Senior Citizens Above 75 years Beware: Bank Mistake = No Refund!

Senior citizens who are 75 years or above and residents of India (not NRI) can avail exemption from filing Income Tax Returns (ITR) for FY 2024-25, provided they meet certain conditions u/s 194P.

Eligibility Criteria

• Section 194P is applicable from FY 2021-22 onwards.
• Individuals must be a resident senior citizen aged 75 years or above.

Conditions and Procedure for Exemption

• The exemption applies only if the senior citizen's income only from pension income and interest income received from the same specified bank where the pension is credited.
• No other income (like business, rent, or capital gains) is permitted to claim the exemption.
• To claim exemption, the senior citizen must submit Form 12BBA each year to the specified bank declaring that they have only pension and interest income and no other income and are opting for the Section 194P exemption.
• Only specified bank can do this (generally scheduled Banks notified by CBDT).

Specified Bank Procedure

Specified bank are required to:

• Compute the total income of the eligible senior citizen.
• Deduct TDS after considering:

1. Section 87A Rebate (if applicable)
2. All Chapter VI-A deduction ( like 80C, 80D, 80TTB)
3. Applies slab rates for senior citizen under old regime.

• Senior citizens can choose between the old and new tax regimes in their declaration but note:

1. Old regime allows deductions under Chapter VI-A (sections 80C to 80U) and rebate u/s 87A if income is below ₹5 lakh.
2. New regime offers limited deductions (only three specified sections 800CCD(2), 80CCH, 80JJAA) and rebate u/s 87A if income is below ₹7 lakh.

• Deposit the tax with the government.

Once TDS is deducted correctly, the senior citizen is not required to file ITR.

Example of Tax Calculation

A 77 year old senior citizen has:

Pension income: Rs.4,80,000Bank Interest: Rs.60,000

Tax rates under the Old Tax Regime for an individual (resident or non-resident) aged 60 years to 80 years

Rebate for FY 2024-25 under old tax regime is Rs.12,500 under new tax regime is Rs.25,000.

Computation by Bank under old regime

Here,

No tax filing is required because tax has been computed and deducted by the bank u/s 194P.

When Exemption is NOT Allowed u/s 194P?

• If the senior citizen has other income (business, rental, capital gains, dividends, etc.).
• ITR filling become mandatory if any income exists like rent, FD interest, saving interest in other bank.
• If pension or interest is credited in a non-specified bank, like cooperative banks, NBFCs, post offices, etc.
• If Form 12BBBA is not submitted.
• No Loss Adjustment or Refunds if you are opting for 194P Section it means Losses (capital or house property) cannot be set off or carried forward without filing ITR.

Points To Remember

• The bank may deduct TDS monthly or quarterly, based on internal policy.
• Senior citizens cannot control cash flow or timing of tax deduction like self-assessment.
• Bank errors cannot be corrected without filing ITR - if the bank over deduct TDS then no automatic refund is possible as refund can be claimed only by filing ITR voluntarily, defeating the purpose of 194P.
• If the bank makes a mistake in income or tax calculation, the senior citizen cannot request a correction (rectification) without filing ITR.
• If senior citizens has previous loss that cannot be set off or carry forward as no ITR is filed.