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Section 80TTB

Financial problems are a concern to every age category. But, old age is more often related to health issues for senior citizens both mentally and physically. This, in turn, could lead them to a substantial financial crisis. Hence, it is the responsibility of the government to provide proper relaxation as tax deductions.

Senior citizens receive financial relief in various forms by the government to help them spend their retired life happily with a space to breathe.

Under the Indian Income Tax Act, senior citizens who are resident taxpayers are provided with various tax deductions.

Section 80TTB introduced by the Government of India in April 2018 is one such deduction that is helping senior citizens have a peaceful retired life.

Section 80TTB was introduced in the 2018 budget and has been in place since then.

What is Section 80TTB?

In Section 80TTB, a senior citizen has presented the right to claim deduction up to Rs 50,000 on the income earned on deposits. As many senior citizens do not actively earn any income, they are mostly dependent on the interest income that they receive from the banks for their deposits. 

Section 80TTB is specially designed for senior citizens to lead a decent and happy lifestyle after retirement. This section will help senior citizens to manage their expenses without much hustle. Section 80TTB shows that it aims to provide senior citizens with strong support to maintain a good economic status and not be reliable for anyone to lead a healthy and happy lifestyle after retirement. The risk of mental and physical illness to Senior citizens makes it very important and a necessity for them to save money for their medical expenses. 

To claim the benefits of section 80TTB of income tax, senior citizens have to meet certain eligibility criteria. 

Eligibility to Claim Deductions in Section 80TTB

According to the Indian Income Tax Act, the eligibility criteria for deductions under Section 80TTB are:

  • The individual must be a taxpayer falling under the category of senior citizens. (Senior citizen is an individual who is 60 years or more of that particular Financial Year)
  • The individual must be a resident of India
  • The individuals must own a fixed deposit account, savings account, or a recurring deposit account
  • The individual must own accounts mentioned above at banks, post offices, or co-operative societies

Deduction available through Section 80TTB

The amount deducted should be below Rs. 50,000 or the amount for specified income from total gross income is allowed.

Any of the sources of income that follows can be counted as the specified income: 

  • Interest on deposits made in banks (either savings, fixed or recurring deposits)
  • Interest on the deposits held in a co-operative society mainly engaged in banking business such as a co-operative land development bank or operative land mortgage bank
  • Interest on deposits at the post office

It is important to note that the only interest earned on savings accounts, recurring, or fixed deposits will be considered for deduction purposes. There are many other types of interests earned in other accounts or sectors such as post office time deposits, Senior citizen Savings Scheme office, post office Monthly Income Scheme, and five-year recurring deposits. 

This is why the government under Section 80TTB has specifically mentioned only a few sources of income that are eligible for deduction. The interests earned from any other sources or sectors are not eligible for deduction. This may include income from company FD and also interest earned on bonds and debentures will not be considered for deduction under Section 80TTB.

Exceptions under Section 80TTB

  • Hindu undivided family cannot avail tax deduction under Section 80TTB
  • Non-resident Indians can not avail tax deductions under Section 80TTB
  • The interest income from savings accounts explicitly owned by an Associate of Persons or body of individuals will not be eligible for Section 80TTB deductions

Illustration of Tax Savings by Senior Citizens

Senior citizens, when compared to normal taxpayers, have the benefit of a higher exemption limit. But now, senior citizens can aid more tax savings after the introduction of Section 80TTB.

The below example compares the tax deduction for senior citizens before and after the introduction of Section 80TTB:

For example, let us take into consideration the following incomes for a senior citizen taxpayer:

  • Savings interest of Rs 10,000
  • Interest earned on fixed deposits of Rs 1,00,000
  • Other income of Rs 1,50,000

The table will help understand the importance of Section 80TTB and how senior citizens are benefited in terms of Tax saving after the introduction of Section 80TTB.

Computation of tax

Particulars Before Section 80TTB After Section 80TTB
Savings interest Rs. 10,000 Rs. 10,000
FD interest Rs. 1,00,000 Rs. 1,00,000
Taxable income Rs. 4,60,000 Rs. 4,10,000
Other income Rs. 3,50,000 Rs. 3,50,000
Gross total income Rs. 4,60,000 Rs. 4,60,000
Less: Deduction under Section 80TTA Not Applicable Not Applicable
Less: Deduction under Section 80TTB Not Applicable Rs. 50,000
Tax payable for above income Rs. 8,000 Rs. 5,500
Health and Education cess Rs. 320 Rs. 220
Total Tax payable Rs. 8,320 Rs. 5,720

Other Tax Deductions for Senior Citizens announced in Union Budget.

The Union Budget announced on 1st February 2018, has introduced new important provisions for a tax deduction to help senior citizens lead a happy and decent lifestyle. Health care is a vital area of concern for senior citizens, both mentally and physically. Senior citizens are prone to unexpected mental and physical illnesses due to ageing. This leads to high medical expenses for senior citizens costing them to spend their savings. For this concern, the government has introduced various tax exemptions, such as:

  • Under Section 80D, senior citizens aged above 60 and below 80 years of age can claim a tax deduction of up to Rs. 50,000 on medical expenses and health insurance. The limit of deduction for tax in the new budget scheme has been raised to Rs. 5000 from Rs. 30,000 to benefit senior citizens in terms of health care. Under this new rule, every senior citizen of the country can take benefits of up to Rs. 50,000 in tax deduction every year for any health insurance premium or General medical expenditure
  • Along with this, senior citizens now can also claim a tax deduction of up to Rs.1,00,000 in case of specific critical illness for medical expenditure. Compared to the earlier tax deduction which was Rs.60,000 for senior citizens and Rs.80,000 for super senior citizens (aged 80 and above), the government has now increased it to Rs.1,00,000 which is now believed to provide a healthy and prosperous lifestyle to the elderlies
  • Under section 80D, senior citizens can claim a standard deduction of Rs. 40,000 on their income from a pension. This is for taxable pensions, just like the salaried income in the form of annuity payments. This falls under Section 80D

Income Tax for Senior Citizens for Financial Year 2019-20

Tax applicable for individuals aged over 60 years and under 80 years

Income tax slabs Income tax slabs Health and education cess
Income up to Rs.3 lakh No tax Not Applicable
Income between Rs.3 lakh and Rs.5 lakh 5% 4% of income tax
Income between Rs.5 lakh and Rs.10 lakh 20% 4% of income tax
Income that exceeds Rs.10 lakh 30% 4% of income tax
  • Income tax relief limit is up to Rs.3 lakh
  • If total income is more than Rs.50 lakh and up to Rs.1 crore surcharge is 10% of income tax
  • If total income is above Rs.1 crore surcharge is 15% of income tax

Income tax for super senior citizens for the Financial year 2020-2021

Tax applicable for individuals aged over 80 years

Income tax slabs Income tax slabs Health and education cess
Income up to Rs.5 lakh No tax Not Applicable
Income between Rs.5 lakh and Rs.10 lakh 20% 4% of income tax
Income that exceeds Rs.10 lakh 30% 4% of income tax
  • The income tax relief limit is up to Rs 5 Lakh
  • If the total income is more than Rs 50 Lakh and up to Rs 1 Crore, the surcharge is 10% of income tax. 
  • If the total income exceeds Rs 1 Crore, the surcharge is 15% of income tax

Rebate in Income Tax for Senior Citizens

Under section 87A, the rebate scheme is applicable for citizens having annual gross income under Rs. 5 lakh. Those individuals having total annual income under Rs. 5 lakh is allowed a rebate of Rs. 2,000. Due to this scheme, the total payable tax becomes Rs 23,000, whereas, for individuals with total income above Rs. 5 lakh, they have to pay a tax of Rs. 25,000 + 20% tax.

Income Tax Calculation for Senior Citizens FY 2020-21

For senior Indian citizens, income tax is calculated based on the basic salary, fixed allowances, house rent allowance (HRA), and other sources of income. However, senior citizens receive a higher exemption limit in tax compared to normal individuals who are aged below 60 years. All the income of senior citizens is taken into consideration along with the deductions allowed and income tax slab to calculate income tax for senior citizens.

There are numerous websites online, including the government's official income tax site for calculating the total payable tax for an individual or an organization. To calculate taxes, one has to enter all the required details, and then the total tax is calculated by the calculator available on the website.

In the Union Budget of the financial year 2020-21, a new tax regime was introduced for taxpayers by the government of India. The taxpayers are given a choice to choose between the new tax regime or the old regime when filing tax for the financial year 2020-21 onwards.

Income Tax Filing for Senior Citizens

To claim their tax refund, senior citizens have to file their income tax return (ITR) forms. The senior citizens are required to fill the following Income Tax return (ITR) forms.

ITR I – Individual whose total Income Includes:

  • Salary or pension
  • Income from house or property (excluding incidents of previous financial years loses)
  • Income from the other sources (excluding horse racing or winning lottery)

ITR 2 - Individual whose total Income Includes:

  • Salary or pension
  • Income from house or property
  • Capital gains
  • Income from the other sources (includes horse racing and lottery winning incomes)
  • Incidents where the individual's income is combined with other individuals such as a spouse or other members

Comparison between Section 80TTA and Section 80TTB

Section 80TTB is an up-gradation of section 80TTB for the benefit of senior citizens. Section 80TTA is similar to Section 80TTB and has similar specifications except that section 80TTB provides a deduction on interests only on savings account and fixed deposits held in banks, post offices, and co-operative banks. Section 80TTA was available for all taxpayers irrespective of age, including Hindu Undivided Family (HUF). However, after the introduction of section 80TTB, the benefits under section 80TTB were blocked for Senior citizens. This has been in action since the financial year 2018-19 though both sections provide deductions towards interest income.

The table below might help us to understand the key differences between the two sections (Section 80TTA and Section 80TTB).

Particulars Section 80TTA Section 80TTB
Eligibility Section 80TTA applies to all individuals and Hindu Undivided families except senior citizens. Section 80TTb applies to only Senior citizen residents of India.
Incomes allowed as Deductions. Income earned on interest on a savings account and did not include recurring deposits or fixed deposits. Income earned on all types of deposits, including fixed and recurring deposits.
The maximum amount of deduction Rs. 10,000 Rs. 50,000

Many clauses came forward to introduce the amendments in section TTA, which then became Section TTB. Section TTB is launched exclusively for the senior citizens, to benefit this section entirely, one should have these documents: Bank documents provided very carefully, and PAN cards play a vital role. 10 per cent of the tax TDS that is Tax Deducted at Source will be deducted if the depositors provide the PAN. If the individual fails to produce PAN, then the deduction rate increases to 20 per cent, resulting in the loss of the depositor. 

Section 80TT is in effect from the assessment year of 2019-20. This has been a great relief for all the senior citizens, and certainly, this prevents Section 80TTA from becoming harmful to the senior citizens. Section 80TTB is more considerate towards the senior citizens who need care and a little extra attention from the government to decrease health or maybe property. The order to gain the benefits in their end is fairly easier with the new methods of e-filing of tax returns and deposits. Therefore, this amendment has become a saviour and should be respected as a decision by every citizen of this country.

FAQ's

  • Q: How to understand the tax savings for senior citizens through Section 80TTB?

    Ans: To understand this, things have become simpler compared to the era before Section 80TTB. Taking a comparison of a normal taxpayer and a senior citizen, Senior citizens can save a lot throughout their interest incomes on several fixed deposits and savings.
    Income Normal Citizen Senior Citizen 
    1. Savings interest Rs.20000 Rs.20000
    2. Interest on FD Rs. 100000 Rs. 100000
    3. Additional  Rs. 250000 Rs. 250000
    Gross Incomes  Rs. 370000 Rs. 370000
    Deduction  Rs. 10000 under 80TTA Rs. 50000 under 80TTB
    Taxable Total Income Rs. 360000 Rs. 320000

    The introduction of 80TTB, therefore, saves senior citizens' income more than normal citizens by Rs.40000/-.

    The tax computation mentioned above is extremely dynamic, one based on the financial year, rebates, and cess rates.

  • Q: How does Section 80TTB help senior citizens save more?

    Ans: The maximum benefit of the tax break is to be taken. This is highly advised. Senior citizens can use the tax break to invest in deposits by specifying the entity. The total interest income in deposits will, therefore, be Rs. 50,000 every financial year. Therefore, the greatest saving strategy is established by following this since the interest income becomes tax-free for senior citizens. We do this because the interest will be deductible from the income of senior citizens before the taxes are levied.
  • Q: What benefits does Section 80TTB of the Indian Income Tax Act have?

    Ans: The benefits are several, but taking the "extra benefit" into the ring, Senior Citizens benefit deduction of Rs. 50,000 on the interest Fix Deposit, etc.
  • Q: Is a deduction u/s 80TTB applicable if an individual comes under the 20% tax bracket? And how is interest earned under the Senior citizen savings scheme taxable?

    Ans: In the hands of the depositor, yes, the interest received is certainly taxable! Interest earned can be claimed as deduction under Section 80TTB.
Written By: Paisawiki - Updated: 26 November 2020