Section 194P - Exemption For ITR Filing For Senior Citizens

Finance Act 2021 inserted a new section 194P which provided conditions for exempting senior citizens from filing income tax returns aged 75 years and above. New Section 194P will become applicable from 1st April 2021. 

What is Section 194P?

Section 194P of the Income-tax Act,1961 was introduced in Budget 2021 to provide conditional relief to senior citizens above the age of 75 years from filing the income tax return.
Section 139 of the Income Tax Act governs the filing of income tax returns by every individual with income above the basic exemption limit. 

However, Union Budget 2021, to provide relief in terms of compliance burden for filing returns, exempted senior citizens above 75 years of age from filing the income tax return, subject to the following conditions:

Conditions for exemption under section 194P

• Senior citizens should be of age 75 years or above. 
• Senior citizens should be ‘Resident’ in the previous year. 
• He must have pension income and interest income from a bank account (savings or deposits) only. Interest income must be accrued/earned from the same bank in which he is receiving his pension.
• The senior citizen will submit a declaration containing some details (mentioned below) to the bank.
• The bank must be specified, and a ‘specified bank’ is a banking company as notified by the Central Government. Such banks will be responsible for the TDS deduction of senior citizens after considering the deductions under Chapter VI-A and rebate under 87A. 

Once the specified bank, as mentioned above, deducts tax for senior citizens above 75 years of age, there will be no requirement to furnish income tax returns by senior citizens.

Filing a declaration by a senior citizen

The specified bank, as mentioned above, shall deduct TDS based on a declaration submitted by the senior citizen to the bank. 
The declaration should contain the below-mentioned details :

• PAN and Pension Payment Order (PPO) Number
• Total income of the senior citizen
• Deductions availed under Section 80C to 80U
• Rebate available under section 87A
• Confirmation from the senior citizen of having only pension and interest income

How will the taxable income be calculated under the new section?

A senior citizen must submit a declaration using Form No. 12BBA. Once the older citizen has filed the declaration, the bank will compute the gross total income (pension plus interest income). To calculate net taxable income, the bank will also consider the deductions, tax exemptions, and rebates available to elderly citizens under Section 87A. After deductions and rebates, the bank would now deduct TDS for older persons.

The bank will request proof of deductions and tax exemptions that the senior person is entitled to when filing the declaration. If they choose the previous income tax regime, this will be required. If the older citizen chooses the new income tax regime, no investment proof will be required.

Benefits to senior citizens under 194P

Upon collection of deduction details, the specified bank calculates the net taxable income, deducts the calculated tax in the form of TDS under section 194P, and reports it to the department. The TDS amount will be reflected in Form 26AS just like any other TDS amount. 

Then the provisions of section 139 (return filing) will not apply to senior citizens aged 75 years and above. This means that if the specified bank deducts TDS under this section, then the senior citizen need not file their ITR. This will be a relief for such taxpayers.

Format of Form 12BBA