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CA Intermediate · Taxation · Deductions from Gross Total Income

Mrs Savita, a resident individual aged 63, has opted out of the concessional tax regime. In tax year 2026-27 she earned interest of Rs 18,000 from savings bank accounts, Rs 41,000 from bank fixed deposits and Rs 30,000 as rent from a let-out shop. Her interest income is taxable under the head Income from other sources. What is her deduction for interest income for tax year 2026-27?

The deduction is Rs 50,000. A resident senior citizen may deduct interest on savings and fixed deposits with banks, up to Rs 50,000. Her eligible interest is Rs 59,000, which exceeds the cap. Rent from the shop is not interest, so it is excluded.

  1. ARs 10,000
  2. BRs 50,000Correct
  3. CRs 59,000
  4. DRs 41,000

Explanation

A resident senior citizen can claim a deduction for interest from deposits with banks, co-operative banks and post offices, which includes both savings and fixed deposits. The cap is Rs 50,000. Eligible interest is 18,000 + 41,000 = Rs 59,000, so the deduction is limited to Rs 50,000. Rs 10,000 is the limit for non-senior individuals and applies to savings interest only. Rent is not interest and is ignored.

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