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The Finance Act 2021 inserted a new section to provide relief to the senior citizens who is 75 years of age or more from the burden of filing the return of income. This section exempts a resident senior citizen from filing return of income if such person has the specified income and tax thereon is deducted by bank. Let’s discuss more on this newly inserted section 194P.
This section was introduced in the Union Budget 2021 with a view to provide a conditional relief to senior citizens of 75 or more years of age from filing ITR. Section 139 of the Income Tax Act governs the filing of ITR by every individual with an income over the basic exemption limit.
The Union Budget 2021, in order to provide relief with respect to compliance burden for filing returns, exempted senior citizens from filing ITR but subject to certain conditions. These conditions are discussed below.
The following conditions should be satisfied to be exempted from filing the return of income:
When the specified bank deducts tax for senior citizens of more than 75 years of age, then there is no need to furnish ITR by senior citizens.
The Income Tax Act to compute tax classifies a resident senior citizen to two categories:
Now there is another category of resident senior citizen whose age is 75 years or more during the previous year. Therefore a resident senior citizen shall be covered under this if he completes 75 years of age on or before 31st March 2022.
The specified bank is required to deduct TDS on the basis of the declaration submitted by the senior citizen to the bank. Such declaration must contain the following details:
This Section 194P moves the obligation of computing the total income of the senior citizen on banks. Banks shall compute the income after giving effect to the deduction allowable under Chap. VI A and the rebate under section 87A.
The bank would then compute the total tax on such income at the rate in force and accordingly deduct the tax. The employer won’t be liable to deduct the tax under Section 192 from the pension scheme.
When the specified bank deducts TDS under this section, the provisions of section 139 shall not apply to senior citizen of 75 years of age or more. It means that if the specified bank deducts TDS under this section, then the senior citizen don’t have to file their Income Tax Return.
The table made below summarizes the provisions of this section.
|Applicability||This Section shall apply to those- That are Indian resident;Is 75 or more years of age;Receives pension income and/or interest income only from specified bank.|
|Declaration||For availing the provisions of this section, the senior citizen is required to file a declaration with a specified bank.|
|Deduction of TDS||Based upon the details of the declaration, the specified bank shall deduct the appropriate income tax.|
|Benefit||Senior citizen no more requires to file an ITR|
It may be noted that the provisions of section 194P is effective from 1st April 2021. If the prescribed conditions are satisfied, then the senior citizen can be exempted from filing ITR. It is essential to know the tax provisions to get the best out of the offers available to taxpayers. However, there are a few other queries that have not been clarified yet with respect to this section.
Read our article:Understanding Section 206AB of Income Tax Act 1961