Senior citizens aged 75 years or above may get significant relief from the compliance burden of filing an income tax return if their income meets certain conditions. Under the provisions of the Income-tax Act, 2025, a resident senior citizen with only pension and interest income can avoid filing an income tax return where the specified bank itself computes the total income and deducts the applicable tax.
The Income Tax Department's guidance states that this facility applies to a resident senior citizen who is 75 years or more at any time during the tax year, subject to prescribed conditions.
Who can avail this benefit?
The provision applies to a senior citizen who satisfies all the prescribed conditions.
The individual must:
- Be a resident senior citizen aged 75 years or more during the tax year.
- Have income comprising only pension income and interest income.
- Receive the interest from an account maintained with the specified bank.
- Receive the pension in the same specified bank.
- Furnish a declaration in Form No. 125 to the bank containing details of pension income.
This means the benefit is not available merely because a taxpayer is above 75. The nature and source of income, along with the banking arrangements and declaration requirement, are also important.
What does the specified bank have to do?
A specified bank is responsible for computing the total income of the eligible senior citizen and deducting income tax from it.
The bank has to calculate the total income after considering the deduction available under Chapter VIII and the rebate under Section 156. Tax is then deducted on the resulting total income at the rates in force.
For this purpose, a "specified bank" means a banking company that is a scheduled bank and has been appointed as an agent of the Reserve Bank of India under Section 45 of the RBI Act, 1934.
Is there any minimum threshold for TDS?
Interestingly, the guidance does not prescribe a separate threshold for deduction under this provision.
Tax is deducted if any tax is payable on the total income after considering the applicable Chapter VIII deduction and Section 156 rebate.
For example, suppose an eligible senior citizen receives ₹2 lakh as pension and ₹3 lakh as fixed deposit interest during the year. If the tax payable on the total income becomes nil after the applicable rebate, the bank will not deduct tax from the interest merely because the interest crosses the ₹50,000 threshold applicable under another TDS provision.
What rate of TDS will apply?
The tax is deducted at the rates in force. The applicable rate is further increased by surcharge and Health & Education Cess, wherever applicable.
The provision also overrides other provisions of Chapter XIX-B relating to TDS. Therefore, where tax is otherwise deductible under another provision, the bank is required to deduct tax under this specific provision for the eligible senior citizen.
Form No. 125 is important
An eligible senior citizen cannot simply rely on the age criterion.
The individual must furnish Form No. 125 in paper form to the specified bank, containing particulars relating to pension income. The bank is also required to maintain the declaration and supporting evidence furnished by the senior citizen.
The deduction under Chapter VIII is to be considered based on the evidence furnished by the senior citizen during the tax year.
Does the senior citizen still need to file an ITR?
One of the biggest advantages of the provision is the exemption from filing a return.
Where tax has been deducted under Section 393(1), Table S. No. 8(iii), an eligible specified senior citizen is not required to file an income tax return for that tax year.
However, this relief is conditional. The taxpayer must satisfy the prescribed eligibility requirements and the tax must actually be deducted under the specified provision.
What happens if the bank fails to deduct or deposit TDS?
The rules also provide consequences for non-compliance by the deductor.
If a person responsible for deducting tax fails to deduct it, penalty may apply under Section 448. If tax is deducted but not deposited with the Central Government, prosecution may arise under Section 476.
Depending on the amount involved, the consequences can include imprisonment and fine. For amounts exceeding ₹50 lakh, the provision may attract simple imprisonment of up to two years, along with fine or both. Where the amount is between ₹10 lakh and ₹50 lakh, simple imprisonment may extend to six months, along with fine or both. In other cases, a fine may apply.
The guidance also provides exceptions where reasonable cause is established and states that prosecution will not be initiated in specified cases involving TDS of ₹25 lakh or below where the delay in deposit is less than 60 days from the due date.
TDS deposit timeline for banks
Tax deducted under this provision is required to be deposited with the Central Government through challan within seven days from the end of the month in which the tax was deducted.
For tax deducted during March, the deposit is required to be made by 30 April of the next financial year.
Also Read: Tax Benefits for Senior Citizens in FY 2026-27: Deductions, TDS Relief and ITR Exemptions
What senior citizens should keep in mind
For senior citizens aged 75 years and above, the provision can simplify tax compliance considerably, but eligibility depends on several conditions. The individual should ensure that pension and interest income fall within the prescribed framework, the pension is received through the specified bank, and Form No. 125 along with the required evidence is furnished.
The bank, meanwhile, has to correctly compute the senior citizen's total income after considering eligible deductions and rebate before determining whether any TDS is payable.
In short, the provision is designed to shift much of the tax-computation and TDS compliance process to the specified bank, while giving eligible senior citizens relief from filing an income tax return for the relevant tax year.
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