Section 80TTB Deduction for Senior Citizens

Section 80TTB Deduction for Senior Citizens | Eligibility, Exemptions, Perks

Section 80TTB: In the year of Budget 2018, the officials have introduced the Income Tax Act of 1961. This section was introduced to help senior citizens to earn interest in fixed deposits without any deductions. However senior citizens will have to know all the information about Section 80TTB in the new tax regime, its eligibility, limitations and so on. Read on to find out more.


Eligibility To Claim Deductions Section 80TTB

Any individual who wishes to claim deductions under Section 80TTB will have to meet the following eligibility criteria:

  1. Senior Citizens who are 60+ years old
  2. Super Senior Citizens who are 80+ years old
  3. Senior and Super Senior citizens earning interest through a fixed deposit account, recurring deposit accounts and savings account.
  4. Senior and Super Senior citizens earning interest through post office deposits
  5. Interests earned through deposits held in a cooperative society involved in banking, such as a co-operative land mortgage bank or a co-operative land development bank by Senior and Super Senior citizens

Who Cannot Claim Deductions Through Section 80TTB?

The following people will not be eligible to claim the deductions under Section 80TTB:

  • Resident individuals or HUFs’ who don’t fall under the category of senior citizens
  • NRIs cannot claim the deductions under Section 80TTB
  • The interest earned on savings accounts owned by entities such as the Associate of Persons, a group of individuals or businesses.
  • Earnings generated through business fixed deposits, NCDs, or bonds shall not be eligible for Section 80TTB benefits.
  • If a senior citizen chooses the Alternative Tax Regime, which is governed by Section 115BAC, deductions under Section 80TTB will be unavailable beginning in AY 2021-22 cannot claim the deductions.

How Much Interest is Tax-Free for Seniors?

From the gross total income, a maximum deduction of less than Rs 50,000 can be exempted. However, if the senior citizen earns more than 50,000 as interest, he/she can claim a maximum of 50,000 as tax-free.

For Example:

If the interest earned on deposits is less than Rs. 50000, the entire interest earned is allowed as a deduction under this provision. Alternatively, if the amount of accrued interest exceeds Rs. 50000, companies can claim an Rs. 50000 deduction under Section 80TTB.

How To Avail Deductions Under Section 80TTB?

By simply filing the income tax returns, eligible entities can claim deductions under Section 80TTB of the Income Tax Act of 1961. However, they must first include the interest money earned from various bank accounts in their total income for the financial year.

When submitting an ITR online, make sure to include interest earnings under the “Income from Other Sources” header. Then, under Section 80TTB of the Income Tax Act, you can claim the appropriate deductions.

Advantages of Section 80TTB

Senior citizens already have a larger basic tax exemption level than normal taxpayers. Apart from this, this section 80TTB acts as a great help to them.

Also, the senior citizens’ health difficulties, both physical and mental, are frequently associated with old age, which has a significant financial impact. Thus appropriate tax breaks in the form of tax deductions have been made available to them with the help of Section TTB.

What is the Difference Between 80TTA and 80TTB?

Similar to Section 80TTB, Section 80TTA allows for deductions. However, it allows for interest deductions from the gross total income of an individual taxpayer or a Hindu undivided family up to Rs 10,000 on savings account kept in a bank, co-operative bank, or post office.

  1. Section 80TTA is available only for HUFs and Individuals other than senior citizens. Whereas 80TTB is exclusively only for senior citizens.
  2. One can claim only 10,000 as the deduction under 80TTA and under section 80TTB, one can claim up to 50,000.
  3. 80TTA is applicable only for interests earned through savings accounts whereas Section 80TTB is applicable for all kinds of fixed deposits.

Example of Section 80TTB Deduction for Senior Citizens

Let’s understand Section 80TTB with an example.

Mr. Kumar is a senior citizen who has accumulated interest from various sources of income, such as

  • Interest generated on savings = Rs 5,000
  • Accrued on fixed deposits = Rs 2,00,000
  • Income from other sources = Rs 1,50,000

Now the tax deductions which can be claimed by him as a senior citizen is explained in the table below:

Details Senior Citizens (Rs.) If Kumar was a Normal Taxpayers (Rs)
Interest on savings 5000 5000
Interest on fixed deposit 200000 200000
Earnings from other sources 150000 150000
Total earnings 3,55,000 3,55,000
Deductions under 80TTA (less) Not applicable 5000
Deductions under 80TTB (less) 50000 Not applicable
Taxable earnings 3,05,000 3,50,000
Taxation before 87A rebate 2500 5,000
Rebate available under section 87A 2500 2500
Amount of tax to be paid (inclusive of cess @4%) NIL 2600 (2600 + 4% Cess)

In this case, when compared to regular taxpayers, who must pay Rs. 2600 in tax, senior citizens have no tax liability. It should be noted that for the fiscal year 2020-2021, the Section 87A refund amount is restricted at Rs 12500 for total earnings of Rs 5 lakh. As a result, the computation discussed above is bound to vary when the same is factored in.

FAQ’s on Section 80TTB

Question 1.
What is Section 80TTB?

Answer:
A taxpayer who is a resident senior citizen, aged 60 or older at any time during a Financial Year (FY), can claim a specific amount as a deduction from his gross total income for that FY under Section 80TTB.

Question 2.
What are the benefits of Section 80TTB of the Income Tax Act?

Answer:
It gives senior citizens an additional benefit in the form of a deduction of INR 50000 on interest on FDs and other investments which cannot be claimed by HUFs and other individuals.

Question 3.
Can senior citizens claim deductions under section 80TTB for AY 2020-21?

Answer:
Yes, the senior citizen can claim the deduction under section 80TTB for FY 2019-20 and AY 2020-21.

Question 4.
Can senior citizens claim both 80TTA and 80TTB?

Answer:
No, the senior citizen can claim the deductions made under 80TTB only. Section 80TTA is not valid for senior citizens.

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