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.]
Introduction
The Finance Act, 2021 has inserted a new Section 194P to provide relief to a senior citizen who is 75 years or more from the burden of filing of return of income. It provides that if tax has been deducted under the newly inserted provision, such senior citizen shall be exempted from the requirement of furnishing return of income. This new provision is applicable from 01-04-2021.
Section 139 provides the situations in which the filing of return of income will be mandatory for an assessee.
An individual has no obligation to file the return of income if his income does not exceed the maximum exemption limit before claiming certain deductions and exemptions. Hitherto the Income-tax Act does not contain any provision exempting a resident assessee from the filing of return of income if his income exceeds the threshold limit and tax is deducted therefrom.
Conditions to be satisfied
Section 194P(2) provides that a senior citizen will not be required to file the return of income if the following conditions are satisfied:
(a) Such senior citizen should be resident in India;
(b) His age during the relevant previous year is 75 years or more;
(c) His income includes only pension and specified interest income;
(d) The interest should be received or receivable from any account maintained by such individual in the specified bank;
(e) His pension income should be received in the same specified bank;
(f) Such bank deducts income-tax on such total income on the basis of the rates in force, after allowing deduction under Chapter VI-A and rebate under Section 87A; and
(g) Such individual furnishes a declaration to the specified bank containing such particulars, in such form and verified in such manner, as may be prescribed.
If the above conditions are satisfied, the resident senior-citizen shall not be liable to file his return of income for the assessment year relevant to the previous year in which tax has been deducted. This new provision is applicable from 01-04-2021. The banks will deduct the tax under this provision on or after 01-04-2021 and accordingly, the exemption from filing of return of income shall be available for the assessment year 2022-23 and onwards.
Family Pension
When a pension is received by a dependent family member of the retired individual after his death, it is known as family pension and is taxable as 'income from other sources'. In other words, the amount received by a retired individual is considered as 'pension' and when after this death it is received by the family members, it is termed as 'family pension'.
As the meaning of the term 'Pension' has not been defined anywhere in the Income-tax Act, but due to its different treatment under the various provision, it may be said that the pension does not include a family pension.
However, as the objective behind such a proposal is to reduce the compliance burden of senior citizens, it is pleaded that family pension should also be eligible for this benefit. Thus, if an eligible senior citizen receiving the family pension after the death of her spouse, she should get the relief under this provision from the filing of return of income.
Exempt Income
Considering the intention of the legislature, this provision should be read liberally. Thus, if a resident senior citizen is earning exempt income, like, interest on PPF, agriculture income, the share of profit from the partnership firm, etc. he should not be treated as ineligible for this provision.
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