Deduction for interest on deposits
[Section-153 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 153(1) of Income Tax Act 2025
153(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, 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(k) of the Post Office Act, 2023.
Section 153(2) of Income Tax Act 2025
153(2) The deduction under sub-section (1) shall be allowed for a tax year as follows:—
- (a) in case of assessee mentioned in sub-section 1(a) or (c), the whole of the interest up to a maximum amount of ten thousand rupees on deposits in a savings account, excluding time deposits;
- (b) in case of assessee mentioned in sub-section (1)(b), the whole of the interest up to a maximum amount of fifty thousand rupess on deposits in a savings account, including time deposits.
Section 153(3) of Income Tax Act 2025
153(3) Where the income referred to in this section 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 the association or any individual of the body.
Section 153(4) of Income Tax Act 2025
153(4) In this section, “time deposits” means the deposits repayable on expiry of fixed periods.
FAQs on Section 153 of Income Tax Act 2025
Who is eligible to claim deduction under section 153 of the Income Tax Act, 2025?
An individual (whether a senior citizen or not) or a Hindu Undivided Family (HUF) is eligible to claim deduction, subject to the conditions specified.
What type of income qualifies for deduction under section 153?
Only income by way of interest on deposits with a banking company, a co-operative bank, or a Post Office qualifies for deduction.
What is the maximum deduction allowed for non-senior citizens and HUFs under section 153?
The maximum deduction allowed is up to ₹10,000 on interest from savings account deposits only, and not from time deposits.
What is the maximum deduction allowed for senior citizens under section 153?
Senior citizens can claim deduction up to ₹50,000 on interest from both savings and time deposits.
Can time deposit interest be claimed as a deduction by non-senior citizens or HUFs?
No, time deposit interest is not eligible for deduction for non-senior citizens or HUFs.
Can the deduction be claimed on interest from multiple savings accounts?
Yes, but the total deduction shall not exceed the applicable limit (₹10,000 or ₹50,000, as the case may be).
Is interest from fixed deposits eligible for deduction under section 153?
Only for senior citizens. Fixed deposits are classified as time deposits, and their interest is deductible only for senior citizens.
Can a firm, AOP, or BOI claim deduction under this section?
No. Section 153(3) clearly states that no deduction shall be allowed for savings account interest derived by or on behalf of a firm, AOP, or BOI.
If a partner in a firm holds a savings account in the name of the firm, can he claim deduction in his individual return?
No, such income is not eligible for deduction in computing the total income of the partner.
What is meant by ‘time deposits’ as per this section?
‘Time deposits’ refer to deposits repayable on expiry of fixed periods.
Are co-operative land mortgage banks and co-operative land development banks included for eligibility?
Yes, these are included under co-operative societies engaged in the business of banking.
Is the interest earned from Post Office savings accounts eligible for deduction?
Yes, interest on eligible Post Office savings accounts is deductible under section 153.
Can senior citizens claim deduction for both savings and time deposits interest together?
Yes, they can claim deduction up to ₹50,000 from both types combined.
Is the deduction under this section available automatically?
No, the assessee must claim the deduction in the return of income and ensure that eligible interest is part of the gross total income.
Is there any separate limit for each deposit source like bank, co-operative bank, or Post Office?
No, the limit applies collectively to all qualifying interest sources.
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