In Circular No.1/2019 dated 1st January, 2019 on the above- mentioned subject, the provisions of section 80TTB were not correctly explained in para 5.5.12 of the circular. In the said circular, it is written that, Interest on deposits (Not being the time deposit) i.e. Interest on saving deposit would be allowed to be deducted in calculating total income. The correct position of the admissibility of deduction under section 80TTB is provided as under:
Section 80TTB introduced by F.A. 2018, w.e.f 01.04.2019, allows deduction to a senior citizen from his gross total income in respect of income by way of interest on deposits with-
(a) a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies;
(b) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or
(c) a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898),
The amount of deduction in respect of above interest on deposit is as under: –
(i) in a case where the amount of such income does not exceed in the aggregate fifty thousand rupees, the whole of such amount; and
(ii) in any other case, fifty thousand rupees.
So, the term interest on deposits not only includes Interest on Saving deposits but also Time deposits. So, Senior citizen can claim interest earned on any deposits while calculating Gross Total Income for the Year.
However, no deduction is allowed under section 80TTB to any partner of the firm or any member of the association or any individual of the body if said interest is derived from any deposit held by, or on behalf of, a firm, an association of persons or a body of individuals.
For this purpose, “senior citizen” means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.
However, taxpayers claiming deduction under section 8OTTB shall not be eligible for deduction under section 80TTA (This deduction is only for Interest on Saving Deposit) meaning thereby 80TTB is for dedction of interest earned from Time deposit as well as for Saving Bank deposit)“.
2. In view of above, Circular No.1/2019 may accordingly be treated as modified to this extent.