Section 194P: Deduction of Tax in Case of Specified Senior Citizens

Introduction

Inserted by Finance Act,2021 in Income Tax Act, 1961, section 194P provisions w.e.f 1^st April 2021 provide relaxations to specified senior citizens from filing income tax returns subject to certain conditions.

Meaning of Certain Terms

Let’s begin by familiarizing ourselves with certain terms that are used in Section 194P.

• Specified Senior Citizen

A person will be considered a ‘specified senior citizen’ if the person meets the following criteria to qualify as one:

• Condition 1: The senior citizen should be resident in India.
• Condition 2: The senior citizen should be 75 years or above during the relevant previous year.
• Condition 3: The senior citizen should be having following incomes only:
  • Pension Income and
  • Interest income received from the specified bank where pension income is received.
• Condition 4: The senior citizen has furnished a declaration to the specified bank in form 12BBA.

• Specified Bank

A specified bank means a bank as notified by the Central Government.

Overview of section 194P of the Income Tax Act

According to Section 194P of the Income Tax Act ( hereinafter referred to as the Act), TDS is deductible only in the case of specified senior citizens provided that the senior citizen has furnished a declaration in the form 12BBA containing the details discussed later on in the article.

Based on the declaration, the specified bank will compute the income of the specified senior citizen after taking into account the deduction available under the section 80C to section 80U and rebate allowable under section 87A of the Act and deduct appropriate income tax on such total income of the specified senior citizen.

Benefits for senior citizens under section 194P.

No need to file the return of income under section 139 for the specified senior citizens provided that the tax has been deducted under section 194P.

Declaration in Form 12BBA.

As discussed above, TDS would be deducted by the specified bank on the basis of the declaration by the specified senior citizen. The following details are required to be furnished in the declaration:

• Total income;
• Details of deduction available under section 80C to section 80U;
• Rebate available under section 87A;
• Declaration confirming receipt of only pension income and interest income.

Summary

FAQs

• Is a senior citizen exempted from filing Income Tax Return?

No, the Income Tax Act,1961 does not provide any exemption to a senior citizen or very senior citizen from filing a return of income. However to provide relief to senior citizens whose age is 75 years or above and to reduce the compliance burden on them, section 194P has been introduced. If TDS is deducted under section 194P as enumerated above, then the specified senior citizens are not required to file the return of income subject to certain conditions.

• Shall the exemption from return filing under section 139 be claimed by the specified senior citizens by virtue of section 194P even if the interest income is receivable from another specified bank?

No, the exemption from return filing is available only when the interest income is receivable from the same bank where the pension is deposited.

• Does pension income includes family pension for exemption under ITR?

No family pension is not considered for exemption under section 194P provisions. However considering the aim of the provisions of Section 194P, one may include a family pension if the recipient is a specified senior citizen.

• How to consider the deductions under Chapter VIA (Section 80C to Section 80U) admissibility?

The specified bank responsible for deducting TDS shall obtain proper evidence for deductions claimed in the declaration furnished by the specified senior citizens.

• Is there any proof of deduction that shall be made available to the specified senior citizens?

Form 16 shall be issued to such senior citizens by the specified bank in case of TDS deduction under section 194P.

• How the specified banks will furnish the details of such TDS deduction?

The specified banks are required to furnish details of TDS deducted under section 194P in form 24Q.

• What is the applicable rate of TDS deduction under section 194P?

TDS under section 194P shall be deducted at the slab rates in force.

• Can form 12BBA (the declaration) be submitted in online mode or offline mode?

The declaration shall be made in form 12BBA duly in offline mode i.e. paper form.

For a detailed understanding of reporting tax deducted under section 194P, refer to the notifications issued by the CBDT:

https://incometaxindia.gov.in/communications/notification/notification_99_2021.pdf

https://incometaxindia.gov.in/communications/notification/notification_98_2021.pdf