Section 194P to the Income Tax Act, 1961 is inserted vide the Finance Act, 2021. Provisions of section 194P provide conditional relaxation to the specified senior citizen from filing of an Income Tax Return.

The entire provisions of the newly introduced section 194P are briefly explained in the present article.

Meaning of term ‘specified senior citizen’ and ‘specified bank’

Before going through and understanding the provisions of section 194P, it is important to understand the following two terms-

1. Specified senior citizen –

The person will qualify as a ‘specified senior citizen’ if it satisfies the following conditions-

  • Condition 1 – The senior citizen should be of the age 75 years or more during the previous year.
  • Condition 2 – The senior citizen should be resident in India.
  • Condition 3 – The senior citizen should be receiving only two incomes i.e., –
    • Pension income; and
    • Interest income receivable from the specified bank from which he is receiving the pension income.
  • Condition 4 – The senior citizen has furnished a required declaration to the specified bank.

2. Specified bank –

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

Basic understanding of section 194P of the Income Tax Act

Provisions of section 194P states as under-

  • TDS under section 194P is deductible only in the case of the ‘specified senior citizen’.
  • The specified senior citizen is required to submit a declaration containing income details.
  • Based on the declaration, the specified bank will-
    • Compute the total income of the specified senior citizen after giving the effect of deduction available under section 80C to section 80U and rebate admissible under section 87A of the Income Tax Act; and
    • Deduct appropriate income tax on such total income of the specified senior citizen.

Benefit available to specified senior citizen under section 194P

Once the tax is deducted by the specified bank under section 194P, the provisions of section 139 will not apply to the senior citizen.

In nut-shell, such senior citizens are not required to furnish their income tax return.

Filing of the declaration-

As seen above, TDS would be deducted by the specified bank on the basis of the declaration filed by the specified senior citizen. The declaration would condition details like-

  • Total income;
  • Details of deduction available under section 80C to section 80U;
  • Rebate available under section 87A;
  • Declaration confirming receipt of only pension income and interest income.

However, it is important to note here that the form and manner of submission of declaration are not yet prescribed.

The effective date of section 194P

The provisions of section 194P of the Income Tax Act are effective from 1st April 2021.

The gist of provisions of section 194P 

Following table summarizes the provisions of section 194P of the Income Tax Act

Particulars Corresponding details
Applicability of provisions of section 194P Section 194P is applicable to the person satisfying the following conditions-

  • Indian resident;
  • Age 75 or more; and
  • Receives pension income and/ or interest income only from the specified bank.
Declaration For availing of the benefit, the specified senior citizen needs to file a declaration with a specified bank.
Deduction of TDS under section 194P Based on the information provided via declaration, the specified bank will deduct appropriate income tax.
The benefit to senior citizen The senior citizen is not required to file an income tax return.

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  1. C S Sahni says:

    The Sr. Citizen may have funds deposited in more than one bank where the customer id is different in different banks, no doubt the customer id is one in a particular Bank if the depoits are in different branches of that particular bank. How to calculate the tax liability by different banks?

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June 2021