Section 153 — Deduction for interest on deposits. Successor to s.80TTA, s.80TTB of the 1961 Act.
Section 153 is in Chapter VIII — Deductions to Be Made in Computing Total Income, which runs from section 122 to section 154.
Sub-section (1) allows a deduction from gross total income, subject to sub-section (2), to three classes of assessee — an individual who is not a senior citizen, an individual who is a senior citizen, and a Hindu undivided family — where that income includes interest on deposits with a banking company to which the Banking Regulation Act, 1949 applies (including a bank or banking institution referred to in section 51 of that Act), a co-operative society carrying on the business of banking including a co-operative land mortgage bank or co-operative land development bank, or a Post Office as defined in section 2(d) of the Post Office Act, 2023.
Sub-section (2) fixes the amount and, in doing so, splits the two groups. For an individual who is not a senior citizen and for a Hindu undivided family the deduction is the whole of the interest up to Rs. 10,000, but only on deposits in a savings account, excluding time deposits. For a senior citizen it is the whole of the interest up to Rs. 50,000 on deposits in any account, including time deposits.
Sub-sections (3) and (4) close off pass-through claims. Where the interest covered by sub-section (2)(a) or (2)(b) is derived from a deposit held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction is allowed under this section in respect of that income in computing the total income of any partner of the firm, any member of the association or any individual of the body. Sub-section (5) defines "time deposits" as deposits repayable on the expiry of fixed periods.
Small savings interest is fully taxable and mostly earned by people with modest incomes, so the Act shelters a slice of it. The senior citizen limb is deliberately wider on both axes — a larger amount and any account rather than only a savings account — because retired people hold their savings in fixed deposits. Sub-sections (3) and (4) stop a firm or association routing its own deposit interest into its partners' or members' hands to multiply the deduction.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Deduction for an individual who is not a senior citizen, or a Hindu undivided family | Whole of the interest up to a maximum of Rs. 10,000 | Interest on deposits in a savings account only, excluding time deposits | Sub-section (2)(a) |
| Deduction for a senior citizen | Whole of the interest up to a maximum of Rs. 50,000 | Interest on deposits in any account, including time deposits | Sub-section (2)(b) |
The two limbs differ in kind, not just in amount. A non-senior individual or a Hindu undivided family gets Rs. 10,000 and only on a savings account — interest on a fixed deposit, recurring deposit or any other time deposit is outside sub-section (2)(a) entirely, because sub-section (5) defines a time deposit as one repayable on the expiry of a fixed period. A senior citizen gets Rs. 50,000 across any account, savings and time deposits together. In both limbs the deposit must be with one of the three institutions listed in sub-section (1) — a bank, a co-operative society carrying on banking, or a Post Office — so interest from a company deposit, a non-banking finance company or a debenture earns nothing here. And the deduction is taken from gross total income, so it does not reduce the interest income itself for any other purpose.
A Hindu undivided family earns Rs. 14,000 of savings bank interest and Rs. 90,000 of interest on a fixed deposit with the same bank. Sub-section (2)(a) allows Rs. 10,000, and nothing at all against the fixed deposit interest, because that is a time deposit. Had the same amounts been earned by an individual who is a senior citizen, sub-section (2)(b) would have allowed Rs. 50,000 out of the Rs. 1,04,000, since that limb covers any account including time deposits.
A taxpayer meets this section on the Chapter VIII deduction schedule of the return of income, and in a processing intimation where the deduction is restricted because the interest came from a time deposit or because the assessee is not a senior citizen.
the whole of the interest up to a maximum amount of Rs. 10000 on deposits in a savings account, excluding time deposits
the whole of the interest up to a maximum amount of Rs. 50000 on deposits in any account, including time deposits
the expression "time deposits" means the deposits repayable on expiry of fixed periods
See the full 1961 to 2025 concordance.
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