Which senior citizens are no longer required to file ITR?

Budget 2021 announced an exemption from the ITR filing process for senior citizens above a certain age. This exemption is available to senior citizens provide they satisfy certain conditions. If the specified conditions are met, he/she is required to submit a declaration during the previous year (i.e. in which income is earned) to claim ITR filing exemption. Lets dig in.

Did you know that not all senior citizens (those above the age of 75 years) have to file their income tax return (ITR) this year? Budget 2021 had announced an exemption for senior citizens aged 75 years and above if they meet certain eligibility criteria. In this regard, the government inserted section 194P in the Income-tax Act, 1961

According to section 194P, senior citizens are not required to file ITR if they fulfil the following criteria:

  • The senior citizen is resident in India and is 75 years old or more during the previous year, i.e., in FY 2021-22,
  • 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 receiving his pension income,
  • The bank, in which pension and interest income is received, is a specified bank as notified by the government.
  • He shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed.

These people will primarily fall into two categories: one who are required to pay no taxes and second who are required to pay taxes. In the latter case, the specified 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 September 2, 2021, notifying the meaning of ‘specified bank’. As per the notification, a senior citizen can submit the declaration to any scheduled bank.

Thus, A senior citizen who fulfils the criteria as mentioned under Section 194P will not be required to file ITR. This will be done if he/she has submitted a declaration to the bank to deduct TDS from their income in the previous financial year i.e., during FY 2021-22. If the declaration has not been submitted by the senior citizen during the last financial year, then senior citizen will be required to file his/her ITR.

How taxable income will be calculated under new section
A senior citizen is required to furnish declaration using Form no. 12BBA. Once the declaration is submitted by the senior citizen, the bank will calculate the gross total income (pension plus interest income). The bank will also take into account the deductions, tax-exemptions and rebate u/s 87A that a senior citizen is eligible for to arrive at net taxable income. Now, the bank will deduct TDS for senior citizens after considering deductions and rebate.

While submitting the declaration, the bank will ask the senior citizen to provide proof of deductions and tax exemptions he/she is eligible for. This will be required if he/she opts for the old income tax regime. If the senior citizen opts for the new income tax regime, then submission of investment proofs will not be required. It is important to note that once an individual submits declaration to the bank, then he/she will not be able to change the income tax regime.

TDS certificate to be issued by a bank
The bank will issue Form 16 for the tax deducted under section 194P. Do note that this is the same TDS certificate issued by the employer to his employee for the tax deducted on the salary income.

Form 16 has been modified by the income tax department in 2021. Form 16 now shows the Pension Payment Order number of the senior citizen along with other details like PAN, address etc.