Important Keyword: Income Tax, Income Tax Filing, Section 194P.

Section 194P- Exemption from ITR filing for senior citizen

The Union Finance Bill 2021 introduced a novel provision, Section 194P, aimed at simplifying income tax filing for senior citizens aged 75 years and above. Effective from April 1, 2021, this section exempts eligible senior citizens from the requirement of filing income tax returns.

What is section 194P?

Section 139 of the Income Tax Act mandates individuals to file income tax returns if their gross total income exceeds the basic exemption limit in the previous year.

Introduced to alleviate the compliance burden on senior citizens, Section 194P of the Income Tax Act delegates the responsibility of Tax Deducted at Source (TDS) deduction for specified senior citizens to their respective banks. Under this section, specified banks are tasked with deducting TDS for senior citizens after accounting for deductions under Chapter VI-A and rebates under Section 87A.

Meaning of the term specified senior citizen

Under Section 194P, a specified senior citizen is defined as an individual who meets the following criteria:

1. Age: The individual should have attained the age of 75 years or above at any time during the previous year.
2. Residency: They must be a resident of India in the previous year.
3. Income Sources: The individual should have no other income apart from pension income and interest income.
4. Source of Interest Income: The interest income should be accrued or earned from the same specified bank from which they are receiving their pension income.

Declarations required by specified senior citizens

Specified senior citizens are required to make the following declarations to enable the specified bank to deduct TDS on their total income:

1. Deductions under Chapter VI-A: They need to declare any deductions they are eligible for under Chapter VI-A of the Income Tax Act, which includes deductions for investments such as LIC premiums, PPF contributions, and others.
2. Rebate under Section 87A: They should declare if they are eligible for any rebate under Section 87A, which provides relief to taxpayers with income below a certain threshold.
3. Other Income: They must confirm that they have not earned any other income apart from pension and interest income during the relevant financial year.
4. Total Income: They need to declare their total income, which includes both pension income and interest income from the specified bank.

Meaning of the term specified bank

If all the conditions specified under Section 194P are met, there will be no requirement for the specified senior citizens to furnish a return of income. It’s important to note that the bank must be a “specified bank” as notified by the Central Government through an official gazette.

However, it’s crucial to highlight that as per the seventh proviso to section 139(1) of the Income Tax Act, a person who is otherwise not required to furnish the Income Tax Return (ITR) is mandated to file the return if any of the following conditions are met:

1. Deposited amount exceeding INR 1 crore in the current account (one or more) in the previous year.
2. Incurred foreign expenditure exceeding INR 2 lakhs in the previous year.
3. Incurred expenditure on electricity exceeding INR 1 lakh in the previous year

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Official Income Tax Return filing website: https://incometaxindia.gov.in/