What's more, the budget has also ended the current practice of tax deduction at source (TDS) on interest income earned by senior citizens. Currently, TDS is deducted on deposits at the rate of 10%. In cases where tax liability is more than the TDS, the account holder will have to pay the difference.
Towards this, the Finance Bill will insert a new section, 80TTB, in the Income-Tax Act relating to this deduction of interest on deposits made by senior citizens. Interest income from a deposit with a bank, co-operative bank or post office will come under this section.
Usually senior citizens prefer fixed deposits to market-linked products. The measure is targeted at only a small portion of the citizens. It is good that it is also targeted at the upper middle-class segment because you need to have a deposit of Rs7.5 lakh in the account to get this benefit
The amendment will take effect from 1 April 2019
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