Section 153 of the Income Tax Act, 2025: Interest Deduction

Introduction

Section 153 of the Income tax Act, 2025 allows eligible individuals and HUFs to claim a deduction on interest from specified deposits. The limit is ₹10,000 for non-senior individuals/HUFs and ₹50,000 for resident senior citizens, including interest on time deposits. This deduction is not available under the default new tax regime under Section 202 and can be claimed only under the old tax regime. The Act came into force on April 1, 2026, and Section 153 combines the deductions previously covered under Sections 80TTA and 80TTB of the Income tax Act, 1961.

This blog explains the eligibility conditions, covered deposits, deduction limits, tax-regime restrictions, and differences between the new and old provisions.

What Is Section 153 of the Income tax Act, 2025?

Section 153 of the Income Tax Act provides a deduction from gross total income when an eligible assessee earns interest from deposits maintained with:

• A banking company
• A co-operative society carrying on banking business
• A specified Post Office

The deduction is not the same for every assessee. It depends on the taxpayer’s category and whether the interest arises from a savings account or a time deposit.

A non-senior individual or HUF can claim the deduction only against savings account interest. A resident senior citizen can claim it against interest from any eligible deposit account, including a time deposit.

Before Section 153 of the Income Tax Act came into effect, deductions for interest on deposits were covered under Sections 80TTA and 80TTB of the Income tax Act, 1961. Section 80TTA allowed non-senior individuals and HUFs to claim up to ₹10,000 on savings account interest, excluding time deposits. Section 80TTB allowed resident senior citizens to claim up to ₹50,000 on interest from savings accounts and time deposits.

Difference between Section 153 and Old Sections 80TTA and 80TTB

The principal change is the consolidation of two old provisions into Section 153 of the Income Tax Act. The eligibility conditions and basic deduction limits remain substantially the same.

Who Can Claim the Deduction?

Section 153(1) identifies three categories of eligible assessees:

• An individual who is not a senior citizen
• An individual who is a senior citizen
• A Hindu Undivided Family

Under the Income tax Act, 2025, a senior citizen means an individual who is resident in India and is 60 years of age or more at any time during the relevant tax year. Therefore, an individual must satisfy both the age and residential-status conditions to claim the ₹50,000 deduction.

Companies, LLPs, partnership firms, Associations of Persons and Bodies of Individuals are not listed as eligible assessees under Section 153 of the Income Tax Act.

Deposits Covered under Section 153 of the Income Tax Act

The interest must arise from a deposit maintained with an institution specified in Section 153(1).

1. Banking Company

The deposit may be maintained with a banking company governed by the Banking Regulation Act, 1949.

This category also includes a bank or banking institution referred to in Section 51 of that Act.

2. Co-operative Society Engaged in Banking

Interest on a deposit with a co-operative society is covered only when the society carries on the business of banking.

The provision specifically includes:

• Co-operative land mortgage banks
• Co-operative land development banks

A co-operative society is not covered merely because it accepts money from its members. It must be engaged in banking business.

3. Post Office

Interest from eligible deposits maintained with a Post Office is also covered. For this purpose, the provision refers to a Post Office as defined under Section 2(d) of the Post Office Act, 2023.

₹10,000 Deduction for Non-Senior Individuals and HUFs

Section 153(2)(a) applies to:

• An individual who is not a senior citizen
• A Hindu Undivided Family

The deduction is equal to the actual eligible savings account interest or ₹10,000, whichever is lower.

For example, where the eligible savings account interest is ₹7,500, the entire ₹7,500 may be deducted. Where it is ₹16,000, the deduction is restricted to ₹10,000.

The ₹10,000 limit applies to the combined interest from all eligible savings accounts. It is not a separate limit for each account or each bank.

Interest from the following time deposits is not eligible for this category:

• Fixed deposits
• Term deposits
• Recurring deposits repayable after a fixed period
• Other deposits with a fixed maturity period

The interest from such deposits must not be included while calculating the ₹10,000 deduction.

₹50,000 Deduction for Senior Citizens

Section 153(2)(b) applies to an individual who qualifies as a resident senior citizen.

The deduction is equal to the actual eligible deposit interest or ₹50,000, whichever is lower.

The eligible interest may arise from:

• Savings accounts
• Fixed deposits
• Term deposits
• Recurring deposits
• Other eligible time deposits

The ₹50,000 amount is a combined limit for the tax year. A senior citizen cannot claim ₹10,000 separately for savings account interest and another ₹50,000 for fixed-deposit interest.

For example, where a senior citizen earns ₹12,000 from a savings account and ₹45,000 from fixed deposits, the total eligible interest is ₹57,000. The deduction is restricted to ₹50,000. The remaining ₹7,000 is not covered by Section 153 of the Income Tax Act.

Meaning of Time Deposit

Section 153(5) defines a time deposit as a deposit repayable on the expiry of a fixed period.

A savings account normally does not have a fixed maturity date. In comparison, a fixed deposit, term deposit or qualifying recurring deposit is repayable after an agreed period and is treated as a time deposit.

Deposits Held by a Firm, AOP or BOI

Sub-sections (3) and (4) restrict partners and members from claiming the deduction against interest from deposits held by or on behalf of:

• A partnership firm
• An Association of Persons
• A Body of Individuals

For example, where a partnership firm owns a fixed deposit, a senior citizen partner cannot claim the ₹50,000 deduction personally against the firm’s interest income.

Similarly, where an AOP owns a savings account, its members cannot divide the interest among themselves and claim separate deductions.

The restriction applies because the deposit is legally held by the firm, AOP or BOI and not by the individual partner or member.

Claim Your Section 153 Deduction with Ebizfiling

Ebizfiling can help individuals and HUFs correctly calculate and claim the deduction under Section 153 of the Income Tax Act while filing their Income tax returns.

• Classify savings account and time-deposit interest correctly
• Verify whether the ₹10,000 or ₹50,000 deduction limit applies
• Reconcile interest income with Form 168 and bank interest certificates for Tax Year 2026-27 onwards, or with AIS and Form 26AS for earlier periods.
• Report total interest income and claim the eligible deduction accurately

Conclusion

Section 153 of the Income tax Act, 2025 combines the interest deduction provisions previously covered under Sections 80TTA and 80TTB. A non-senior individual or HUF can claim up to ₹10,000 against eligible savings account interest. A resident senior citizen can claim up to ₹50,000 against interest from eligible savings accounts and time deposits. The deduction depends on the taxpayer’s category, residential status, type of deposit, institution maintaining the deposit, and legal ownership of the account. Section 153 is available only under the old tax regime and cannot be claimed where income is taxed under the default new tax regime under Section 202.

Frequently Asked Questions