Section 153 — Interest on Deposits Deduction | ITA 2025

Section 153 — - DEDUCTION IN RESPECT OF INTEREST ON DEPOSITS

Section 153 consolidates 1961 s. 80TTA (general non-senior-citizen / HUF -- INR 10,000 on savings-account interest only) and s. 80TTB (senior citizen -- INR 50,000 on any deposit including time deposits) into a single section with two parallel limbs distinguished by assessee category. The senior-citizen INR 50,000 ceiling and broader scope (including time deposits / FD interest) was a major FA 2018 reform recognising senior-citizen savings reliance. Deposit eligibility: with banking company (BR Act 1949) / co-op bank / Post Office (Post Office Act 2023). The firm / AOP / BOI carve-out (sub-ss. 3 and 4) prevents indirect-claim by partners / members on interest earned by entity. Practitioner-grade rule: every individual / HUF return must claim s. 153 to the maximum -- it is the most-used personal deduction provision.

Statutory text — Income-tax Act, 2025

Marginal note -- Deduction in respect of interest on deposits

(1) An assessee who is—

(a) an individual, not being a senior citizen; or

(b) an individual, being a senior citizen; or

(c) a Hindu undivided family, shall be allowed a deduction from the gross total income, subject to conditions specified in sub-section (2), where it includes income by way of interest on deposits with—

(i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act); or

(ii) 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

(iii) a Post Office as defined in section 2(d) of the Post Office Act, 2023 (43 of 2023).

(2) The deduction under sub-section (1) shall be allowed for a tax year as follows:—

(a) in case of an assessee mentioned in sub-section (1)(a) or (c), the whole of the interest up to a maximum amount of ` 10000 on deposits in a savings account, excluding time deposits;

(b) in case of an assessee mentioned in sub-section (1)(b), the whole of the interest up to a maximum amount of ` 50000 on deposits in any account, including time deposits.

(3) Where the income referred to in sub-section (2)(a) is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of such association or any individual of such body of individuals.

(4) Where the income referred to in sub-section (2)(b) is derived from any deposit held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of such income in computing the total income of any partner of the firm or any member of such association or any individual of such body of individuals.

(5) For the purposes of this section, the expression “time deposits” means the deposits repayable on expiry of fixed periods. E.—Other deductions Deduction in case of a person with disability.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 153	INCOME-TAX ACT, 1961
s. 153(1)(a) -- Individual (non-senior) or (c) HUF -- INR 10,000 cap on SAVINGS account interest only	1961 s. 80TTA
s. 153(1)(b) -- Senior citizen individual -- INR 50,000 cap on ANY DEPOSIT including time deposits	1961 s. 80TTB [FA 2018]
Eligible institutions: banking company / co-op bank / Post Office	1961 s. 80TTA / 80TTB Explanation
Sub-s. (3)/(4) -- firm / AOP / BOI carve-out preventing partner / member double-deduction	1961 s. 80TTA Proviso
Sub-s. (5) -- 'time deposits' = deposits repayable on expiry of fixed periods	1961 s. 80TTB Explanation

STATUTORY ARCHITECTURE

TWO PARALLEL LIMBS: (i) Non-senior individual + HUF: INR 10,000 cap on SAVINGS ACCOUNT interest only (excluding time deposits / FDs). Codifies 1961 s. 80TTA. (ii) Senior citizen individual (60+): INR 50,000 cap on ANY DEPOSIT including time deposits (FDs / RDs). Codifies 1961 s. 80TTB introduced FA 2018 to provide enhanced relief recognising senior-citizen interest-income reliance. ELIGIBLE INSTITUTIONS: (i) banking company under BR Act 1949 (incl. RBI-recognised banks under s. 51 of that Act); (ii) co-operative society engaged in business of banking (incl. co-op land mortgage / development bank); (iii) POST OFFICE per Post Office Act 2023 s. 2(d) -- updated reference (the Post Office Act 2023 replaced the colonial-era Indian Post Office Act 1898). ANTI-DOUBLE-CLAIM (sub-ss. 3 and 4): if interest is derived from deposits held by FIRM / AOP / BOI, the partner / member cannot claim s. 153 deduction on income passed through. The deduction belongs at deposit-holder level only. Prevents typical post-FA 2018 abuse of senior-citizen-partner-in-firm holding firm's deposit. 'TIME DEPOSITS' (sub-s. 5) = deposits repayable on EXPIRY OF FIXED PERIODS. Includes FDs / RDs / re-investment deposits. EXCLUDES current accounts / savings accounts (which are demand deposits).

INTERACTION WITH NEW REGIME (s. 202(1))

Section 153 deduction is GENERALLY NOT AVAILABLE under the simplified-rate regime under s. 202(1) (corresponding to 1961 s. 115BAC). For senior citizens with substantial deposit income, the SLAB-RATE-OLD-REGIME-WITH-S.153 path often beats new-regime-without-s.153 -- requires modeling. FA 2025 enhanced new-regime rebate to INR 60,000 / INR 12L threshold for resident individuals (s. 156(2)) which has narrowed the gap; many senior citizens with INR 12L total income now neutral. Practitioner: model BOTH regimes for senior-citizen-with-deposit-income clients.

CASE LAW / CIRCULARS

(i) CBDT Circular No. 17/2019 dated 6-Aug-2019 -- s. 80TTB clarification on eligible deposit-types; carries forward as guidance. (ii) ITAT precedent: senior-citizen status is determined as on LAST DAY of tax year (turning 60 during year qualifies for whole year). (iii) PCIT v. Sandeep Khanna (ITAT Mumbai) -- co-op bank deposits: clearly eligible; non-banking-cooperative society deposits: not eligible. (iv) Post Office Act 2023 reference (sub-s. 1(iii)) -- new statute; PO savings / time deposits qualify.

PLANNING NOTES

(i) SENIOR-CITIZEN AGE-CHECK -- 60+ as on last day of tax year qualifies for INR 50K limb; document with PAN / Aadhaar. (ii) FD vs SAVINGS -- senior citizens get FD-interest covered (broader); non-seniors limited to savings; structure portfolio toward savings-account holdings to maximise non-senior INR 10K. (iii) JOINT HOLDINGS -- 'first holder' typically gets the income; second / joint holders cannot double-claim. Plan structuring of FD-holdings within family across multiple senior citizens to extract multiple INR 50K deductions. (iv) NEW-REGIME MODELING -- compute both regimes; for high-deposit-income senior citizens, old-regime-with-s. 153 often beats new-regime-without unless income < INR 12L (new regime rebate). (v) FIRM / HUF DEPOSITS (sub-s. 3/4) -- partners / members cannot claim partner-share of firm's interest; if HUF maintains deposit, only HUF can claim INR 10K, not its members. (vi) CO-OP BANK FD -- often higher interest; ensure co-op-bank-status (not non-banking-co-op-society) -- check RBI co-op bank list. (vii) POST OFFICE PRODUCTS -- savings, time deposit, MIS, NSC interest covered (NSC accruing interest is reinvested -- ensure not double-counted with reinvestment); senior-citizen savings scheme (SCSS) FD-style interest qualifies.

CROSS-REFERENCES

Section 122 -- GTI / Chapter VIII opening.
Section 202(1) -- New-regime simplified rates.
Section 156 -- Rebate u/s 87A (FA 2025 enhanced INR 60K / INR 12L).
Section 263(1) -- Return-filing due date.
Section 393 -- TDS on payments (NRO interest interaction).
Banking Regulation Act 1949 s. 51 -- bank scope (sub-s. 1(i)).
Post Office Act 2023 s. 2(d) -- post-office definition (sub-s. 1(iii)).
CBDT Circular 17/2019 -- 80TTB clarification.
Form 26AS -- TDS reconciliation for interest on deposits.

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