According to section 80TTB, which was inserted by Finance Act 2018, which is to be effective from 01.04.2019 i.e from the Assessment Year 2019-20 a deduction of Rs. 50,000/- can be claimed by senior citizens being aged 60 year and more, where the gross total income includes any income by way of interest on deposits with a Banking Company, or a co-operative society or a Post Office.
But as per wording in Income Tax Circular No. 1/2019 dated 01.01.2019 (which is reproduced below) this deduction is not available for interest received from Term Deposits:
Section 80TTB introduced from Financial Year 2018-19 allows a deduction up to Rs. 50,000 in respect of interest income from deposits held by senior citizens from his gross total income if it includes any income by way of interest on deposits (not being time deposits) in a savings account, a deduction amounting to:
Now the confusion is whether the deduction can be claimed for interest on Fixed Deposits or the same is restricted to interest on Savings Bank Deposits only. As per the Act the interest can be from Term (Fixed) Deposits also since the wordings ‘interest on deposits (not being time deposits)’ is not found in the section 80TTB which is in section 80TTA. But the circular states that this deduction cannot be claimed for interest on Term Deposits.
It is to be noted that deduction of Rs. 10,000 from Savings Bank Deposits is not available for senior citizens, since they are given higher deduction of Rs. 50,000/- for interest on all deposits including Savings Bank Deposits.
Since TDS limit has also been enhanced to Rs. 50,000/- for the interest on deposits for the senior citizens the intention of the law is to allow deduction of Rs. 50,000/- for all Deposits as per 80TTB including interest from Savings bank Deposits. A circular cannot supersede the section and hence the deduction is available up to Rs. 50,000/- for interest on all deposits i.e. Savings Bank deposits as well as Term (Fixed) Deposits. The Circular is to be corrected to avoid confusion.