As per section 194P, senior citizens are not required to file ITR if they fulfill the following criteria:
a) senior citizen is resident in India and is 75 years or more in the previous year i.e. FY 2021-22,
b) He has pension income and no other income. However, in addition to such pension income, he may also have interest income from the same bank in which he is drawing his pension income,
c) The bank in which pension and interest income is received is a designated bank notified by the Government.
d) He has to submit a declaration to the designated bank. Such particulars in the declaration shall be verified in such form and in such manner as may be prescribed.
These people mainly fall into two categories: one who is not required to pay taxes and the other who are required to pay taxes. In the latter case, the designated bank will deduct the taxes as per the information provided by the senior citizen.
The Government has also issued a notification in this regard on 2nd September 2021 giving the meaning of ‘Specified Bank’. As per the notification, a senior citizen can submit the declaration to any scheduled bank.
Abhishek Soni, CEO, Tax2win.in – an ITR Filing The website says, “A senior citizen who fulfills the criteria mentioned under section 194P will not be required to file ITR. This will be done if he has made a declaration to the bank to deduct TDS from his income in the previous financial year.” i.e., during the financial year 2021-22. If the declaration has not been submitted by the senior citizen during the previous financial year, the senior citizen will have to file his ITR.”
How taxable income will be computed under the new section
A senior citizen is required to submit the declaration using Form No. 12BBA. After the senior citizen submits the declaration, the bank will calculate the gross total income (pension plus interest income). The bank will also take into account the deductions, tax-exemptions and exemptions that a senior citizen is eligible to make under section 87A to arrive at the net taxable income. Now the bank will deduct TDS for senior citizens after considering deductions and exemptions.
While submitting the declaration, the bank will ask the senior citizen to provide proof of deduction and tax exemption for which he is eligible. This will be necessary if he opts for the old income tax regime. If senior citizens opt for the new income tax regime, there will be no need to submit investment proof.
“It is important to note that once a person submits the declaration to the bank, he will not be able to change the income tax regime,” says Soni.
TDS certificate issued by a bank
Bank will issue Form 16 for tax deducted under section 194P. Note that this is the same TDS certificate issued by the employer to his employee for tax deducted on salary income.
Form 16 has been changed in 2021 by the Income Tax Department. Form 16 now shows the pension payment order number of the senior citizen along with other details like PAN, address etc.