Interest income is the amount paid to an entity to pay its loan or to another entity to use its funds. On a larger scale, interest income is the amount of money an investor earns in an investment or project.
Such income is generally taxable, but the Income Tax Act provides for some exemptions on such income. Individuals and senior citizens are given such exemptions separately.
Why have senior citizens in India increased WRT tax exemption?
Most of the elderly people in India face financial crisis in old age as most of them are not in a position to earn a living.
Their savings, if any, are not enough to cover their daily expenses, especially medical expenses. Valuable older people are looking for a good short-term financial plan to earn a good income from their money. Income tax laws provide various benefits to senior citizens in India with the aim of alleviating their problems.
Citizens, The limit of financial tax exemption for ordinary citizens below the age of 60 years is Rs. 2.5 lakhs in a financial year. However, in the case of senior citizens, the discount limit is three lakh rupees and in the case of super senior citizens, the limit is five lakh rupees.
Thus, the annual income is up to Rs 3 lakh and no senior citizen has to file any tax or ITR without deducting any TDS in the financial year. Similarly, a super senior citizen is exempted from paying tax and filing ITR if his annual income is up to Rs, 5 lakh and no TDS is deducted.
Considered a senior citizen in India?
By law, a senior citizen is an individual resident between the ages of 60 and 80 as the last day of the previous financial year.
Who is Super Senior Citizen in India?
A senior citizen called who's Age above 80 Years of age
Is interest income taxable?
Interest income from fixed deposits is taxable. This is covered in your income tax return under the heading 'Income from other sources.
Senior citizens earning interest income from FDs, savings accounts and recurring deposits can get income tax exemption up to Rs 50,000 per annum under section 80TTB. This is through the amendment of the Finance Act 2018.
What is Section 80TTB?
Section 80TTB which was applicable w.e.f. 1 April 2018 is a provision under which a taxpayer, a resident senior citizen, at any time during any financial year, aged 60 years and above, can deduct a sum of money from a certain income from his total income from that total income for that financial year.
Specific income is any one of the following
- Interest on bank deposits (savings or fixed);
- Interest on deposits in cooperative societies engaged in banking business including cooperative land mortgage bank or a cooperative land development bank; Or
- Interest on post office deposits
Senior citizens cannot claim a waiver under Section 80TTA
Section 80 TTA gives a rebate of Rs. 10,000 on interest income. This discount is available to any individual and HUF.
This deduction on interest earned is allowed
- From a savings account with a bank
- From a savings account with a cooperative society taken into the banking business
- From a savings account with a post office
Previously, this deduction was available to everyone regardless of their age, i.e. for persons under 60 years of age, senior citizens and super senior citizens.
However, senior citizens will not be able to claim an exemption under this section from the financial year 2011. After Budget 2018, 80 TTA of the department has been amended which prohibits senior citizens from claiming any rebate on interest earned on savings accounts with banks or post offices under this particular department. However, they have to claim a rebate of up to Rs 50,000 for the interest received from the savings account and have fixed deposits in banks and post offices under the newly inserted department, i.e., Section 80TTB.
To know which interest income is taxable and what are the exemptions, see the following summary
Interest income on fixed deposit - Interest income on a fixed deposit is taxable and taxable according to the applicable tax slab rate. In addition, the bank deducts TDS on this income, although TDS is deducted only when the amount of interest income exceeds Rs. 10,000 in a given financial year. In addition, the exemption limit for senior citizens is Rs. 50,000 under TTB Rs. 50,000. If all taxable income from your source is below the relevant exemption limit, the TDS can also be availed by submitting Form 15G (15H for Senior Citizens).
Interest income on a savings account - Rs.10,000 (Rs. 50,000 for senior citizens) Interest income on a savings account is exempt. However, any interest income on a savings account above Rs 10,000 is taxable as per the applicable slab rate. To calculate the exemption limit, interest income is added from all accounts, including bank savings accounts, post office savings accounts and cooperative bank savings accounts.
Interest income on recurring deposits - Savings of interest earned on recurring deposits are fully taxable without any discount against any savings account. In addition, under Section 1944, banks deduct TDS at the rate of 10% on interest on recurring deposits.
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