Question 5 OR (a)

Deductions for contributions to the Agniveer Corpus Fund and for interest on deposits of senior citizens

6 marks

Time to write
About 12 minutes
Topic
Deductions from gross total income
Notes
Crux notes

Question

Question 5 OR (a) · 6 marks

Explain these provisions:

  1. Section 80CCH: contribution to the Agnipath Scheme

  2. Section 80TTB: interest on deposits of senior citizens (6)

Paper note: Set under the Income-tax Act, 1961 for assessment year 2024-25 (previous year 2023-24); answered under the Income-tax Act, 2025 for tax year 2026-27, so the year term moves forward by 3 years and every date in the question moves forward by the same 3 years, so that intervals, holding periods and ages are as printed. Every figure and name is as printed. The question names sections 80CCH and 80TTB of the Income-tax Act, 1961; the answer gives the corresponding provisions of the Income-tax Act, 2025 and says so.

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

12 minfor 6 marks

Read from the question

  • (i)–(ii)2 items, each marked on its own: give each its share.
  • Section 80CCHThe section is named: open with what it says, then explain or apply it.

Write it in this order

The parts stand alone: start with the one you are surest of.

  1. Read; underline the asks; jot your points 1 min
  2. 1 Agnipath Scheme: eligibility, both contributions, default regime, exempt payment 3 marks 5 min
  3. 2 Senior citizens' interest: eligibility, deposits covered, limit, default regime 3 marks 5 min
  4. Check: every ask answered, key terms underlined 1 min

Short on time? A few lines on every part beat a full answer to one: each part is capped at its own marks.

Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

(i) Contribution to the Agnipath Scheme (section 125; formerly section 80CCH)

The Agnipath Scheme, notified by the Ministry of Defence, enrols young people as Agniveers in the armed forces for four years. Part of each Agniveer's pay is deposited in the Agniveer Corpus Fund, and the Central Government adds a matching contribution; on leaving, the Agniveer receives the accumulated amount (the Seva Nidhi).

  1. Who: an individual enrolled in the Agnipath Scheme who subscribes to the Agniveer Corpus Fund on or after 1 November 2022.
  2. Own contribution: the whole amount he pays or deposits into his account in the Fund during the tax year is deductible from total income (section 125(1)).
  3. Government's contribution: the Central Government's contribution to his account is first included in his salary (section 16(l)) and then deducted in full (section 125(2)), so it is not taxed.
  4. No upper limit applies to either deduction, and they are outside the ₹1,50,000 limit of section 123.
  5. Default regime: the deduction for the Government's contribution (section 125(2)) is allowed even under the default regime of section 202(1); the deduction for his own contribution (section 125(1)) is allowed only under the old regime (section 202(2)(a)(xii)).
  6. Payment from the Fund: the amount paid to the Agniveer (or his nominee) from the Fund is excluded from total income (Schedule II, Sl. No. 7), so under the old regime the scheme is exempt at every stage; under the default regime the Agniveer's own contribution is taxed, as point 5 shows.

(ii) Interest on deposits of senior citizens (section 153(1)(b) and (2)(b); formerly section 80TTB)

  1. Who: a senior citizen, that is, a resident individual aged 60 years or more at any time during the year.
  2. What: interest on deposits with a bank, a co-operative bank engaged in banking, or a post office, on any account, including fixed and recurring (time) deposits.
  3. Amount: the whole of such interest, up to ₹50,000 a year.
  4. Not with the savings-account deduction: a senior citizen cannot also claim the ₹10,000 deduction on savings account interest; that deduction (section 153(2)(a)) is for other individuals and Hindu undivided families.
  5. Interest on deposits held for a firm, association of persons or body of individuals does not qualify in a member's hands (section 153(4)).
  6. Default regime: not available (section 202(2)(a)(xii)).

Example: Mrs. Joshi, aged 66, earns ₹38,000 interest on bank fixed deposits and ₹18,000 on her savings account. Under the old regime her deduction is ₹50,000 (the total ₹56,000, limited to ₹50,000).

Comparison

PointAgniveer Corpus Fund (section 125)Senior citizens' interest (section 153(2)(b))
WhoIndividual enrolled as an AgniveerResident individual aged 60 or more
DeductionWhole of own and Government contributionsInterest on deposits up to ₹50,000
Default regimeGovernment contribution allowed; own contribution notNot allowed

Where the 6 marks sit

#ComponentMarks
1Agnipath Scheme: eligibility, both contributions, default regime, exempt payment3
2Senior citizens' interest: eligibility, deposits covered, limit, default regime3
Total6
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