Under Section 194P of the Income-tax Act, a senior citizen aged 75 years or above is not required to file an income tax return if their income consists solely of pension and interest income earned from a specified bank. The relief applies only when both pension and interest are received from the same specified bank, which is responsible for computing the total taxable income, applying eligible deductions under Chapter VI-A and rebate under Section 87A, and deducting tax at the rates in force. This provision simplifies tax compliance for elderly taxpayers with limited income sources.
The term “specified bank” refers to a scheduled bank appointed as an agent of the Reserve Bank of India under Section 45 of the RBI Act, 1934. To avail of the benefit, the senior citizen must submit a declaration in Form No. 12BBA to the bank, containing details of pension income and supporting documents for eligible deductions. Once submitted, the bank computes the total income and deducts the applicable tax without any threshold limit. If, after considering deductions and rebates, no tax liability arises, no tax is deducted. For example, a senior citizen with ₹2,00,000 pension and ₹3,00,000 interest income will not face tax deduction due to the Section 87A rebate benefit.
Section 194P overrides other TDS provisions under Chapter XVII-B, meaning tax is to be deducted only under this section even if other sections such as 194A would normally apply. The deducted tax must be deposited with the Central Government through Challan ITNS 281 by the 7th of the following month (or by 30th April for March deductions). Once tax is properly deducted and deposited by the bank, the specified senior citizen is exempt from filing an income tax return for that year. Non-compliance with the deduction or deposit requirements may lead to penalties under Section 271C and prosecution under Section 276B, though relief is available in genuine cases. Section 194P thus ensures simplified compliance, accurate tax deduction, and relief from return filing for eligible senior citizens.
Deduction of tax in case of Specified Senior Citizen
A senior citizen (whose age is 75 years or more) will not be required to file his return of income if his income includes only pension income and interest income from any account maintained with specified bank and such specified bank computed the total income and deduct tax from it.
Who is required to deduct tax under section 194P?
Every specified bank is responsible for deducing tax at source in accordance with section 194P. The bank shall be liable to –
a) Compute the total income of a specified senior citizen for the relevant assessment year after giving effect to the deduction under Chapter VI-A and rebate under Section 87A; and
b) Deduct income tax on the total income on the basis of the rates in force.
Here ‘Specified Bank’ means a banking company which is a scheduled bank and has been appointed as agent of RBI under Section 45 of the RBI Act, 1934.
Who is eligible for section 194P relief?
Tax is required to be deducted only if the recipient is a resident senior citizen whose age is 75 years or more at any time during the previous year.
Conditions for deduction of tax under section 194P
Tax is required to be deducted under this provision only if the following conditions are satisfied:
a) The income of the deductee includes only pension and interest income;
b) The interest is received or receivable from any account maintained by the deductee in such specified bank;
c) The pension income is received in the same bank; and
d) The senior citizen furnishes a declaration in Form No. 12BBA to the bank containing particulars related to pension income.
The effect of the deduction allowable under Chapter VI-A shall be given based on the evidence furnished by the senior citizen during the previous year. The specified bank is also required to maintain the declaration and the evidence furnished by the senior citizen.
Threshold limit for tax deduction
No threshold limit has been prescribed for the deduction of tax at source. The tax shall be deducted if any tax is payable on the total income (aggregate of pension and interest income after deduction under Chapter VI-A and rebate under Section 87A) of the deductee.
Rate of TDS
The tax shall be deducted at the rates in force. The rate shall be further increased by Surcharge and Health & Education Cess.
The provisions of Section 194P override all other provisions of Chapter XVII-B. Thus, if any tax is also deductible under any other Section (say, Section 194A from interest payable by a bank on the time deposits), the bank shall deduct the tax under this provision only.
For example, if a specified senior citizen earns a pension income of Rs. 2,00,000 and interest income of Rs. 3,00,000 from the fixed deposit during the year, the bank shall not deduct any tax from the interest payable during the year as tax payable on his total income shall be nil after claiming rebate under Section 87A. The bank shall not be required to deduct the tax from the interest payable even if it exceeds the threshold limit of Rs. 50,000 specified in Section 194A.
Tax deducted under this provision is required to be deposited to the credit of the Central Government through Challan ITNS 281 within 7 days from the end of the month in which tax was deducted.
However, the tax deducted during the month of March shall be deposited by 30th April of the next financial year.
Exemption from filing return of Income (ITR)
Where tax has been deducted under section 194P, specified 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.
Penalty and Prosecution
Failure to comply with the provisions of deduction of tax at source under this provision may result in penalties and prosecution as per the following provisions:
a) If a person fails to deduct tax at source, he shall be liable for payment of penalty under Section 271C;
b) If a person deducts tax but fails to deposit the same to the credit of the Central Government, he shall be liable for the penalty under Section 221 and prosecution under Section 276B.
However, no person shall be punishable under Section 276B if he proves that there was reasonable cause for the failure. Further, a person can also file an application for compounding of offence.
MCQs on deduction of tax in case of Specified Senior Citizen
Q1. Deduction under section 194P is applicable in the case of a senior citizen whose age is_________ .
Ans :- (a) 60 years or more
(b) 80 years or more
(c) 75 years or more
(d) None of the above
Correct Answer: (c)
Justification of the correct answer: A specified bank is responsible to compute the total income and deduct tax from it under section 194P if the account holder is a senior citizen (whose age is 75 years or more) and his income includes only pension income and interest income from any account maintained with such bank.
Q2. Senior citizens having only____________ are eligible for section 194P.
Ans :- (a) Pension income and interest income
(b) Pension income and Income from one-house property
(c) Interest income
(d) Pension income
Correct Answer: (a)
Justification of the correct answer: A specified bank is responsible to compute the total income and deduct tax from it under section 194P if the account holder is a senior citizen (whose age is 75 years or more) and his income includes only pension income and interest income from any account maintained with such bank.
Q3. Mr. A, a non-resident whose age is 72 years, has only pension income from a specified bank. Is he eligible under section 194P?
Ans :- (a) Yes, as he has only pension income
(b) No, as he is less than 75 years
(c) No, as he is a non-resident
(d) Both (b) and (c)
Correct Answer: (d)
Justification of the correct answer: Tax is required to be deducted under this provision only if the recipient is a resident senior citizen whose age is 75 years or more at any time during the previous year.
Q4: As per section 194P, the deductee is required to furnish a declaration in_________ to the bank containing particulars related to pension income.
Ans :- (a) Form No. 12BBA electronically
(b) Form No. 12BBA in paper form
(c) Form No. 12BBA electronically or in paper form
(d) No declaration is required
Correct Answer: (b)
Justification of the correct answer: The deductee furnishes a declaration in Form No. 12BBA in paper form to the bank containing particulars related to pension income.
Q5: Where any person responsible for deducting tax fails to deduct tax or after deduction, fails to deposit the same to the credit of the Central Government, the deductor shall be liable for.
Ans :- (a) Penalty under section 271C
(b) Prosecution under section 276B
(c) Both (a) and (b)
(d) None of the above
Correct Answer: (c)
Justification of the correct answer: Penalty under section 271C shall be applicable, where any person responsible for deducting tax fails to deduct tax or after deduction, fails to deposit the same to the credit of the Central Government. However, such penalty shall not exceed the amount of tax liable to be deducted or deposited, as the case may be.
Further, the deductor shall be liable for prosecution under section 276B for a term that shall not be less than 3 months but may extend to 7 years and with a fine.
Q7. While computing the total income of specified senior citizen whether deduction under Chapter VI-A and rebate under section 87A is to be considered by the specified bank?
Ans :- (a) Yes
(b) No
(c) Maybe
(d) None of the above
Correct Answer: (a)
Justification of the correct answer: The specified bank shall be liable to compute the total income of a specified senior citizen for the relevant assessment year after giving effect to the deduction under Chapter VI-A and rebate under Section 87A.
Q8. What is the tax rate for the deduction of tax under section 194P?
Ans :- (a) 10%
(b) 20%
(c) Rate in force
(d) 5%
Correct Answer: (c)
Justification of the correct answer: The specified bank shall be liable to compute the total income of a specified senior citizen for the relevant assessment year after giving effect to the deduction under Chapter VI-A and rebate under Section 87A and deduct income tax on the total income so computed on the basis of the rates in force.
Clarify rule no tds deduction if senior citizen sells immovable proprtty worth rs 75 lacs in 2025-26