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Posted on January 6, 2022
Section 194P – Exemption for ITR Filing for Senior Citizen
The Finance Act of 2021 added a new section namely, 194P. And this particular section set forth the conditions for senior individuals aged 75 and up, to be excluded from filing ITRs or income tax returns. The new Section 194P has taken effect from the date of April 1, 2021.
Understanding Section 194P
In the Finance Budget which pertains to the year of 2021, a new section namely, the Section 194P was established or introduced to provide a conditional relief to the senior citizens over the age of 75 who are required to file income tax return.
Every individual with income above the basic exemption limit as contemplated by the Act, must file an income tax return under Section 139 of the Income Tax Act.
However, in order to reduce the compliance burden of filing returns, the Union Budget 2021 exempted senior individuals over 75 years of age from filing income tax returns, subject to certain conditions which are discussed with in this article.
Conditions to be Met for Exemption under Section 194 P
The conditions which should be met with for being able to take the advantage of exemption provided by Section 194P would be as follows:
- Senior citizens must be 75 years old or older than that.
- Senior persons must have lived in India during the previous year and should be a ‘Resident’.
- He solely has interest and pension income. And the interest income which is earned or accumulated or received should be from the same bank where he is receiving the pension income.
- To the designated and specified bank, the senior person will or should have to submit a declaration containing certain facts, which are discussed below.
- According to the Central Government, the bank is a “specified bank.” After taking into account the deductions under Chapter VI-A and the rebate under 87A, such banks will be accountable for the TDS deduction of senior persons.
There will be no necessity for senior individuals over 75 years of age to file an income tax return once the specified bank, as described above, deducts tax in the form of TDS.
Declaration Filing to be Done by Senior Citizen
TDS will be deducted by the above-mentioned or the specified banks based on a declaration filed by the senior citizen to the bank.
And the below given or following information should be included in the declaration:
- Senior citizen’s total income earned during the relevant financial year
- Deductions which are availed under sections 80C to 80U of the Income Tax Act
- Rebate which shall be made available under the specific section of 87A of Income Tax Act
- Confirmation from the elderly person that his or her only source of income is his or her pension and interest.
Advantages Provided by Section 194P to the Senior Citizens
The regulations of section 139 with regard to the return filing will not apply to senior citizens aged 75 and up once the specified bank as described above has or is deducting TDS under section 194P. This means that if a bank deducts TDS under this clause, the senior citizen does not need to file an ITR and can get the exemption as given under the Section 194P of Income Tax Act.
Hence, we can conclude that Section 194 of the Income Tax Act which was introduced via the Finance Budget of 2021, is a difference making element which would help the senior citizens who are 75 years or above to gain exemption from the filing of ITRs. This will help them stay away from paying of any unwanted interest, penalty or fines due to the non-compliance with the filing of ITRs on time or within the due date.