Senior persons have the right under 80TTB to claim a greater deduction for interest income generated on deposits. It is intended to assist elderly persons in maintaining a good living after retirement, as many rely on their interest income money for these costs. The goal is to provide significant assistance to elderly persons so that they may retain a respectable economic position after retirement and therefore promote a happy existence and a healthy livelihood. This article will explain Section 80TTB of the Income Tax Act.
WHAT IS 80TTB
This Section functions as an enhanced version of Section 80TTA, as the tax deduction on interest income, has been increased from INR 10,000 to INR 50,000. Budget 2018 included a new section 80TTB to the Income Tax Act, allowing seniors to deduct certain interest income from their taxable income. A resident individual who is 60 years of age or older during the fiscal year is referred to as a senior citizen under the Income Tax Act. Section 80TTB allows a senior person to deduct up to Rs 50,000 from total interest income received during a fiscal year from gross total income generated during that fiscal year before tax is deducted.
- Where an assessee’s gross total income as a senior citizen includes any income from interest on deposits with
- A financial firm subject to the Financial Regulation Act, 1949 (10 of 1949) (which includes any bank or banking institution specified in section 51 of that Act);
- A co-operative banking society (which may include a co-operative land mortgage bank or a co-operative land development bank); or
- A Post Office as specified in subsection (k) of section 2 of the Indian Post Office Act of 1898. (6 of 1898),
In determining the assessee’s total income, a deduction shall be granted in line with and subject to the requirements of this section—
- If the entire amount of such revenue does not exceed fifty thousand rupees;
- In all other cases, the amount is 50,000 rupees.
- There shall be no deduction from the total income of any partner or member of the firm, any member of the association, or any individual member of the body in the case where the income mentioned in sub-section (1) is derived from any deposit held by or on behalf of such firm, an association of persons, or body of individuals under this section in respect of such income.
‘In this section, a “senior citizen” is defined as a person living in India who is sixty years old or older at any point during the previous year’
80TTA VS 80TTB
When opposed to Section 80TTA, Section 80TTB provides significantly more benefits to older persons. Section 80TTA is similar to Section 80TTB in some ways, however, it only allows for interest deductions on savings accounts kept in a bank, co-operative bank, or post-office.
The amount mentioned is INR 10,000 from the individual taxpayer’s or Hindu Undivided Family’s gross total income (HUF). As a result, it was open to anybody, regardless of age, who had a deposit. However, once Section 80TTB went into effect in the fiscal year 2018-2019, the advantages of Section 80TTA were no longer available to elderly persons. Section 80TTB is reserved for elderly persons alone; older citizens no longer have access to Section 80TTA.
The following contrasts between the two parts are discernible.-
Section 80TTA: Applicable to individual taxpayers and HUF Hindu Undivided Family and Not applicable to resident senior citizen taxpayers
Section 80TTB: Applicable only to resident senior citizen taxpayers
- Maximum Amount of Deduction
Section 80TTA: Rs 10,000 or the actual amount of interest income, whichever is lower
Section 80TTB: Rs 50,000 or the actual amount of interest income, whichever is lower
- Type of Interest Income
Section 80TTA: Interest on savings accounts; does not apply to fixed deposits, term deposits, or recurrent deposits.
Section 80TTB: Interest on deposits, including fixed deposits and savings bank account balances; does not apply to bonds or non-convertible bonds. Interest income as a percentage of a firm’s equity, AOP, and BOI are not covered. Such a business, AOP, or BOI, holds the deposit.
- Type of FD Accounts
Section 80TTA: Includes NRO account and NRI account interest income
Section 80TTB: Not applicable to any type of NRI account
DEDUCTION UNDER SECTION 80TTB OF INCOME TAX ACT (PERSON ELIGIBLE, TYPES OF INCOME, MAXIMUM AMOUNT)
Not all interest income is deductible. Section 80TTB imposes several limitations and eligibility requirements that must be met in order to reap the advantages.
- Personal Eligibility
An elderly citizen who is a resident of India is eligible for a deduction under section 80TTB. For the purposes of section 80TTB, a senior citizen is a resident individual taxpayer who is over the age of 60 at any point during the fiscal year. Senior citizens having non-resident status (NRI) will not be eligible for this deduction.
- Types Of Income
Interest income generated on deposits by a senior citizen is deductible under section 80TTB. Deposits should be made with one of the following institutions:
- A co-operative society engaged in banking business (this includes a co-operative land development bank or a co-operative land mortgage bank);
- A post office that comes under section 2 (k) of the Indian Post Office Act.
- A financial institute (i.e. a bank) that comes under the Banking Regulation Act (this includes banks referred to in section 51)
Section 80TTB (2) specifies expressly that interest income generated on savings accounts maintained by a firm, an Association of Persons (AOP), or a Body of Individuals (BOI) is not deductible under section 80TTB for partners of the business, members of the association, or an individual of the BOI.
- Maximum Amount
The maximum deduction allowed according to section 80TTB is as follows:
- The entire interest income earned during the fiscal year, or INR 50,000
In plain terms, if the amount of eligible interest income is less than INR 50,000, the whole amount of eligible interest income is deductible. However, if the interest income exceeds INR 50,000, only INR 50,000 can be deducted under section 80TTB.
80TTB DEDUCTION FOR AY 2020-21
The deduction is up to Rs.50,000 in light of the interest earned on elderly persons’ savings. Senior citizens who have FDs, savings accounts at banks, cooperative banks, and post offices who earn interest on their deposits are entitled to the section 80TTB deduction. Individuals can continue to use the old/current tax system in FY 2020-21 by making use of current deductions and tax exemptions. He or she might also choose the new, more favourable tax system without claiming any deductions or tax exemptions.
Among the tax benefits that are forfeited when one chooses to participate in the new tax regime are deductions under Section 80C for a maximum of Rs 1.5 lakh claimed by investing in specified financial products, Section 80D for health insurance premiums paid, Section 80TTA/80TTB for a deduction on savings account interest earned from a bank or post office, and so on. As a result, taxpayers who choose the new tax system will be unable to make use of the deduction allowed under sections 80TTA and 80TTB.
FAQs on Section 80TTB
- How do I apply for a deduction under Section 80TTB?
You can claim the 80TTB deduction by completing your income tax return. The income must first be reflected in your income before the 80TTB deduction can be claimed.
- Is FD interest included in 80TTB?
Yes, section 80TTB includes an interest in FDs. Senior citizens may deduct interest earned on fixed deposits under section 80ttb.