In the Finance Act 2021, a new section 194P has been inserted which deals with the deduction of tax in case of certain senior citizens.
The Section reads as under :-
(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.’.
As per the section, it is mentioned that
- The section is applicable on the Specified Senior Citizen who has attained the age of 75 years at any time during the previous year.
- The Senior citizen should only have pension income as well as interest received or receivable from any account maintained in such bank where he is receiving the pension
- The Senior citizen has furnished a declaration to the Bank regarding such particulars.
- Upon meeting all the above criteria, the Bank shall deduct the taxes applicable on the Income of the Senior citizen after giving the effect of the deductions under chapter VI-A as well as Rebate under section 87A.
- After the Bank deduct the tax, the Senior citizen is not required to file the Income tax return as the provisions of Section 139 relating to the filing of Income tax return shall not apply.
- However it is pertinent to note that the said section shall be applicable only on the Senior citizens having age of 75 years or more during the relevant previous year.
- As per the plain reading of the section, it can be assessed that the section shall be applicable only in the cases where the senior citizen has maintained only 1 bank account in which there is the receipt of the Pension income and interest income maintained in the said bank.
- In cases where the Senior Citizen is maintaining more than 1 account in which the Interest income is coming. As per our opinion, the Senior Citizen may declare the whole interest income in the declaration (to be prescribed) and submit to the Bank in which the pension income is being received or if there is any other income or if there is any dilemma regarding the filing of the Income tax return, the senior citizen shall have the option of not availing the benefit of section 194P by not submitting the declaration as specified in the explanation of Section 194P and thus, can file their Income tax return as per the applicable section.