Deduction of Interest u/s 80TTB

Old age is usually accompanied by a myriad of issues and problems. Health being one of the major factors. To cope up with the health issues and at the same time manage finances can be a bit of a stretch. The government recently came up with measures to make things a little bit easier for senior citizens. 

In the budget for 2018, a few such important measures were included, which would benefit the senior citizens. The introduction of Section 80TTB is a testament to the same. This new section allows senior citizens to claim tax breaks of up to INR 50,000 for specific interest earned during a fiscal year.

The Section is applicable to individuals who qualify as senior citizens. Essentially individuals above 60 years of age or above. Apart from being senior citizens, individuals must also be residents of India to avail the benefits. 

Deductions You Can Avail

Taxpayers can deduct any amount up to INR 50,000 for specified interest earned during a financial year. The amount will be deducted from their gross income. The following is a list of the specified interest that you can claim under this section.

• Any interest that you earn on bank deposits, either on fixed deposits or savings accounts.
• Any interest that you earn on deposits made in the post office.
• Any interest that you earn on your deposits with the co-operative society that is involved with banking institutions, a co-operative land development institution or a co-operative land mortgage institution, etc.

Exceptions under Section 80TTB

While the intention of Section 80TTB is to help reduce the tax burden on senior citizens, it is not applicable to all the scenarios. Here are certain situations, where the section would not hold good.

• If any deposits are held by partnership firms.
• If any deposits are held by an association of persons (AOP).
• If any deposits are held by a body of individuals (BOI).

If an individual belongs to any of the above entities, they are exempted from Section 80TTB.

Difference Between 80TTA and 80TTB

The deductions under Section 80TTA are quite similar to Section 80TTB but with some minor differences. Section 80TTA allows for deductions if the interest earned is on savings accounts. You can hold the savings account either with a bank, post office or co-operative bank. The deduction is then subtracted from the gross income of an individual or Hindu Undivided Family (HUF). The maximum deductions allowed is INR 10,000.

Here are the major differences between both the Sections.

One of the major differences between Sections 80TTA and 80TTB is its applicability. Prior to the financial year 2018-2019, the Section was open to everyone. Meaning anyone would claim the deduction, individuals, senior citizens, super senior citizens. However, from the financial year 2018-2019 onwards senior citizens will no longer be able to claim deductions under Section 80TTA. 

Clause 29 and 30 of Finance Bill 2018 

Clause 29 of the Finance Bill of 2018 aims at making amendments to Section 80TTA. The section is applicable to any taxpayer, whether an individual or HUF, whose gross income for an assessment year includes interest earned by savings bank accounts. 

According to the suggested amendment, taxpayers who avail Section 80TTB will no longer be able to avail the benefits of Section 80TTA. The amendment came into effect on the 1st of April 2019. Thereby making it applicable for the assessment year 2019-2020 and the subsequent years, unless there are any changes.

Clause 3 of the Finance Bill of 2018 aimed at introducing a new section into the Income Tax Act, namely Section 80TTB. This section will purely be related to interests earned and for senior citizens only. As per the new Section, if the gross income of a taxpayer, a senior citizen, consists of interest earned via any of the following means, shall be entitled to a deduction of up to INR 50,000 for a fiscal year.

• Interest earned through any banking institution. Essentially institutions to which Banking Regulation Act of 1949 applies.
• Any deposits made to banks or financial institutions which are mentioned in Section 51 of the Banking Regulation Act of 1949.
• Deposits made to co-operative societies that engage in banking-related activities.
• Deposits made to co-operative societies that engage in land mortgage activities.
• Deposits made to co-operative societies that engage in land development activities.
• Deposits made to post offices or as defined in Section 2 of the Indian Post Office Act of 1898. 

And it must be noted that the deductions are available for availing as long as they do not belong to a body of individuals, association of persons or firms. The section is exclusively introduced for senior citizens only. Thus, they cannot claim deductions under Section 80TTA anymore. 

FAQs

1. Are there any special benefits for senior citizens?
   Yes. The government offers a host of tax benefits for senior citizens. Starting from a more relaxed tax slab to several other benefits such as the introduction of Section 80TTB, the details to which are mentioned above.
   
   
2. Are there any other benefits for senior citizens related to interest earned?
   Apart from the above-mentioned Section 80TTB, there is another clause Section 194A, which can be very beneficial for senior citizens. According to this section, no tax will be deducted at source for senior citizens for deposits up to INR 50,000. 
   
   
3. Is the Section 80TTB applicable to super senior citizens?
   Yes. The benefits of Section 80TTB is applicable for senior citizens as well as super senior citizens.
   
   
4. How old should I have to be to avail these benefits?
   As per the income tax laws, any resident individual whose age is of 60 years or above during the current fiscal year qualifies to be a senior citizen.
   
   
5. Do I need to submit any documents?
   No. You are not required to submit any documents to avail these benefits.