Section 80TTB Deduction

For senior citizens, old age is often associated with health concerns, both physical and mental, which take a heavy toll on their finances. As a result, it is necessary to provide them with adequate relief in the form of tax breaks.

With this in mind, the government continues to enact new regulations to make life easier for senior citizens. The 2018 Finance Budget has chosen to provide numerous benefits to our senior citizens. The introduction of a new provision – Section 80TTB – is one such significant amendment in Budget 2018 (for senior citizens).

Section 80TTB Deduction

What Is Section 80TTB?

  • This section allows senior citizens to claim a larger deduction of Rs 50,000 on interest income earned on deposits. It is intended to assist senior citizens in maintaining a decent lifestyle after retirement, as many of them rely on interest income for these expenses. 
  • The goal is to provide strong support to senior citizens so that they can maintain a decent economic status after retirement and thus support a happy existence and a healthy livelihood. 
  • Senior citizens are also at risk of mental and physical illnesses, making it even more important for them to save money for such unforeseeable medical expenses.
  • Section 80TTB imposes limits and eligibility requirements that must be met to reap the benefits.

Applicability Of Section 80TTB

Section 80TTB is a provision that allows a taxpayer who is a resident senior citizen, aged 60 years or older, at any time during a Fiscal Year (FY), to deduct a specified amount from his gross total income for that FY. This Section is effective as of April 1, 2018.

Amount of deductions Available Under 80TTB

From the gross total income, a deduction of less than Rs 50,000 or a specified income is permitted. In aggregate, specified income is any of the following income:

  • Fixed-Deposit Interest
  • Savings Account Interest
  • Recurring Deposit Interest
  • Deposits at the post office earn interest.
  • Deposits in cooperative societies earn interest.

Exceptions To Section 80TTB

Assume the specified deposits are held by or for a partnership firm. In the case of an Association of Persons (AOP) or a Body of Individuals (BOI), the Section 80TTB deduction is not available to the partner of such a firm or any member of such an AOP or BOI when calculating their total income.

Section 80TTA vs 80TTB

Section 80TTA, like Section 80TTB, allows for deductions. However, it only allows interest deductions from the gross total income of an individual taxpayer or a Hindu Undivided Family (HUF) can save up to Rs 10,000 on saving a/c in a bank, co-operative bank, or post office. With the introduction of Section 80TTB, deductions under Section 80TTA are no longer available to senior citizens.

Difference Between Section 80TTA & Section 80TTB

ParticularsSection 80TTASection 80TTB
ApplicabilityExcept for senior citizens, this applies to individuals and HUFSenior citizens are eligible
Specified earningsOnly savings and earn interestInterest is paid on all types of deposits
Deduction quantityUp to Rs 10,000Up to Rs 50,000

Senior citizens already have a higher basic exemption limit than regular taxpayers. The addition of Section 80TTB helps senior citizens save even more money on their taxes. Let’s take a look at an example to see how it works. Consider the following income levels for a taxpayer:

  • Rs 5,000 in savings interest
  • Fixed deposit of Rs 2,000,000 yields interest of Rs 2,000,000 yields interest of Rs 2,000,000 yields interest of Rs 2,000,000
  • Rs 150,000 in other income

Now, the table below will help you understand how a senior citizen stands to benefit (as opposed to a regular taxpayer) from Section 80TTB provisions.

Taxable Income Calculation (Amount in Rs)

ParticularsNon-Senior Citizen (Rs)Senior Citizen (Rs)
Savings interest5,0005,000
FD interest2,00,0002,00,000
Other income1,50,0001,50,000
Gross total income3,55,0003,55,000
Less: Deduction under Section 80TTA5,000Not Applicable
Less: Deduction under Section 80TTBNot Applicable50,000
Taxable income3,50,0003,05,000

In the preceding example, a non-senior citizen can claim only a Rs 5,000 savings interest deduction under Section 80TTA. A senior citizen, on the other hand, can claim a deduction for savings interest and fixed deposit interest up to Rs 50,000.

Section 80TTB Deduction

Conclusion

  • Several clauses were added to Section 80TTA to convert it into Section 80TTB, which was launched exclusively for senior citizens. For full benefits, make sure to carefully provide your bank documents, with the PAN card being especially important. If depositors provide their PAN, the bank deducts TDS (Tax deducted at Source) at a rate of 10%.
  • If it is not provided, the rate rises to 20%, resulting in a depositor’s loss. Section 80TTB, which went into effect in the fiscal year 2019-20, has been a huge relief for senior citizens. It is not a negative fact that Section 80TTA has been prohibited from them. The separation of Sections for regular and senior citizens makes the taxation procedure more convenient. 
  • Section 80TTB is more considerate of senior citizens who require special government attention due to deteriorating health and property. The procedure for obtaining the benefits is also simplified by the new methods of e-filing tax returns and deposits. As a result, the amendment becomes a savior, which should be recognized as a decision by every citizen.