Section 194P- Exemption for ITR filing for senior citizen

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.

Explanation to 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 total income during the previous year exceeded the basic exemption limit.

Section 194P was introduced in order to provide relief to senior citizens who are of the age of 75 years or more and to reduce compliance for them.

Moreover, Benefits under section 194P are subject to fulfillment of certain conditions.

Conditions to Section 194P

Section 194 exempted senior citizens of 75 years of age or more from filing the income tax return, subject to the following conditions:

  • Senior citizens should be of age 75 years or above. 
  • Senior citizens should be ‘Resident of India’ in the previous year. 
  • He has no other income except pension income and interest income.
  • Interest income accrued/ earned from the same specified bank in which he is receiving his pension.
  • The senior citizen will declare to its bank containing details of Chapter VI-A deductions and rebate allowable under 87A.
  • Also, They need to declare that they have not earned any other income except pension and interest income.
  • The bank is a ‘specified bank’ 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. 

If all conditions are satisfied, there will not be any requirement of furnishing return of income by such senior citizens.

FAQs

What is Section 87 A in income tax?

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 12500 if total income does not exceed INR 5 lakh in a financial year.

Who is senior citizen as per Income Tax Act?

As per Income Tax Act 1961, an individual is treated as senior citizen once he attains the age of 60 years or more and he will be treated as super senior citizen once he attains the age of 80 years or more.

When is tax filing not mandatory?

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 income before any deductions under chapter VI-A.

Got Questions? Ask Away!

  1. Healthcare should be treated as a priority. Only once we successfully recover from this, our economy can gain momentum again.

  2. Can you please provide me more information with respect to “Tax on PF interest from contribution exceeding 2.5 lakhs” Does this includes employer contribution and VPF?

  3. The audit limit increased from 5 crores to 10 crores. Do I have to file for tax audit if my turnover is less than 10 crore?

  4. Hey @ViraajAhuja47

    Employee’s contributions to EPF was tax-deductible under section 80C while the employer’s contribution is completely tax-free. However, as per the recent announcement in Budget 2021 , interest earned on annual PF contribution exceeding INR 2.5 lakhs from April 2021 will now be taxable. Any withdrawal after the specified period (5 years) is exempt from income tax.

    Hope this helps!