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Composition scheme eligibility barred for casual and non-resident taxable persons; cannot claim composition as casual dealer.
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Composition scheme ineligibility: manufacturers of ice cream, pan masala and tobacco and certain suppliers cannot opt.
Section 10(2) excludes five categories from the composition scheme: suppliers of services (except restaurant services), suppliers of non taxable goods, inter State suppliers, persons supplying through electronic commerce operators, and manufacturers of notified goods. Rule 5 adds further ineligible classes. A notification further specifies that manufacturers of ice cream, pan masala, and all tobacco and manufactured tobacco substitutes are not eligible for composition levy.
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Composition scheme lapse triggers transition to regular tax liability and requires issuing tax invoices and filing withdrawal notice promptly.
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Composition scheme eligibility may be available for suppliers using e-commerce operators while TDS/TCS provisions remain inoperative.
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Comparison of Section 153 "Deduction for interest on deposits." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

3 September, 2025

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Section 153 Deduction for interest on deposits.

Income-tax Act, 2025

At a Glance

Clause 153 of the Income Tax Bill, 2025 (Old Version) sets out deductions for interest on deposits for specified categories of assessees (individuals - both non-senior and senior citizens - and Hindu undivided families). It prescribes monetary ceilings and identifies eligible deposit institutions. The provision affects taxpayers (individuals and HUFs) who receive interest on deposits with banks, cooperative banks and Post Offices. Effective date or enactment timing: Not stated in the document.

Background & Scope

Statutory hooks: Clause 153 sits within the chapter heading "Deductions in respect of other incomes." It addresses deduction from gross total income where that income includes interest on deposits. The clause identifies assessees eligible for deduction: (a) individuals not being senior citizens, (b) individuals being senior citizens, and (c) Hindu undivided families. Eligible deposit takers are defined by reference to existing regulatory statutes - Banking Regulation Act, 1949 (for banking companies), cooperative societies engaged in banking (including cooperative land mortgage/development banks), and Post Offices as defined in section 2(k) of the Post Office Act, 2023. The clause contains an internal definition of "time deposits."

Statutory Provision Mode

Text & Scope

Clause 153(1) establishes that an assessee in the enumerated categories shall be allowed a deduction from gross total income, subject to sub-section (2), where it includes income by way of interest on deposits with specified institutions (banking companies under the Banking Regulation Act, cooperative societies carrying on banking, or Post Offices as defined). Clause 153(2) prescribes the quantum and account-type limitations for the deduction for a tax year:

  • (a) For non-senior individuals and HUFs: whole interest up to a maximum of ten thousand rupees on deposits in a savings account, excluding time deposits.
  • (b) For senior citizens: whole interest up to a maximum of fifty thousand rupees on deposits in a savings account, including time deposits.

Clause 153(3) states that where the income referred to in "this section" is derived from any deposit in a savings account held by or on behalf of a firm, association of persons or body of individuals, no deduction shall be allowed under the section in respect of such income in computing the total income of any partner/member/individual of such entity. Clause 153(4) defines "time deposits" as deposits repayable on expiry of fixed periods.

Interpretation

The text distinguishes assessees by age (senior citizen vs non-senior) and by entity type (individual/HUF). The deduction is account-specific: savings accounts are central to the non-senior/HUF benefit; the senior citizen provision explicitly refers to savings accounts but also states "including time deposits." This combination may require interpretive attention, as "savings account" and "time deposits" are traditionally distinct categories. The legislature's inclusion of "time deposits" within the senior citizen sub-clause signals an intent to extend benefit to interest from fixed-term deposits for senior citizens, but restricting the words "savings account" to both categories may create an internal tension requiring purposive construction. The restriction in sub-section (3) prevents pass-through of the concession to partners/members where the deposit is held by or on behalf of a partnership/AOP/BOI.

Exceptions/Provisos

No further provisos or carve-outs are provided beyond the account-type limitations, monetary ceilings and the bar on deduction where deposits are held by firms/AOPs/BOIs and the definition of time deposits. Specific exceptions for other classes of entities (e.g., companies, trusts) are not provided. Not stated in the document: any specific anti-avoidance measures, procedural compliance, or certificate/documentation requirements for claiming the deduction.

Illustrations

  • Example 1 - Non-senior individual: A non-senior individual receives interest of Rs. 12,000 in a tax year from a savings account (excluding time deposits). Under Clause 153(2)(a), deduction allowed is the whole of interest up to Rs. 10,000; thus Rs. 10,000 deductible, and Rs. 2,000 remains taxable. (This example is a direct application of the numeric ceiling stated.)
  • Example 2 - Senior citizen: A senior citizen receives Rs. 45,000 interest in the tax year from a five-year fixed deposit held with a bank. Clause 153(2)(b) permits deduction of whole interest up to Rs. 50,000 on deposits in a savings account, "including time deposits." Applying the text, the senior citizen may claim deduction up to Rs. 45,000 (subject to interpretation of "savings account" phrase). The full interest would be deductible, being below the Rs. 50,000 ceiling. (This example follows the provision as worded.)
  • Example 3 - Partner of firm: A partner receives share of interest income from a savings account held by the firm. Clause 153(3) bars deduction in computing the partner's total income in respect of such income. (Direct textual application.)

Interplay

The clause references the Banking Regulation Act, 1949 and Post Office Act, 2023 for institutional definitions. Not stated in the document: any interaction with other specific sections of the Income-tax Code concerning income classification (e.g., treatment of interest as "income from other sources") or rules governing computation of gross total income. Not stated in the document: whether the clause displaces general provisions on deduction elsewhere in the Code or specific filing/conduct requirements in rules or notifications.

Differences between Section 153 of the Income-tax Act, 2025 and Clause 153 of the Income Tax Bill, 2025 (Old Version)

  • Scope of deductible interest for senior citizens (sub-section (2)(b)): The Act version permits deduction for senior citizens of "the whole of the interest up to a maximum amount of Rs. 50,000 on deposits in any account, including time deposits." The Bill (Old Version) limits the wording to "deposits in a savings account, including time deposits."
    • Practical impact: The Act version is broader-allows senior citizens to claim the deduction on interest from any kind of deposit account (savings or other accounts), whereas the Bill's older text confines the benefit to savings accounts (albeit it still says "including time deposits," creating a textual ambiguity). This change affects the tax benefit available to senior citizens who hold interest-bearing deposits in non-savings accounts (e.g., term accounts held in non-savings category) - under the Act version they clearly receive relief; under the Bill version they may be excluded.
  • Treatment of non-senior individuals and HUFs (sub-section (2)(a)): Both versions provide that individuals (non-senior) and HUFs may claim deduction up to Rs. 10,000 on interest on deposits in a savings account excluding time deposits. Wording differs only in numeric styling ("Rs. 10000" vs. "ten thousand rupees") and punctuation; substantive position appears consistent.
    • Practical impact: None substantive; same monetary ceiling and exclusion of time deposits.
  • Structure and placement of prohibitions when deposits are held by firms/AOPs/BOIs (sub-sections (3) and (4)): The Act separates prohibitions: (3) bars deduction for the non-senior/HUF category where income referred to in sub-section (2)(a) derives from deposits in a savings account held by/for a firm/AOP/BOI; (4) separately bars deduction for the senior citizen category where income referred to in sub-section (2)(b) derives from deposits held by/for such entities. The Bill consolidates the restriction into a single sub-section (3) referring to "where the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed ... in computing the total income of any partner ... member ... or individual ..."
    • Practical impact: The Bill's single provision speaks only of "savings account" deposits and references "this section" generally; it could be interpreted as not addressing the situation where the senior-citizen deduction applies to non-savings accounts (if the Bill's (2)(b) were read to permit non-savings accounts). The Act's split provisions are clearer in mapping the prohibition to each beneficiary category. The Act thus reduces interpretive uncertainty about applicability of the bar for senior citizens when the Act allows deduction on "any account."
  • Definition/placement of "time deposits": The Bill defines "time deposits" in its sub-section (4): "In this section, 'time deposits' means the deposits repayable on expiry of fixed periods." The Act places that definition as sub-section (5) with essentially identical wording.
    • Practical impact: None substantive; placement/numbering differs but definition unchanged.

Practical Implications

  • Compliance and risk areas: Taxpayers must identify whether interest originates from an eligible institution and whether the deposit is a "savings account" or a "time deposit" (as defined). The clause differentiates benefits by assessees (non-senior vs senior), so accurate taxpayer classification (seniority) is essential. The textual overlap ("savings account, including time deposits" for senior citizens) could give rise to disputes concerning eligibility of particular deposit types; taxpayers and practitioners should be prepared to justify characterization of accounts. The prohibition in sub-section (3) requires attention where deposits are held by firms/AOPs/BOIs to prevent incorrect claims by partners/members.
  • Record-keeping/evidence: Retain bank/postal account statements, deposit receipts, account opening documents identifying account type, and evidence of senior citizenship status (if claiming the senior citizen ceiling). Where deposit is held on behalf of a firm/AOP/BOI, retain documentation demonstrating beneficial ownership/arrangement to establish whether the bar in sub-section (3) applies. Not stated in the document: specific documentary threshold or certificate formats.

Key Takeaways

  • The Clause targets individuals (non-senior and senior) and HUFs with specified ceilings for deduction on interest from deposits.
  • Non-senior individuals and HUFs: deduction capped at Rs. 10,000 on interest from savings accounts (excluding time deposits).
  • Senior citizens: deduction capped at Rs. 50,000 and the text purports to include time deposits; the phraseology creates potential interpretive ambiguity concerning account types.
  • Deposits held by or on behalf of firms/AOPs/BOIs are expressly excluded from allowing the deduction to partners/members/individuals under this section.
  • "Time deposits" are defined in the clause as deposits repayable on expiry of fixed periods.
  • The clause refers to regulated banking/cooperative/postal institutions; other deposit takers are not within the clause's scope as drafted.
  • Not stated in the document: effective date, procedural mechanics, or interactions with other Code provisions beyond the express references.

Full Text:

Section 153 Deduction for interest on deposits.

Topics

Acts Income Tax