Section 80TTB: Deduction for Senior Citizen [AY 2019-20]

In budget 2018, the government has provided a  big relief to our senior citizens (60 years or more) in form of a deduction of their interest income up to Rs.50,000/-.

In this article, we will understand all aspects of this deduction as provided under section 80TTB.

Effective date

Section 80TTB will be applicable from the financial year 2018-19 i.e the Assessment year 2019-20.

Eligibility

It is available only to a resident individual having an age of 60 years or more.

Specified Income

The deduction can be availed in respect of interest income earned from the deposit held in any-
1. Bank
2. Co-operative society
3. Post office
Interest on time deposit like fixed deposit is also available for deduction.

Example- Interest from a savings account, fixed deposit, recurring deposit etc

Maximum Deduction

Lower of the following is deductible:

1. Actual interest Income
2. 50,000/-

Therefore, the maximum deduction of interest income is fifty thousand rupee only. Any amount of interest in excess of fifty thousand rupees shall be taxable.

For a senior citizen, the budget has also increased the threshold of TDS deduction on interest income from 10,000 to Rs.50,000/-. (Under section 194A)

Further, a senior citizen can avoid TDS deduction by furnishing Form 15H to the payer even if his interest income is more than Rs.50,000/-.

Non-applicability

A. Section 80TTB will not be available to:

1. HUF
2. A senior citizen who is a non-resident
3. A non-senior citizen who is a resident [can use 80TTA]

B. The deduction will not be available if such deposit is held by a senior citizen on behalf of any-

1. Firm
2. Association of person (AOP)
3. The body of Individual (BOI)

 Que: Can I get the deduction of fixed deposit Interest of account held by me on behalf of my Firm?

Ans: No, 80TTB deduction is available only to an individual earning interest income on his fixed deposit account etc.

Section 80TTA

Similar to section 80TTB, section 80TTA also provide deductions of interest income derived from saving account of Individuals and HUF up to Rs.10,000/- only.

From FY 2018-19, 80TTA will not be available to the resident senior citizen.

Conclusion

After the introduction of section 80TTB, in comparison with previous years, a senior citizen can lower their taxable income up to a maximum of Rs.40,000/- [50000-10000] after considering non-availability of section 80TTA from FY 2018-19.

Look at the example:

A resident senior citizen earning the same amount of interest in both years but having different taxable income.

Happy Reading!!