Section 194P - Exemption For ITR Filing For Senior Citizens

What is Section 194P?

Section 194P provides senior citizens over the age of 75 years with relief from the ITR filing requirement, subject to the fulfillment of certain conditions. In other words, if senior citizens above 75 years of age meet certain criteria, they are not required to file an income tax return.

What are the Conditions for Exemptions Under Section 194P?

Given below are the conditions that must be met in order to get exemption from filing ITR under section 194P -

• The senior citizens should be 75 years of age and above.
• Senior citizens should be ‘Resident’ in previous years.
• He must have a pension and interest income from savings or a bank account only. Interest income should be earned or accrued from the bank account in which he is receiving his pension.
• The senior citizen shall submit a declaration containing certain details to the bank.
• The bank must be specified, which means it should be notified by the Central Government. Such banks will be required to deduct TDS os senior citizens after considering the deductions under chapter VI-A and rebate under section 87A.

What is the Applicability of Section 194P?

Under Section 194P, a "specified senior citizen" is an individual who reached 75 or above during the last financial year. They must meet the following criteria to qualify:

• Be a resident of India in that year.
• Have income exclusively from pension and interest.
• Earn or accrue interest income from the same bank that pays them their pension.

What are the Key Features of Section 194P?

Here are the key features of section 194P -

• Interest Income: The interest income must come from the same bank in which the senior citizens receive their pension.
• Submission of Declaration: Senior citizens are required to submit a declaration to the bank -
  • Their PAN number and Pension Payment Order (PPO) number
  • Details of the total income
  • Deductions claimed under sections 80C to 80U.
  • Rebate eligibility under section 87A.
  • They should have no other income sources apart from their pension and interest.
• Specified Banks: The bank must be a specified bank notified by the Central Government. These banks must deduct TDS for senior citizens above the age of 75 years.
• No Need to File Returns: After the specified banks deduct the TDS, the senior citizens are exempted from filing income tax returns.

Benefits of Section 194P for Senior Citizens

Senior citizens aged 75 years or more who have only pension and interest income from the same bank need not file their income tax returns.

But they have to file Form 12BBA with their bank. When they receive this declaration, the bank will add pension and interest income and calculate total income. It will then include relevant deductions, exemptions, and rebates under Section 87A to arrive at the net taxable income. The bank will then deduct the required TDS based on this.

After deduction of TDS under Section 194P, the person is not required to file the income tax return under Section 139. It provides relief to senior citizens from filing income tax returns.

What are the Penalties for Non-compliance with Section 194P?

Section 194P is meant to ease tax compliance for senior citizens who are 75 years and above and receive pension income. Banks, however, have an important role to play in this and must:

• Deduct the appropriate amount of TDS
• Maintain proper records of declarations made by senior citizens

If the banks do not fulfill these duties, they are subject to being penalized under the Income Tax Act, 1961. These provisions make sure the process remains smooth and transparent for the senior citizens.

What Should the Declaration Filed by a Senior Citizen Include?

To avail Section 194P, a senior citizen has to furnish a declaration to the bank designated to them. The declaration must contain:

• PAN and PPO Number
• Total Income: Details of pension and interest income of senior citizen
• Deductions: Details of deductions allowed under Sections 80C to 80U
• Rebate: Details of rebate under Section 87A
• Income Confirmation: A confirmation that income is solely from pension and interest

How is Taxable Income Calculated Under Section 194P?

A senior citizen will have to file Form 12BBA with the bank to avail of Section 194P. The bank, on receipt of the declaration, will compute the gross total income (pension + interest) and arrive at the net taxable income after taking into consideration eligible deductions, exemptions, and rebate under Section 87A. The bank will then deduct the required TDS accordingly.

If the elderly person decides to take the old tax regime, then the bank will demand proof of deductions and exemptions. But if they decide on the new tax regime, proof of investments is not needed.

Though Section 194P grants ITR exemption to some senior citizens, not all of them are eligible for the same. If you are not eligible, you might still have to file your income tax return.

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