Senior citizen tax deduction: Why Section 80TTB limit should be raised to ₹1 lakh, expert explains

In the Union Budget 2025, the Finance Minister provided some relief to senior citizens by increasing the threshold for deducting tax at source (TDS) on interest income to Rs 1 lakh. This means banks will not deduct any TDS on interest income of up to Rs 1 lakh from bank deposits, including fixed deposits, recurring deposits, and savings accounts.

Even as TDS is not deducted, such interest income remains taxable at the individual slab rates of old and new tax regimes.

Now, under Section 80TTB of the Income-tax Act 1961, senior citizens are allowed to claim a deduction of up to ₹50,000 in respect of interest of bank deposits. As Budget 2026 approaches, tax experts believe the deduction limit under Section 80TTB should be increased to ₹1 lakh to match with the higher non-TDS threshold announced in Budget 2025. Such a move will lead to continued tax incidence and reduce compliance burden for senior citizens.

"Section 80TTB provides senior citizens with a higher deduction of up to ₹50,000 in respect of interest income from deposits. The Government has extended additional relief to senior citizens by enhancing the threshold for non-deduction of tax at source on interest income under section 194A (corresponding to Section 393(1)[Table: S.No. 5(ii) of the ITA 2025) to ₹1,00,000, post the amendments introduced by the Finance Act, 2025. However, the deduction limit under section 80TTB has not been aligned with this policy approach, leading to continued tax incidence and compliance burden for senior citizens," said CA Dr Suresh Surana.

"In view of the enhanced threshold for non-deduction of tax at source, it would be appropriate to align the deduction limit under section 80TTB be enhanced to ₹1,00,000 to provide relief to senior citizens," he added.

Finance Minister Nirmala Sitharaman will present Budget 2026 on Sunday.

Meanwhile, experts have also suggested increasing the Section 80TTA deduction limit to at least Rs 50,000 for salaried taxpayers.

"It is unlikely that salaried individuals would keep their entire savings in a savings bank account, which earns a much lower rate of interest as compared to term deposits. They are likely to transfer some portion of their savings to term deposits/recurring deposits in banks to earn comparatively better returns," the American Chambers of Commerce in India (AMCHAM) said in its pre-budget memorandum.