Section 194P: TDS and Exemption from ITR Filing for Senior Citizens (75 or above)

New IT Section 194P relating to TDS in the case of senior citizens aged 75 or more, provides for responsibility of necessary deduction of tax at source by specified banks paying pension/ interest, to allow exemption from filing of return for such senior citizens.

The Finance Act, 2021 has, inserted a new IT Section 194P effective from FY 2021-22/ AY 2022-23, under which specified banks paying pension/ interest to senior citizens of 75 years or more will be responsible for deducting necessary tax at source. Furthermore, such senior citizens will not be required to file their Income Tax Return (ITR), reducing their compliance burden.

In other words, senior citizen pensioners who are of 75 years of age or above, have been exempted from the requirement of filing of income tax return, if the full amount of tax payable has been deducted from their pension/ interest income, by the paying bank.

Explanation to Section 194P defines “specified senior citizen” as a resident individual of India, who is of the age of 75 years or more during the previous year and having income from pension and interest from deposits with the same bank. Such specified senior citizen is required to submit a declaration to the bank containing such income/ age details for the purpose of necessary TDS u/s 194P for availing exemption from filing ITR.

Section 194P: Deduction of tax in case of specified senior citizen

New Section 194P has been inserted in the Income Tax Act, 1961 vide Section 53 of the Finance Act, 2021, as under:

“(1) Notwithstanding anything contained in the provisions of Chapter XVII-B, in case of a specified senior citizen, the specified bank shall, after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A, compute the total income of such specified senior citizen for the relevant assessment year and deduct income-tax on such total income on the basis of the rates in force.

(2) The provisions of section 139 shall not apply to a specified senior citizen for the assessment year relevant to the previous year in which the tax has been deducted under sub-section (1).

Explanation.- For the purposes of this section,–

(a) “specified bank” means a banking company as the Central Government may, by notification in Official Gazette, specify;

(b) “specified senior citizen” means an individual, being a resident in India–

(i) who is of the age of seventy-five years or more at any time during the previous year;

(ii) who is having income of the nature of pension and no other income except the income of the nature of interest received or receivable from any account maintained by such individual in the same specified bank in which he is receiving his pension income; and

(iii) has furnished a declaration to the specified bank containing such particulars, in such form and verified in such manner, as may be prescribed.”

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