Section 194P was inserted in the Income Tax Act, 1961 vide the Finance Act, 2021, which was made applicable w.e.f. 1st April, 2021.
Extract of Section 194P
(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.
Until now, there were a lot of practical difficulties which were faced by the concerned individuals and professionals. However, in recent times, the CBDT has published two notifications that give clarity regarding the following matters:
- Meaning of specified bank
- Form of declaration
To have a better understanding let’s have a look at the notifications:
1. CBDT Notification No. S.O. 3595(E). dated 2nd September, 2021
Vide this notification, the CG has provided the meaning of specified bank for the purpose of Section 194P.
Accordingly, specified bank means:
A banking company which is a scheduled bank and has been appointed as agents of Reserve Bank of Indiaunder section 45 of the Reserve Bank of India Act, 1934 (2 of 1934).
Explanation: For the purpose of this notification–
- "banking company" shall have the meaning assigned to it in clause (a) of section 45A of the Reserve Bank of India Act, 1934 (2 of 1934);
- "scheduled bank" shall have the meaning assigned to it in clause (e) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934).
The said notification shall come into force on the date of its publication in the Official Gazette.
2. CBDT Notification No. G.S.R. 612(E). dated 2nd September, 2021
Vide this notification, the CBDT has introduced a new set of rules, Income-tax (26th Amendment) Rules, 2021 to amend the existing Income-tax Rules, 1962. The new set of rules are made by exercising the powers as conferred by Section 194P and 206AB read with Section 195.
(a) Insertion of Rule 26D after Rule 26C
26D. Furnishing of declaration and evidence of claims by a specified senior citizen under section 194P:
(1) The declaration required to be furnished by the specified senior citizen to the specified bank under sub-clause (iii) of clause (b) of Explanation to section 194P shall be in Form no. 12BBA to be furnished in paper form duly verified.
(2) On furnishing of the declaration in Form No. 12BBA, 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.
(3) The effect to the deduction allowable under Chapter VI-A shall be given based on the evidence furnished by the specified senior citizen during the previous year.
(4) The declaration referred to in sub-rule (1) and evidence for claiming deduction under Chapter VI-A referred to in sub-rule (3) shall be properly maintained by the Specified Bank and shall be made available to the Principal ChiefCommissioner of Income-tax or Chief Commissioner of Income-tax, as and when required.
(5) The Principal Director General of Income-tax (Systems) or the Director-General of Income-tax (Systems), as the case may be, shall specify procedure for furnishing of particulars of Form No. 12BBA referred to in sub-rule (1) and evidence referred to in sub-rule (3) by the specified banks to the Principal Chief Commissioner of Income-tax or ChiefCommissioner of Income-tax, as and when required.
Comments: The intent of this Rule is to specify the form of declaration (Form no. 12BBA) under section 194P.
(b) in rule 31(1)(a), after the word and figures "section 192", the words, figures and letter "and section 194P" shall be inserted.
Comments: The intent of this amendment is to provide for the provision of furnishing Certificate of TDS in Form no. 16 for cases falling under section 194P.
(c) Insertion in rule 31A(1):
(I) in clause (a), after the word and figures "section 192", the words, figures and letter "and section 194P" shall be inserted;
(II) in clause (b), after the words, figures and letter "section 193 to 196D", the brackets, words, figures and letter "(other than section 194P)" shall be inserted.
Comments: The intent of this amendment is to provide for the provision of a furnishing Statement of deduction of tax in Form no. 24Qfor cases falling under section 194P.
(d) Insertion in rule 31A after sub-rule (3A):
(3B) Specified bank responsible for deduction of tax under section 194P shall furnish evidence produced by thespecified senior citizen for claiming deduction under chapter VI-A to the Principal Director General of Income-tax(Systems) or Director General of Income-tax (Systems) or to any other person authorized by the Principal DirectorGeneral of Income-tax (Systems) or Director General of Income-tax(Systems), as and when required.
Comments: Self-explanatory.
(e) Other amendments:
- Insertion ofForm No. 12BBA
- Substitution of Form No. 16
- Substitution of Form No. 24Q
- Substitution of Form No. 24QB
- Substitution of Form No. 24QC
- Substitution of Form No. 24QD
The said notification shall come into force on the date of its publication in the Official Gazette.
Disclaimer: The author is based in Jabalpur and is a Practicing Company Secretary dealing in Corporate, Legal & Taxation services. The information contained in this write up, as provided by the author, is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Author recommends that professional advice is sought before taking any action on specific issues.
The author can also be reached at cstanveersaluja@gmail.com
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