The Income Tax Act 2025 introduced several structural changes to simplify compliance and improve clarity for taxpayers. Among the most notable updates, Section 80TTA and Section 80TTB have been merged into Section 153. This consolidation streamlines deduction claims and reduces confusion for individuals, Hindu Undivided Families (HUFs), and senior citizens.

Background of Section 80TTA and 80TTB

Previously, under the Income Tax Act 1961, Section 80TTA allowed a deduction of up to ₹10,000 on interest earned from savings accounts. This benefit applied to individuals and HUFs but excluded senior citizens. In contrast, Section 80TTB provided senior citizens with a higher deduction limit of ₹50,000, covering interest from savings accounts, fixed deposits, and recurring deposits.

Although both sections served similar purposes, taxpayers often faced confusion regarding eligibility, limits, and applicable institutions. Therefore, the Income Tax Act 2025 sought to merge these provisions into a single, comprehensive section.

Introduction of Section 153

With effect from FY 2026‑27 (AY 2027‑28), Section 153 replaces both 80TTA and 80TTB. Importantly, the deduction limits remain unchanged, but the section now consolidates rules for all categories of taxpayers.

·         Non‑senior individuals and HUFs: Deduction up to ₹10,000 on savings account interest.

·         Senior citizens (60+ years): Deduction up to ₹50,000 on interest from savings accounts, fixed deposits, and recurring deposits.

Thus, Section 153 ensures clarity by placing all deduction rules under one umbrella.

Eligible Institutions

Section 153 specifies that deductions apply only to interest earned from:

·         Banks regulated under the Banking Regulation Act, 1949.

·         Co‑operative banks, including land mortgage and development banks.

·         Post offices recognised under the Post Office Act, 2023.

Consequently, taxpayers cannot claim deductions on interest from corporate deposits, bonds, or non‑convertible debentures.

Transition From Old to New Act

Because the Income Tax Act 2025 takes effect from 1 April 2026, taxpayers filing returns for FY 2025‑26 must continue using Sections 80TTA and 80TTB. However, from FY 2026‑27 onward, deductions must be claimed under Section 153.

This transition requires employers, payroll systems, and tax software to update their codes. Moreover, taxpayers must ensure they reference the correct section while filing returns to avoid mismatches or notices.

Practical Implications for Taxpayers

First, salaried individuals will notice changes in their Form 16, where deductions will now appear under Section 153. Second, tax professionals must guide clients to avoid mistakenly citing 80TTA or 80TTB in future filings. Third, senior citizens benefit from continued access to the higher deduction limit, ensuring their savings remain tax‑efficient.

Additionally, the merger reduces duplication in the law, making it easier for new taxpayers to understand deduction provisions.


Comparison: Old vs New

Feature

Old Act (1961)

New Act (2025 – Section 153)

Non‑senior deduction

₹10,000 (Savings interest only)

₹10,000 (Savings interest only)

Senior citizen deduction

₹50,000 (Savings + FD + RD)

₹50,000 (Savings + FD + RD)

Section reference

80TTA / 80TTB

Section 153

Effective year

Till FY 2025‑26

From FY 2026‑27

Eligible institutions

Banks, co‑op banks, post offices

Same institutions

Why the Merger Matters

The merger of Sections 80TTA and 80TTB into Section 153 reflects the government’s intent to simplify tax laws. Instead of maintaining separate provisions for different categories of taxpayers, the new Act consolidates them. As a result, compliance becomes easier, and taxpayers can focus on planning rather than deciphering multiple sections.

Furthermore, the merger aligns with the broader goal of the Income Tax Act 2025: modernisation, simplification, and digital‑friendly compliance.

Tax Planning Tips Under Section 153

·         Track interest income carefully: Even though deductions exist, taxpayers must report all interest income in their returns.

·         Use bank statements and Form 26AS: These documents help reconcile interest income with deductions claimed.

·         Senior citizens should maximise benefits: By investing in fixed deposits and recurring deposits, they can fully utilise the ₹50,000 deduction.

·         Avoid claiming ineligible interest: Corporate deposits, bonds, and NCDs remain outside the scope of Section 153.

Conclusion

The merger of Section 80TTA and Section 80TTB into Section 153 under the Income Tax Act 2025 marks a significant step toward simplification. Although deduction limits remain unchanged, taxpayers must adapt to the new section reference from FY 2026‑27 onward.

Ultimately, this change reduces confusion, enhances compliance, and ensures that both non‑senior individuals and senior citizens continue enjoying tax relief on interest income. By understanding the transition and applying deductions correctly, taxpayers can optimise their savings while staying compliant with the latest law.