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CMA Intermediate · Direct and Indirect Taxation · Taxation of Individuals (including AMT) and HUF

Mrs. Kamala Iyer, a resident senior citizen, receives Rs. 18,000 interest on a bank savings account, Rs. 45,000 interest on a bank fixed deposit and Rs. 12,000 interest on a Post Office time deposit. What is the deduction for interest on deposits under the Income-tax Act, 2025?

The deduction is Rs. 50,000. A senior citizen can claim interest from banks and Post Office deposits, including time deposits, up to Rs. 50,000. Total interest is Rs. 75,000, so the limit applies and only Rs. 50,000 is deducted.

  1. ARs. 10,000
  2. BRs. 50,000Correct
  3. CRs. 63,000
  4. DRs. 75,000

Explanation

For a senior citizen, the whole of the interest on deposits in any account, including time deposits, is deductible up to Rs. 50,000. Total qualifying interest is 18,000 + 45,000 + 12,000 = Rs. 75,000, so the deduction is capped at Rs. 50,000. Rs. 75,000 ignores the cap.

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