–2025, is the 80TTB deduction still applicable? 

Indeed, the AY 2023–2024 period is covered by the Section 80TTB deduction. 




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