Section 80TTB, a significant provision in the Indian Income Tax Act, offers valuable deductions to senior citizens aged 60 and above. This deduction aims to alleviate the tax burden on senior citizens by allowing them to reduce their taxable income based on the interest income they earn from specific sources.
What Is Section 80TTB?
Section 80TTB in India refers to a provision under the Income Tax Act of 1961 that allows senior citizens (individuals aged 60 years and above) to claim deduction under Section 80TTB on the interest income earned from specified sources. Under this section, senior citizens can avail a deduction of up to ₹50,000 from their gross total income, which includes interest earned from savings accounts, fixed deposits, and recurring deposits with banks, cooperative societies, or post offices.
This deduction is aimed at providing financial relief to senior citizens and reducing their tax liability. Senior citizens who are residents and pay taxes may deduct above ₹50,000 under Section 80TTB. This deduction gives them the opportunity to save on taxes and improve their financial security.
When Was This Section 80TTB Introduced?
Section 80TTB is a provision that allows resident senior citizens, aged 60 years and above during a Financial Year (FY), to claim a specified deduction from their gross total income for that FY. This provision came into effect on 1 April 2018.
Available Claim Deduction Under Section 80TTB
Senior and super senior citizens who are 60 years of age or older at the start of the fiscal year are eligible for tax deductions under Section 80TTB. They can claim deductions for different types of interest income, which include:
- Interest accrued on bank deposits held by depositors
- Interest received on money deposited with a legally recognised cooperative society
- Interest earned on bank accounts with the post office.
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What Is the Eligibility for Section 80TTB Deduction?
Only older citizens who meet the requirements of Section 80TTB as outlined in the Income Tax Act of 1961 are eligible. The following prerequisites must be satisfied:
- The candidate must be a senior Indian citizen
- At any point during the pertinent Financial Year (FY), the person must have reached the age of 60 or older.
Conditions for Deduction of Payment/Liability Under Section 80TTB
As per Section 80TTB, no deduction is allowed unless the payment or incurrence of liability is made or incurred within three years after the end of the year in which he ceases to be an employee. However, if the payment or liability is made or incurred before the expiry of three years but more than six months after the date of termination of employment, then the deduction will be allowed only if the payment or liability was made or incurred within 6 months after the date of cessation of employment.
Deduction is only permitted if the payment is made or the liability is incurred either:
(a) With the aim of acquiring property; or
(b) In connection with a property purchase.
In case of payment for services rendered, the deduction is allowed only if the services were rendered in pursuance of an agreement entered into prior to the date of commencement of services and the payment was made or liability was incurred in accordance with the terms of the agreement.
In case of payment for goods or materials supplied, the deduction is allowed if the payment is made in accordance with the terms and conditions of the sale or purchase of the goods or materials.
Applicability of Section 80 TTB
Section 80TTB is applicable to the following sources of income for senior citizens:
Interest Income from Savings Account: Senior citizens can claim a deduction on the interest income earned from a savings account held with a bank, cooperative society, or post office. The maximum deduction allowed is ₹ 50,000 in a financial year.
Interest Income from Fixed Deposits (FDs): This section also covers interest income from fixed deposits, recurring deposits, and time deposits with banks, cooperative societies, or post offices. The maximum deduction allowed on this income is ₹ 50,000 in a financial year.
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Amount of Deductions Available:
The maximum deduction available under Section 80TTB is ₹ 50,000 per financial year for senior citizens. This means that senior citizens can reduce up to ₹ 50,000 from their total taxable income if their interest income from savings accounts and fixed deposits combined is equal to or exceeds that amount.
Here’s an example to illustrate how this deduction works:
Suppose a senior citizen earns ₹ 60,000 in interest income from savings accounts and fixed deposits in a financial year. In this case, the maximum deduction they can claim under Section 80TTB is ₹ 50,000. So, their taxable income will be calculated after deducting ₹ 50,000 from the interest income, and they will be liable to pay income tax on the remaining ₹ 10,000.
It’s important to note that this deduction is applicable only to individual taxpayers who are senior citizens. If a senior citizen’s total interest income is less than ₹ 50,000, they can claim a deduction equal to the actual interest income earned.
Additionally, senior citizens should be aware that this deduction does not apply to interest income earned from sources such as corporate bonds, debentures, or interest income from sources other than savings accounts and fixed deposits.
As tax laws can change over time, it’s advisable to consult a tax professional or refer to the latest tax provisions and guidelines to ensure accurate compliance with the tax laws in effect for the relevant financial year.
What Are the Exceptions to Section 80TTB?
Usually, for a senior citizens to get the deduction under Section 80TTB, they should be the ones who have the deposit. Nevertheless, there are some situations when this rule does not always hold true. The Section 80TTB deduction won’t be available in the following cases:
- If the interest income is derived from a deposit that is held in the name of certain individuals or groups
- Body of Individuals
- An association of persons
- A partnership firm
The Hindu Undivided Families (HUFs), non-resident Indians, and income earned through savings accounts held by organisations can benefit from this Section 80TTB. In general, senior citizens may deduct from their taxes the interest they earn on deposits made with banks, post offices, and cooperative societies under Section 80TTB of the Income Tax Act of 1961. However, other types of extra income won’t be eligible for any exemptions.
How to Claim Deductions Under Section 80TTB?
Claiming deduction under Section 80TTB involves two steps:
- Identifying the asset resulting from employment
- Identifying the nature of the asset acquired on account of employment.
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Identification of Asset Acquired On Account Of Employment
In order to identify the asset acquired as a result of employment, it is necessary to identify the transaction that gave rise to it. If this cannot be identified, the asset should be identified by its characteristics. It can be done in a number of ways. One method is to examine the nature of the asset. Another method is to examine how it was acquired or leased. A third method is to examine whether it was purchased or leased.
In addition to these methods, there are many others that can be used to identify an asset. The most common methods used are as follows:
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- Identification of the asset based on the name given to the asset.
- Identification of the type of asset based on the use to which the asset is put.
- Identification of an asset based on its location.
- Identification of a specific asset based on the identity of the person who owns the asset.
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Identification of Nature of Asset Acquired On Account of Employment
After determining whether the asset was acquired for employment reasons, the next step is to determine whether the asset was acquired for employment reasons.
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- By examining the nature of the asset itself.
- Analyzing the circumstances of the asset’s acquisition.
- Analyzing how and why the asset was created.
- The person who owned the asset can be determined by looking.
If the asset was acquired on account of employment, then the deduction is allowable.
Example : Mr. Raj has been employed in a firm for ten years. Duringhis last three years of service he received a monthly salary of₹ 15,000. His employer also provided him with housing accommodation at a rent of ₹12,000 per annum. Mr. S does not have any savings apart from his salary. His goal is to take out a loan of ₹25,000 from his bank.He would like to deduct ₹7,500 (25% of the amount borrowed) as a monthly deduction.
Is he entitled to do so?
Answer: Yes. Since the asset was acquired on account of employment, the deduction is allowed.
Income Tax Deduction Under Section 80TTB
Example : A person buys a car for ₹30,000. He pays ₹20,000 as down payment and takes a loan of Rs. 10,00 from a bank. There are no interest payments made by him. He is not required to pay income tax on interest earned by the bank. If he sells the car after two years, he gets back ₹35,000and pays tax on ₹30,000 only.
Is he eligible for a deduction under section 80TTB?
Answer: The asset was not acquired through employment, so it cannot be deducted.
Income Tax Deductions Under Section 80TTB
Example: A person borrows ₹50,000 from a bank and pays interest at 9%. Shesells her house for ₹60,000 and receives ₹40,000 as proceeds.
Is she eligible for a deduction under section 80TTB?
Answer: Yes. The property sold by her is an asset acquired on account of employment. Therefore, she is entitled to a deduction equal to 25% ofthe sale price.
What Are the Differences Between Section 80TTA vs 80TTB?
| Particulars | Section 80TTA | Section 80TTB |
| Applicability | HUF and regular citizens and taxpayers. exception of senior citizens. | Applicable to senior citizens |
| Specified income | only earn interest on savings accounts | Interest on all kinds of deposits |
| Quantum of deduction | Above ₹10,000 | Above ₹50,000 |
| NRI Eligibility |
Applicable NRI and NRO accounts |
Deductions do not apply to NRIs. |
| Claim Process | Deductions can be accessed by filing Income Tax Returns. | Deductions can be claimed by filing 80TTB at ITD. |
Illustration on Tax Savings by Senior Citizens
Senior citizens have a higher basic exemption limit than regular taxpayers, which already helps them save on taxes. The addition of Section 80TTB provides further tax benefits for senior citizens. Let’s consider the following incomes for a taxpayer:
- ₹5,000 from savings interest
- ₹2,00,000 from fixed deposit interest
- ₹1,50,000 from other income
Computation of Taxable Income
| Particulars | Non-Senior Citizen (₹) | Senior Citizen (₹) |
| Savings interest | ₹5,000 | ₹5,000 |
| FD interest | ₹2,00,000 | ₹2,00,000 |
| Other income | ₹1,50,000 | ₹1,50,000 |
| Gross total income | ₹3,55,000 | ₹3,55,000 |
| Less: Deduction under Section 80TTA | ₹5,000 | Not Applicable |
| Less: Deduction under Section 80TTB | Not Applicable | ₹50,000 |
| Taxable income | ₹3,50,000 | ₹3,05,000 |
Documents Required for Claim Section 80TTB
To claim your 80TTB deductions, you may need some important documents.
- Form 16
- Bank documents like passbook and statements
- PAN Card
How to Claim Deduction for Senior Citizen
In order to avail the benefit of this section for senior citizens, you need to file your ITR with the help of Form 16. You can also use Form 17 if you do not want to file your own return. In order to file this form, you must do so within 30 days of the end of the fiscal year. Once you complete the process of filing your returns, you can get back all the money that you paid towards the expenses mentioned in the list below:
- Medical Expenses: If you pay ₹10,000 per annum for medical treatment, then you can claim up to ₹5,00,000 as a deduction
- Education Fees: For every year, you can claim up to 25% of the total amount spent on tuition fees as a deduction
- House Rent: If you live in a rented accommodation, then you can claim 50% of the total rent as a deduction
- Travel Expenses: If you spend more than ₹20,000 per annum on traveling, then you can claim 100% of the expenditure as a deduction
- Other Expenses: Other expenses like housekeeping, telephone bills, insurance premiums, etc., can also be claimed as a deduction.
What Are the Limitations?
There are some limitations associated with this section. It is probably applicable for senior citizens. The expenses cannot exceed ₹50,000 per annum. The deduction cannot exceed the taxable income. Finally, the expenses must be incurred during the period between April 1 and March 31.
Section 80TTB FAQs
What is the limit of 80TTB?
Under section 80TTB, senior citizens may deduct up to ₹50,000. Senior persons are eligible to deduct up to ₹50,000 in interest income from banks and post offices under Section 80TTB.
Can we claim both 80TTA and 80TTB?
No, You can't get both the 80TTA and 80TTB deductions at the same time. The 80TTA deduction is for people under 60 years old, while the 80TTB deduction is only for older people who are 60 years or more.
What is 80TTB Exemption for Senior Citizens?
The 80TTB exemption is a special rule in the Income Tax Act that helps older people. As a result, they are allowed to pay as little as ₹50,000 less in taxes. This law is applicable to interest income that people get from various sources, such as savings accounts, fixed deposits, and post office deposits.
Who cannot claim 80TTB?
Only older people who are classified as senior citizens can get the 80TTB deduction. If you are not a senior citizen, which is defined as being 60 years of age or older, you cannot use this deduction.
How can I claim a deduction under Section 80TTB?
To be eligible for a deduction under Section 80TTB, you must declare to the government on your income tax return (ITR) the money you earn from specific sources. By including the essential details in the relevant part of the ITR form, you can deduct above ₹50,000.
Is 80TTB deduction applicable for AY 2021-22?
Yes, for the year 2021-22, older people can use the 80TTB deduction. It allows them to pay more than ₹50,000 less in taxes on the interest income they receive from specific sources, but only for that specific year.
Is Section 80TTB applicable for super senior citizens?
Yes, Even really, really old people called ‘super senior citizens’ who are 80 years or more can also use Section 80TTB. They have the ability to lower the amount of taxes they owe on the interest income they get from specific sources.
How can you claim under Section 80TTB deduction in the ITR?
To be eligible for the Section 80TTB deduction on your tax return, you must notify the government of the money you receive from specific sources. By completing the Income Tax Return (ITR), a particular portion of the tax form, you can achieve this. You can enter the desired Section 80TTB deduction amount in a designated field on this form.
Is fixed deposit interest income taxable for senior citizens?
Yes, Normally, older people have to give some of the money they get from fixed deposits to the government as taxes. But guess what? They have a special way to pay less! It's called Section 80TTB. With this special rule, they can lower their taxes by above ₹50,000 on the money they earn from fixed deposits and other special places.
Are senior citizens eligible for deductions under Section 80TTB of the IT Act?
Yes, Section 80TTB of the Income Tax Act gives senior individuals a unique benefit. On the earnings from their savings accounts and fixed deposits, customers can reduce their tax obligations by more than ₹50,000, or post office deposits.
Is 80TTB deduction applicable for 2023-2024?
Whether you can get the 80TTB deduction for the year 2023-2024 depends on what the government offers. Look at the most recent regulations and consult a tax expert to determine whether you qualify for this deduction.
Conclusion
In this article, we discussed how to claim deductions under Section 80TTB. We hope that this information helps you better understand the concept.
Helpful Links
- Know about Income Tax Benefits
- What to Know About Form 29B?
- Who is Eligible for Income Tax
- Filing Income Tax Return
