Newly inserted Section 194P - Relaxation for specified senior citizen from filing return of Income
Union Finance Bill 2021–Budget 2021 inserted new section 194P which provides relaxation for specified resident senior citizen who are the age 75 years or above from filing Income Tax Return.
Section 139 of the Act provides for filing of return of income. Sub-section (1) of the section provides that every person being an individual, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income.
In order to provide relief to senior citizens who are of the age of 75 year or above and to reduce compliance for them, it is proposed to insert a new section to provide a relaxation from filing the return of income, if the following conditions are satisfied: -
(i) The senior citizen is resident in India and of the age of 75 or more during the previous year;
(ii) He has pension income and no other income. However, in addition to such pension income he may have also have interest income from the same bank in which he is receiving his pension income;
(iii) This bank is a specified bank. The Government will be notifying a few banks, which are banking company, to be the specified bank; and
(iv) He shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed.
Once the declaration is furnished, the specified bank would be required to compute the income of such senior citizen after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A of the Act, for the relevant assessment year and deduct income tax on the basis of rates in force.
Once this is done, there will not be any requirement of furnishing return of income by such senior citizen for this assessment year.
This amendment will take effect from 1st April, 2021.
Consequential amendment has also been made in section 139(1) which requireds filing of return of Income.
Section 194P inserted in Finance Act 2021 (Text for reference)
194P. (1) Notwithstanding anything contained in the provisions of Chapter XVII-B, in case of a specified senior citizen, the specified bank shall, after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A, compute the total income of such specified senior citizen for the relevant assessment year and deduct income-tax on such total income on the basis of the rates in force.
(2) The provisions of section 139 shall not apply to a specified senior citizen for the assessment year relevant to the previous year in which the tax has been deducted under sub-section (1).
Explanation.–– For the purposes of this section,––
(a) “specified bank” means a banking company as the Central Government may, by notification in Official Gazette, specify;
(b) “specified senior citizen” means an individual, being a resident in India––
(i) who is of the age of seventy-five years or more at any time during the previous year;
(ii) who is having income of the nature of pension and no other income except the income of the nature of interest received or receivable from any account maintained by such individual in the same specified bank in which he is receiving his pension income; and
(iii) has furnished a declaration to the specified bank containing such particulars, in such form and verified in such manner, as may be prescribed.’.
FAQ's : -
1. If Mr. A who is resident & 76 years old having pension Income from SBI bank and Interest Income from HDFC bank. Will this section provide the relaxation to such individuals?
- No benefit of this section and will have to file ITR himself since as per provision, pension Income and interest income have to be from the same bank.
2. If Mr. A who is resident & 76 years old having rental income from the house property and such income gets directly credited in same bank from which he is getting pension income. Will this section provide the relaxation to such individuals?
- No benefit of this section and will have to file ITR himself since as per provision, he cannot have income other than pension Income and interest income.
3. If Mr. A who is resident & 76 years old having pension income only. Will this section provide the relaxation to such individuals?
- Yes, No need to file ITR by himself.
4. If Mr. A who is resident & 76 years old having pension income only but fails to provide the declaration to the bank. Will this section provide the relaxation to such individuals?
- No benefit of this section and will have to file ITR himself.
5. If Mr. A who is resident & 76 years old having Interest income from the same bank. Will this section provide the relaxation to such individuals?
- Clarification is required from the department. However, as per the intent behind this section as mentioned in memorandum to finance bill, benefit should be available to Mr. A.
6. Which are the specified banks under this section?
- Department has not yet notified the list of banks to be the specified banks.
7. As per section 194A, banking companies are liable to deduct TDS on Interest other than income by way of interest on securities, will there be double deduction of TDS on interest income?
- No, in such case, TDS will be deducted under section 194P since this section overrides every other section specified under TDS chapter of Income tax Act.