According to Section 80TTB of the Income Tax Act, people over the age of 60 are eligible to avail tax deductions up to ₹50,000. This 80TTB deduction is applicable to the interest income earned during a particular financial year.
Section 80TTB is a provision whereby a taxpayer who is a resident senior citizen, aged 60 years and above at any time during a Financial Year (FY), can claim a specified amount as a deduction from his gross total income for that FY. This Section is applicable w.e.f. 1st April 2018.
An individual can claim deduction under either Section 80TTA or Section 80TTB, not both.
Relief under Section 80TTA is limited to savings accounts while Section 80TTB covers both savings account and fixed deposit accounts. Relief under Section 80TTA available to individuals and HUF. Section 80TTB provides relief to only individuals. Section 80TTB provides relief to only resident senior citizens.
It should be noted that Section 80TTB is applicable only to senior citizens who are residents of India and not NRIs (Non-resident Indians). The Exception to section 80TTB include: Non-senior citizens and HUFs.
Amount of Deduction under 80TTB
If the interest income is less than Rs 50000 then the total amount of interest income is tax-exempt. However, if the interest income is more than Rs 50,000 (including interest from all the deposits) then Rs 50,000 is available as a deduction.
As per I-T laws, 10% TDS is deducted on interest income above ₹50,000 earned by a senior citizen aged 60 years and above.
Only citizens more than 60 years of age can claim the 80TTB deductions. Those senior citizens who own a fixed deposit or savings account at banks, co-operative banks and post offices, thereby earning interest from such deposits and accounts, qualify for the deduction under Section 80TTB.
In every financial year if the income earned through interest exceeds Rs. 10,000, the applicant or account holder will have to pay tax at any cost. However, if the interest earned is less than Rs. 10,000, then the account holder will not have to pay tax.
What is a Tax-Saving FD. A tax-saving fixed deposit (FD) account is a type of fixed deposit account that offers a tax deduction under Section 80C of the Income Tax Act, 1961. Any investor can claim a deduction of a maximum of Rs. 1.5 lakh per annum by investing in a tax-saving fixed deposit account.
It is in effect from the assessment year of 2019-20. HUFs and individuals can avail the deductions allowed under Section 80TTA. Only senior citizens can avail the deductions made available under 80TTB. Only interest on savings accounts qualifies for a deduction under this section.
Senior Citizen Meaning
For example, an individual born on or before 01/04/1962 shall be considered as having completed 60 years of age, as on 31/03/2022, for the purpose of getting income tax benefits or status as a senior citizen in respect of FY 2021-22/ AY 2022-23.
As per the latest changes in the Income Tax Act, the standard deduction for senior citizens is ₹50,000. As per the latest changes in the Income Tax Act, the standard deduction for senior citizens is ₹50,000.
As such, being a senior citizen may be based on your age, but it is not a specific age. In general, however, once you turn 55 you start to enter the senior age demographic. By the time you are 65 you reach the most common age for retirement from your job.
Standard deduction to pensioners & salaried persons
2.5 Lakhs for AY 2019-20 and is continued for AY 2021-22 also. For Senior citizens, the basic exemption limit is set @ Rs. 3 Lakhs. This means, Senior citizens who are aged @ 80 years or more, do not have to pay any tax up to Rs.
The rate for Tax Deducted at Source on fixed deposits (FDs) is 10% if the interest amount for the entire financial year exceeds Rs. 10,000 for AY 2019-20. As per the Union Budget 2019, this TDS deduction limit on FD has been increased to Rs. 40,000 annually for AY 2020-21.
For Indian Residents: In the financial year 2021-22, the TDS on interest earned by Indian residents on fixed deposits would be 10%. 2. For NRIs: NRIs must pay TDS of 30% plus relevant surcharges and taxes on interest generated on fixed deposits.
An investor can claim income tax exemption on investments up to Rs 1.5 lakh when investing in Fixed Deposits. As part of a Tax Saving Fixed Deposit, interest earned is taxable, which is deducted at source. There are no premature withdrawals, loans, or overdraft (OD) facilities for tax-saving FDs.
The TDS rate on fixed deposits (FDs) is 10% if the interest amount for the entire financial year exceeds Rs 10,000 for AY 2019-20. In the interim budget 2019, this TDS deduction limit on FD has been increased to Rs. 40,000 annually which is applicable in AY 2020-21.
The threshold for deduction of the TDS under section 194C is Rs. 1,00,000/- for aggregate payment of the whole Financial Year and Rs 30,000/- for the single payment.
If a savings account holder deposits more than ₹1 lakh in one's savings account, then the income tax department may send income tax notice. Similarly, for current account holders, the limit is ₹50 lakh and on violation of this limit may also liable for income tax notice.
Also, u/s 194A of the Income Tax Act, no Tax is Deducted at Source (TDS) on interest payment of up to ₹ 50,000 by the bank, post office or co-operative bank to a Senior Citizen. This limit is to be computed for every bank individually.
The interest earned is taxable at the marginal rate applicable to the tax holder, while the maturity proceeds are tax-exempt.
What is the TDS rate on FD interest? For all resident Indian investors, if the interest income earned on company FD exceeds Rs. 5000, the TDS rate is 10% (if PAN details are provided to the financier). If PAN details are not provided to the financier, the TDS deduction on FD interest is chargeable at 20%.
However, from AY 2019-20 onwards, a senior citizen can claim deduction upto Rs. 50,000 u/s 80TTB in respect of interest income earned on not only savings bank accounts but also on interest income earned on any bank deposits or any deposit with post office or cooperative banks.