In finance budget 2018, government has introduced a new section 80TTB to provide tax benefits to senior citizens getting interest income from bank, co-operative society engaged in banking business or post office deposits.
This means Section 80TTB will be applicable with effect from financial year 2018-19 (AY 2019-20).
Who is eligible
A senior citizen can claim tax deduction for Interest income incurred on bank, co-operative society engaged in banking business and post office deposits under section 80TTB of income tax act 1961.
A person will be considered as senior citizen if at any time during the financial year he/she is aged 60 years or above.
A partnership firm, company, AOP, BOI are not allowed to claim tax deduction under section 80TTB. Benefits of this section is also not applicable to a senior citizen who is non-resident in India for the financial year.
Conditions to be fulfilled
If you fulfill following conditions then up to a maximum limit of Rs 50,000 can be claimed as tax deduction from your gross total income under section 80TTB.
- You must be a senior citizen during the financial year.
- Interest income is from deposits held on banks, co-operative societies engaged in the banking business or post offices.
- The senior citizen is a resident in India.
This means, a resident senior citizen can claim tax deduction under section 80TTB for Interest income from bank saving account, fixed and recurring deposits.
Similarly, interest income from post office saving account and other deposits such as NSC, senior citizen saving scheme, monthly income scheme and recurring deposits are eligible for 80TTB deduction. Please remember, interest received on deposits with a company will not be eligible for tax deduction.
Quantum of tax deduction from interest on deposits
In simpler term least of the following will be allowed as tax deduction to a resident senior citizen under section 80TTB:
- interest income from bank, co-operative society engaged in banking business and/or post office deposits, or
- Rs 50,000
This means if interest is from deposits of a bank, co-operative society engaged in banking business or post office is less than Rs 50,000, then deduction under section 80TTB will be restricted up to the amount of interest incurred.
For instance, if you being a resident senior citizen has received interest from fixed deposit held in bank amounting to Rs 35,000, then deduction under section 80TTB will be restricted to Rs 35,000, as its lower than the maximum limit of Rs 50,000.
Similarly, if instead of Rs 35,000, you have received Rs 65,000 as interest from bank fixed deposit, then tax deduction under section 80TTB will be restricted to Rs 50,000.
Is section 80TTA benefits available to resident senior citizen in addition to tax deduction of 80TTB?
Section 80TTA provides similar tax benefits for interest on saving account held in a bank, co-operative bank rendering banking business or post office upto a maximum limit of Rs 10,000. However, its not available on interest from fixed, recurring and time deposits.
With effect from financial year 2018-19, section 80TTA is not available to those person who are eligible for taking benefits of section 80TTB. This means section 80TTA will not be applicable to resident senior citizen with effect from financial year 2018-19 as the new section 80TTB has been introduced for it.
If you are resident senior citizen then as discussed above, up to a maximum limit of Rs 50,000 tax deduction can be claimed on interest on deposits. You can not avail benefit of Section 80TTA as section 80TTB is applicable to you.
However, Section 80TTB is not applicable to a senior citizen who is non-resident in India for the financial year. Such non-resident senior citizen can claim section 80TTA benefits as section 80TTB is not applicable to him.`
How to claim tax deduction under section 80TTB
You need to include the total interest amount to your annual tax return under the head “income from other sources” before claiming tax deduction under section 80TTB. It will be part of your Gross total income.
Before claiming tax deduction on interest, we suggest you to check form 26AS online to know if any TDS amount has already been deducted from your interest income.
If it’s deducted, then match the actual interest income calculated by you with the amount shown in form 26AS. After arriving at the final interest income, include it under the head “income from other sources” before claiming deduction u/s 80TTB.
Refund can be claimed while filing return of income if you are not taxable but TDS amount has been deducted from you.
If as a pensioner, your pension and interest income is more than Rs 5,00,000 per year, then you can easily reduce your taxable income up to Rs 5,00,000 or less by taking tax benefits of section 80TTB in addition to other eligible deductions.
You can take help of a chartered accountant or tax expert to file your income tax return according to the provisions of income tax act 1961 based on your eligibility.