Section 194P of Income Tax Act: Analysis By CS Tanveer Singh Saluja

Section 194P TDS in case of specified senior citizen Relaxation from filing ITR

Section 194P was inserted in the
Income Tax Act, 1961 vide the Finance Act, 2021

Applicability: 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 (A.Y.) and deduct income-tax (TDS) on such total income on the basis of the rates in force.

Applicable w.e.f.: 1st April, 2021.

Rate of TDS: TDS shall be deducted on the basis of rates in force as on the time of deduction.

Non-applicability of Section 139: The provisions of Section 139 shall not apply to a specified senior citizen for the A.Y. relevant to the previous year in which the tax has been deducted under Section 194P.

That is to say, once the tax is deducted by the specified bank under section 194P, the provisions of section 139 shall not apply to the senior citizen and such senior citizen is not required to furnish his income tax return (ITR).

Note: Specified banks will deduct TDS on or after 1st April, 2021 and accordingly, the exemption from filing of ITR shall be available from A.Y. 2022-23 onwards.

Conditions for deduction u/s 194P:

For the purpose of deducting TDS under this section the following conditions are needed to be satisfied.

The specified senior citizen:

  • is an individual;

  • a resident of India;

  • has attained the age of 75 or more at any time during the previous year;

  • has income only in the nature:

  • pension &

  • no other income except interest received/receivable from any account maintained by such individual in the same specified bank in which he is receiving his pension income;

  • has furnished a declaration to the specified bank.

Specified Bank: A specified bank means a bank as notified by the Central Government.

Role of Senior Citizen & Bank:

Bank: To deduct TDS after considering the deductions under Chapter VI-A and rebate under 87A.

Senior Citizen: To furnish declaration to the Specified Bank.

Declaration: It is pertinent to note that, the form and manner of submission of declaration is not prescribed yet. However, the declaration should contain the following details:

  • Total Income;

  • Details of deductions under Chapter VI-A;

  • Rebate u/s 87A;

  • Declaration confirming receipt of only pension income and interest income.

Interest Income from other than specified bank: If a senior citizen is earning interest income from any bank other than the specified bank then he/ she shall not be covered u/s 194P and shall have to follow the normal procedure of filing ITR u/s 139.

No Pension only interest: An issue lies in the point that whether a senior citizen who is earning only interest income and no pension income will be covered u/s 194P or not? As of now, there’s no such clarification in this regard but keeping in view the intent of the provisions, the author is of the opinion that yes, if there’s no pension and only interest income is earned by a senior citizen then he shall be covered u/s 194P.

Meaning of Pension: The term Pension is nowhere defined in the IT Act, 1961. The point of question is whether family pension as received by the family members of the deceased will be covered under this section or not. Keeping in view different treatment of ‘pension’ & ‘family pension’ under the various provisions of the Act, it may be said that pension does not include family pension. However, on considering the objective behind introduction of this section, it is clear that the intention is to reduce the compliance burden of senior citizens. Thus, it will not be wrong if we include family pension in ‘pension’ in those cases where it is received by a family member who is himself/ herself a specified senior citizen.

Practical issues:

  • Rate of TDS: No guidance as to how the rate of tax would be practically computed by the specified bank.

  • Time of deduction: The point of time, when the tax would be deducted by the specified bank is not mentioned.

Lex comply

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