Section 153 of the Income Tax Act 2025

Section 153 of the Income Tax Act, 2025, deals with the deduction of interest on deposits. It is a part of the chapter “Deductions to be made in computing total income” and is present under the subpart for “Deductions in respect of other incomes”.

This provision is the successor to the old Section 80TTA and related provisions like 80TTB for seniors from the Income Tax Act 1961.

Check out the key highlights of Section 153 with respect to Non-Senior Citizen (Individual)/HUFs and Senior Citizen (Individual):

The new Income Tax Act, 2025 aims to simplify the income tax code by reducing the number of sections/subsections as well as eliminating various overlapping and redundant provisions. Different exemption limits and criteria for those aged less than 60 years as well as senior citizens aged 60 years and old are now clearly stated in the newly introduced Section 153 of the Income Tax Act, 2025.

This consolidates the different provisions in the old act and is expected to simplify understanding as well as compliance. The provisions have been retained as per the previous act to ensure continuity. Senior citizens continue to get the higher ₹50,000 deduction limit on interest income including time deposit interest. Those aged below 60 year get ₹10,000 tax deduction on interest earned from savings account deposits only.

Section 153, titled “Deduction for Interest on Deposits,” has the primary purpose of offering tax relief on interest income from savings account deposits and time deposits, particularly to:

• Encourage savings among individuals and families.
• Provide additional relief to senior citizens, who often prefer the security of fixed deposits and other guaranteed return instruments to finance their retirement.
• Simplify the tax code by consolidating the earlier separate provisions (Section 80TTA for individuals and HUFs and Section 80TTB for seniors) into one clear section.

This deduction reduces the taxable income, thereby lowering the overall income tax liability for eligible taxpayers.

Sub-section (1) of Section 153 clearly defines the specific categories of assessees who can claim a deduction. An assessee can claim a deduction if they fall under any one of the following:

Section 153 provides a deduction for interest income earned on deposits with specified financial institutions such as scheduled banks, India Post Office, etc. The types of interest that qualify differ based on the category of the assessee under sub-section (1). Below are the different types of interest income that may be subject to income tax in India:

Section 153 allows a deduction from gross total income for interest on deposits with banks, co-operative societies engaged in banking, and post offices. The monetary limits and scope differ based on the assessee category under subsection (1):

• Individual (not being a senior citizen) or Hindu Undivided Family (HUF): Up to ₹10,000
• An individual, being a senior citizen: Up to ₹50,000

Note: Limits apply per assessee per tax year (not per bank or per account).

Section 153 allows a deduction from gross total income for interest on deposits, but it is subject to strict conditions outlined primarily in subsections (1) and (2), with additional restrictions in other subsections.

Under section 153(1), the deduction is available only to:

Section 80TTA provides a deduction of up to ₹10,000 on interest earned from savings accounts, not time deposits like fixed or recurring deposits. It is available only under the old tax regime.

The following assessees are eligible to claim deduction u/s 80TTA:

• Individuals who are not senior citizens. It means those who are below 60 years of age during the previous year.
• Hindu Undivided Families

Note: Non-Resident Individuals (NRIs) are eligible, but only on interest from NRO (Non-Resident Ordinary) savings accounts. Interest on NRE accounts is generally tax-free, so 80TTA does not apply there.

Here is a clear overview of the exclusion criteria for Section 80TTA and Section 80TTB under the Income Tax Act, 1961. These provisions are available only under the old tax regime:

Check out the key differences between Section 153 and Section 80TTA & 80TTB, based on factors like eligible assessees, deduction limits, and more:

Section 153 deductions can be easily claimed while filing your ITR online. Enter the details of the total interest earned from various deposits during the tax year. The system will automatically apply the applicable deduction, and report the remaining amount, if any, under the head “Income from Other Sources”. Here’s the step by step process to do this:

Here are some practical tips on how to save tax by maximising benefits under Section 153 of the Income Tax Act 2025:

• Check your tax liability under both tax regimes before you opt for old tax regime to claim Section 153 deduction.
• Choose the correct assessee category wisely. Plan your deposits accordingly to fully utilise the enhanced limit, if eligible.
• In order to maximise qualifying interests, you must structure deposits.
• For non-seniors/HUFs, keep aggregate savings account interest lower that the ₹10,000 exemption limit in a tax year. Senior citizens have a bit more leeway as they can claim exemption on up to ₹50,000 in interest from any eligible deposits during the tax year.
• Stagger maturity dates of fixed deposits to manage annual interest income efficiently.
• Avoid an ineligible structure. Do not hold qualifying deposits “by or on behalf of” a firm, AOP, or BOI; no deduction is allowed in such cases.