To provide significant relief to the senior citizens aged 75 or above from IT filing, Ministry has introduced Section 194P in the Income-Tax Act, 1961 via the Finance Act 2021. New Section 194P is applicable from the 1st day of April 2021. They can give a simple declaration to his/their bank to get exemption from filing the Income Tax Return (ITR) for AY 2022-23.

What is section 194P?

Section 194P was introduced in Budget 2021 to provide conditional relief to the senior citizen above the age of 75 years from filing the Income-tax return.
Section 139 of the Income Tax Act governs the filing of income tax returns by every individual with income above the basic exemption limit.
However, Union Budget 2021 in order to provide relief in terms of compliance burden for filing returns, exempted senior citizens above 75 years of age from filing the income tax return, subject to the following conditions:

Conditions for exemption under section 194P

• Senior citizens should be of age 75 years or above. 
• Senior citizens should be ‘Resident’ in the previous year. 
• He has pension income and interest income only. Interest income accrued/ earned from the same specified bank in which he is receiving his pension.
• The senior citizen will submit a declaration containing some details (mentioned below) to the specified bank.
• 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. 

Once the specified bank, as mentioned above, deducts tax for senior citizens above 75 years of age, there will be no requirement to furnish income tax returns by senior citizens.

Filing of a declaration by senior citizen

The specified bank, as mentioned above, shall deduct TDS based on a declaration submitted by the senior citizen to the bank.

 The declaration should contain the below-mentioned details :

• Total income of the senior citizen
• Deductions availed under section 80C to 80U
• rebate available under section 87A
• Confirmation from the senior citizen of having only pension and interest income

Benefits to the senior citizen under 194P

Once the specified bank, as mentioned above, deducts TDS under section 194P, the provisions of section 139 (return filing) will not apply to senior citizens aged 75 years and above. This means that if the specified bank deducts TDS under this section, then the senior citizen need not file their ITR.

ITR Filing related points – what we must know

1. The rule prescribes a new physical form, 12BBA, that the eligible senior citizen must furnish to banks.

2. Department has also notified a separate Annexure-II in Form 16 with the details of incomes and deductions available only to the eligible senior citizens.

3. “For the computation of the taxable income, the bank will consider the declaration submitted by the senior citizen, the pension and interest income received as also the applicable deductions and rebate.

4. After this exercise (mentioned in point 3), the bank will deduct TDS and issue Form 16 to the senior citizen.

5. No exemption from ITR Filing if, Senior citizen 75 years or more with multiple bank accounts will not get any exemption from filing ITR.

6. The provisions about submitting return of income under section 139 of the Income Tax Act 1961 shall not apply to the specified senior citizen for the assessment year relevant to the previous year in which tax is deducted under section 194P.

7. Once the specified bank deducts tax under section 197P, the specified senior citizens are not required to file ITR since section 139 will not apply to them.

8. CBDT has notified a new rule 26D, under which senior citizens are required to submit form 12BBA with the specified bank to claim the benefit of section 194P.

9. Necessary amendments have been made in various provisions and returns including, form 16, form 24Q, form 26QC and form 26QD, to incorporate necessary changes related to provisions of section 194P.