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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products

Mrs. Latha Iyer, a resident senior citizen, earns interest from bank fixed deposits and post office deposits. Under the Income-tax Act, the benefit available to her on interest from bank deposits is best described as:

A resident senior citizen can claim a deduction on interest earned from deposits with banks, co-operative societies and post offices, up to a prescribed limit. It is a capped deduction, not a full exemption or flat rate, and it does not cover corporate bond interest.

  1. AA deduction for interest up to a prescribed limit from deposits with banks, post offices and co-operative banksCorrect
  2. BFull exemption of all bank interest
  3. CA flat 5% tax rate on all interest
  4. DA rebate only on interest from corporate bonds

Explanation

Senior citizens get a deduction on interest from deposits with banks, co-operative banks and post offices, up to a stated ceiling, under the old regime provisions. It is not full exemption, nor a flat rate. The benefit also does not extend to corporate bond interest.

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