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Section 153 Income Tax Act 2025: Who Can Claim Deduction on Bank and Post Office Interest?

Section 153 provides a deduction for qualifying interest on deposits. The maximum is Rs. 10,000 for individuals who are not senior citizens and for Hindu undivided families, and Rs. 50,000 for senior citizens, subject to the specified account types and other conditions.

Law in force: The Income-tax Act, 2025 applies from 1 April 2026. Section 153 consolidates the rules relating to deposit-interest deductions for eligible taxpayers. Deduction availability under an optional tax regime should be checked separately before filing.

Who can claim the deduction under Section 153?

Section 153(1) covers an individual who is not a senior citizen, an individual who is a senior citizen, and a Hindu undivided family (HUF). Qualifying interest must arise from deposits with a bank governed by the Banking Regulation Act, 1949, a co-operative society carrying on banking business, or a Post Office within the meaning of the Post Office Act, 2023.

How much deposit interest is deductible?

Eligible taxpayer	Covered deposits	Maximum deduction per tax year
Individual other than a senior citizen	Savings accounts only; time deposits excluded	Rs. 10,000
Hindu undivided family	Savings accounts only; time deposits excluded	Rs. 10,000
Senior citizen individual	Any qualifying deposit account, including time deposits	Rs. 50,000

The deductible amount is the actual eligible interest if lower than the relevant ceiling. The ceilings apply to aggregate eligible interest, not separately for each bank or account. The deduction reduces qualifying gross total income; it is not an exemption from reporting interest.

Section 153: Explanation of the statutory provisions

Section 153(1): Eligible taxpayers and institutions

Deduction is available only to the listed individuals and HUFs for interest earned on deposits with specified banking institutions, co-operative banks and post offices. Ordinary companies and firms are not eligible in their own right under this provision.

Section 153(2)(a): Savings interest up to Rs. 10,000

An individual who is not a senior citizen, or an HUF, may deduct qualifying savings-account interest up to Rs. 10,000. Fixed deposits and other time deposits are excluded from this category.

Section 153(2)(b): Senior citizens' interest up to Rs. 50,000

A senior citizen individual may deduct qualifying interest up to Rs. 50,000 from any eligible deposit account, including time deposits such as fixed deposits.

Section 153(3) and (4): Deposits held for firms, AOPs and BOIs

Interest from deposits held by or on behalf of a firm, association of persons (AOP) or body of individuals (BOI) cannot be claimed as a Section 153 deduction by its partners or members merely by attributing that interest to them. Subsection (3) addresses the savings-account category, while subsection (4) addresses the senior-citizen deposit category.

Section 153(5): Meaning of time deposits

A time deposit is a deposit repayable upon expiry of a fixed period. This distinction matters because non-senior individuals and HUFs cannot deduct interest on time deposits under Section 153(2)(a).

Important legal terms

Gross total income: Total income computed before deductions allowed under the relevant deductions chapter, subject to the Act's computation rules.

Senior citizen: An individual meeting the age threshold specified under the applicable definitions and provisions of the Income-tax Act; age eligibility must be established for the relevant tax year.

Savings account: A deposit account distinguished from a fixed-term or time deposit for the purpose of Section 153(2)(a).

Time deposit: A deposit repayable on expiry of a fixed period, as expressly defined in Section 153(5).

HUF: Hindu undivided family, a separately recognised category of assessee under Indian income-tax law.

Practical examples

Example 1: Non-senior individual

An individual earns Rs. 7,500 savings-account interest and Rs. 24,000 fixed-deposit interest. Subject to the applicable tax regime and other conditions, the Section 153 deduction is Rs. 7,500; the fixed-deposit interest does not qualify for the Rs. 10,000 category.

Example 2: Savings interest from multiple banks

An eligible HUF earns Rs. 6,000 in savings interest at one bank and Rs. 8,000 at another. The aggregate is Rs. 14,000, but the maximum Section 153 deduction is Rs. 10,000.

Example 3: Senior citizen

A senior citizen earns Rs. 12,000 savings interest and Rs. 46,000 fixed-deposit interest from qualifying institutions. The aggregate eligible interest is Rs. 58,000; the maximum deduction is Rs. 50,000, subject to the applicable regime and other requirements.

Filing note: Report all taxable interest under the correct income head, retain account statements and interest certificates, and confirm whether the chosen tax regime permits this deduction. A deduction is not automatic merely because a bank has paid interest.

Frequently asked questions

Does Section 153 allow a deduction on fixed-deposit interest?

For a senior citizen, yes, qualifying time-deposit interest is included within the Rs. 50,000 limit. For a non-senior individual or HUF, the Rs. 10,000 category covers savings-account interest only.

Is the Rs. 10,000 limit available for every savings account?

No. The statutory limit is an overall maximum for the eligible taxpayer for the tax year, rather than a separate limit per account.

Can a firm claim Section 153 deduction?

No. Section 153(1) specifies eligible individuals and HUFs. Its subsections (3) and (4) also prevent partners and members from claiming the specified deduction for deposits held by or on behalf of firms, AOPs or BOIs.

Is Section 153 of the 2025 Act the same as Section 153 of the 1961 Act?

No. Section 153 of the Income-tax Act, 2025 concerns deposit-interest deductions. Section 153 of the Income-tax Act, 1961 dealt with time limits for assessments and reassessments. Always identify the Act and year when citing the section.

Official legal text and further resources

Read the official Income-tax Act, 2025 as amended and the Income Tax e-Filing Portal. For historical correspondence, consult the Income Tax Department's provision mapping.

Last reviewed: 10 November 2026. This article is general legal information, not a substitute for advice on specific facts.