Interest on Savings Deposits Deduction under the Income Tax Act 2025: Rs 10,000 and Rs 50,000 Limits (Section 153)
Section 153 of the Income-tax Act, 2025 lets you deduct interest earned on deposits with a bank, a co-operative bank or the Post Office from your gross total income. An individual who is not a senior citizen and a HUF get up to Rs 10,000, on savings account interest only. A senior citizen gets up to Rs 50,000, on interest from any account, including fixed deposits.
The rules below come from section 153 of the Act as amended by the Finance Act, 2026, and apply to tax year 2026-27. Last reviewed on 10 November 2026.
What is the interest on deposits deduction under section 153?
It is a deduction from gross total income (the total of your income under all heads, before deductions). It applies only where that income includes interest on deposits with one of three kinds of institution (section 153(1)):
- a banking company covered by the Banking Regulation Act, 1949, including a bank or banking institution referred to in section 51 of that Act;
- a co-operative society carrying on the business of banking, including a co-operative land mortgage bank or land development bank; or
- a Post Office as defined in section 2(d) of the Post Office Act, 2023.
Interest from a company fixed deposit, a bond, or a loan you gave to a friend is not interest on a deposit with these institutions, so section 153 does not reach it. That interest is taxed in full as your income.
How much deduction can I claim? Rs 10,000 or Rs 50,000?
| Who you are | Which deposits count | Maximum deduction for the tax year |
|---|---|---|
| Individual who is not a senior citizen (153(1)(a)) | Savings account only; time deposits excluded | Whole interest, up to Rs 10,000 (153(2)(a)) |
| HUF (153(1)(c)) | Savings account only; time deposits excluded | Whole interest, up to Rs 10,000 (153(2)(a)) |
| Senior citizen (153(1)(b)) | Any account, including time deposits | Whole interest, up to Rs 50,000 (153(2)(b)) |
"Time deposits" means deposits repayable on expiry of fixed periods (section 153(5)). A fixed deposit and a recurring deposit fit that description. A normal savings account, where you can withdraw any time, does not.
Who is a senior citizen for section 153?
Section 2(100) defines a senior citizen as an individual resident in India who is 60 years or more at any time during the relevant tax year. The test is not "age on 31 March". A person who turns 60 on 10 February 2027 is a senior citizen for tax year 2026-27 and can claim the higher limit for the whole year's interest.
How do I know which limit applies to me?
How is the deduction calculated? Two worked examples
Example 1: Meena, age 35, salaried (tax year 2026-27). Assumptions: she holds a savings account in a bank and a fixed deposit in the same bank, and has no other deposit income.
| Step | Working | Amount (Rs) |
|---|---|---|
| 1. Savings account interest | Given | 14,200 |
| 2. Fixed deposit interest | Given (time deposit) | 30,000 |
| 3. Total deposit interest in gross total income | 14,200 + 30,000 | 44,200 |
| 4. Eligible interest for section 153(2)(a) | Savings only | 14,200 |
| 5. Deduction | Lower of 14,200 and 10,000 | 10,000 |
| 6. Deposit interest left in income | 44,200 - 10,000 | 34,200 |
Example 2: Ravi, age 66, retired (tax year 2026-27). Assumptions: he is resident in India, with savings account interest and fixed deposit interest, all in banks and the Post Office.
| Step | Working | Amount (Rs) |
|---|---|---|
| 1. Savings account interest | Given | 22,000 |
| 2. Bank fixed deposit interest | Given | 40,000 |
| 3. Post Office time deposit interest | Given | 8,000 |
| 4. Total eligible interest | 22,000 + 40,000 + 8,000 | 70,000 |
| 5. Deduction | Lower of 70,000 and 50,000 | 50,000 |
| 6. Deposit interest left in income | 70,000 - 50,000 | 20,000 |
Can an NRI claim the savings interest deduction?
Section 153(1)(a) covers "an individual, not being a senior citizen" and does not mention residence. So a non-resident individual can claim the Rs 10,000 limit on savings account interest. The Rs 50,000 limit needs a senior citizen, and section 2(100) requires that person to be resident in India. A non-resident aged 60 or more is therefore not a senior citizen and falls in the Rs 10,000, savings-account-only bracket.
What happens when interest is earned through a firm or association?
Sections 153(3) and 153(4) close a gap. If the interest is earned on a deposit held by, or on behalf of, a firm, an association of persons (AOP) or a body of individuals (BOI), no partner, member or individual of that body can claim the deduction on that income in their own total income.
- For the Rs 10,000 savings-account limit, this applies to savings account interest (section 153(3)).
- For the Rs 50,000 senior citizen limit, it applies to any deposit (section 153(4)).
Real-life example: Anil and Sunita run a partnership. The firm keeps its operating money in a savings account and earns Rs 18,000 interest. Neither partner can take a Rs 10,000 deduction on their share of that interest, even though each holds a personal savings account too. The personal account interest of each partner is tested separately.
Real-life example: Kamla turns 60 in February. Kamla is a resident individual who turns 60 on 12 February 2027. Because section 2(100) looks at any time in the tax year, she is a senior citizen for 2026-27. Her fixed deposit interest for the whole of that year is eligible under the Rs 50,000 limit, not just the interest after her birthday.
Real-life example: a HUF with a savings account. The Sharma HUF earns Rs 6,500 on its bank savings account. The whole Rs 6,500 is deductible under section 153(2)(a) as it is below Rs 10,000. If the same HUF also had Rs 25,000 of fixed deposit interest, that part would stay fully taxable.
Can I claim this deduction under the new tax regime?
Probably not under the default regime. Section 202 sets out the new tax regime for individuals, HUFs and certain other persons, with its own rate table. Section 202(2)(a)(xii) says total income under that regime is computed without any deduction under Chapter VIII, other than sections 124(1), 124(2), 125(2) and 146. Section 153 sits inside Chapter VIII and is not in that list of exceptions.
A person can exercise the option under section 202(4) to be taxed outside that regime, in the manner and time that sub-section provides. Which regime gives a lower tax bill depends on the rest of your income and deductions, so work out both before filing.
Where do I show it, and does TDS affect it?
The deduction is available to you whether or not tax was deducted at source on the interest. TDS on interest is a separate matter, covered in our guide on TDS on interest, commission and contractor payments under the Income-tax Act, 2025. The sections reviewed for this article do not prescribe a separate form or certificate for claiming section 153, so claim it in your return of income in the deductions part, with the interest first included in your income. Check the return form for the exact schedule.
Quick reference
| Point | Rule | Reference |
|---|---|---|
| Eligible institutions | Bank, co-operative bank, Post Office | 153(1)(i) to (iii) |
| Non-senior individual or HUF | Up to Rs 10,000, savings account only | 153(2)(a) |
| Senior citizen | Up to Rs 50,000, any account including time deposits | 153(2)(b) |
| Senior citizen age test | 60 or more at any time in the tax year, resident | 2(100) |
| Firm, AOP, BOI deposits | No deduction for partner or member on that income | 153(3), 153(4) |
| Time deposit | Deposit repayable on expiry of a fixed period | 153(5) |
| Default new regime | Chapter VIII deductions not allowed, except a few sections | 202(2)(a)(xii) |
Common mistakes
- Claiming Rs 10,000 on fixed deposit interest. For a person who is not a senior citizen, time deposits are excluded.
- Deducting before including the interest. The deduction is allowed only where your gross total income actually includes the interest. Leaving interest out of income also removes the deduction.
- Treating the limit as per account. The limit is per tax year for the assessee, across all eligible deposits, not per bank account.
- Counting company FD or bond interest. Only deposits with a bank, co-operative bank or Post Office qualify.
- Using age on 31 March. Section 2(100) tests age at any time during the tax year, and requires the person to be resident in India.
- Claiming it under the default new regime. Section 202(2)(a)(xii) excludes Chapter VIII deductions, which includes section 153.
Where this is in the Act
- Section 153: deduction for interest on deposits (sub-sections 1 to 5).
- Section 2(100): definition of senior citizen.
- Section 202(2)(a)(xii) and 202(4): new tax regime exclusions and the option to opt out.
- Chapter VIII: the group of deductions that section 153 belongs to.
For a CA firm, the practical work is collecting interest statements and Post Office passbooks for every client, then keeping senior citizens and HUFs separate from the Rs 10,000 cases. Finexo's practice management software tracks client documents and filing tasks across your client book. It does not compute the deduction or file returns for you.
This article is general information, not tax advice. Confirm facts for your own case before filing.
Frequently Asked Questions
How much interest on savings account is deductible under the Income-tax Act, 2025?
An individual who is not a senior citizen, or a HUF, can deduct the whole interest on savings account deposits up to Rs 10,000 in a tax year under section 153(2)(a). Interest on time deposits is not covered for these assessees.
What is the deduction limit for senior citizens?
A senior citizen can deduct the whole interest on deposits in any account, including time deposits, up to Rs 50,000 in a tax year under section 153(2)(b). The deposit must be with a bank, a co-operative bank or the Post Office.
Who is a senior citizen under the Income-tax Act, 2025?
Under section 2(100), a resident individual who is 60 years or more at any time during the relevant tax year. Turning 60 during the year is enough.
Does section 153 cover Post Office deposits?
Yes. Section 153(1)(iii) covers interest on deposits with a Post Office as defined in section 2(d) of the Post Office Act, 2023, along with banks and co-operative banks carrying on banking business.
Can a partner claim the deduction on a firm's savings account interest?
No. Under section 153(3), where savings account interest is earned on a deposit held by or on behalf of a firm, AOP or BOI, no partner or member can claim the deduction on that income. Section 153(4) says the same for the senior citizen limit.
Is the section 153 deduction available in the new tax regime?
Under the default regime in section 202, total income is computed without Chapter VIII deductions other than sections 124(1), 124(2), 125(2) and 146. Section 153 is in Chapter VIII, so it is not allowed there. A person who exercises the option under section 202(4) is outside that regime.
Can an NRI or a non-resident aged 60+ claim the Rs 50,000 limit?
No. Section 2(100) defines a senior citizen as a resident individual aged 60 or more. A non-resident individual falls under section 153(1)(a) and can claim up to Rs 10,000 on savings account interest only.