Union Finance Bill 2021 came up with the introduction of a new section 194P. It provides conditions for exempting from filing Income Tax returns to senior citizens aged 75 years and above. New Section 194P is applicable from 1st April 2021.
What is section 194P?
Section 139 of the Income Tax Act provides that every person being an individual shall furnish a return of his income if his gross total income during the previous year exceeded the basic exemption limit.
Section 194P of Income Tax Act was introduced in order to provide relief to senior citizens to reduce the compliance of filing of ITR.
As per Section 194P of Income Tax Act, in the case of a specified senior citizen, the specified bank will be responsible for the TDS deduction of such senior citizens after considering the deductions under Chapter VI-A and rebate under Section 87A.
Meaning of the term specified senior citizen
For the purpose of Section 194P specified senior citizen means:
- Who has attained the age of 75 years or above at any time during the previous year.
- They should be ‘Resident of India’ in the previous year.
- They have no other income except pension income and interest income.
- Interest income accrued/ earned from the same specified bank in which they are receiving their pension income.
Declarations required by specified senior citizens
Specified senior citizens have to make these declarations to enable the specified bank to deduct the TDS on total income.
- Deductions available under Chapter VI-A
- Rebate available under section 87A
- They have not earned any other income except pension and interest income.
- Total Income
Meaning of the term specified bank
- The bank is a ‘specified bank’ as notified by the Central Government by notification in Official Gazette.
If all conditions are satisfied, there will not be any requirement of furnishing a return of income by such senior citizens.
As per the seventh proviso to section 139(1) of income tax act a person who is otherwise not required to furnish the ITR is mandated to file the return even if any one of the following conditions are met:
- Deposited amount or aggregate of the amount exceeding INR 1 crore in the current account (one or more) in the previous year.
- Incurred foreign expenditure of amount or aggregate of the amount exceeding INR 2 lakhs in the previous year.
- Incurred expenditure on electricity of amount or aggregate of the amount exceeding INR 1 lakh in the previous year.
A rebate under section 87A is one of the income tax provisions that help taxpayers reduce their income tax liability. One can claim an income tax rebate of a maximum of INR 12,500 if the total income does not exceed INR 5 lakh in a financial year.
As per Income Tax Act 1961, an individual is treated as a senior citizen once he attains the age of 60 years or more and he will be treated as a super senior citizen once he attains the age of 80 years or more.
As per the tax provisions, filing income tax returns is mandatory where the gross total income of an individual is more than the basic exemption. Here, Gross total income would mean the total income after loss adjustment but before any deductions under chapter VI-A.