Section 194P of the Income Tax Act, 1961 | An analysis

Section 194P of the Income Tax Act, 1961 is inserted vide Finance Act, 2021. Provisions of section 194P provide conditional relaxation to a specified senior citizen from filing 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 1^st April 2021.

The gist of provisions of section 194P

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