To relax compliance norms for senior citizens, Finance Minister Nirmala Sitharaman in the Union Budget 2021, exempted pensioners aged 75 years and above from income tax return (ITR) filing in case the full amount of tax payable has been deducted by the paying bank. Further as per experts this exemption in ITR filing shall be available in a case if the pension income of the senior citizen is being credited into the same bank from which the interest income is being earned and the bank deducts the TDS at the applicable rate from the sum of such income.
In simple words, if the annual tax liability on interest and pension income is cleared by deduction of TDS by the interest paying bank then filing of income tax return shall not be an obligation for the senior citizen. In the Finance Bill there has been introduced a new provision 194P as per which the bank which pays the pension will compute the tax on the total income (pension and interest) after considering any deductions under Chapter VI-A.
"The bank will do the necessary TDS deductions from the pension and senior citizens aged 75 years and above will be absolved from the filing of tax returns. However, if there are any other sources of income or deductions, then such senior citizens will need to file the tax returns," states Sandeep Sehgal, director-taxes and regulatory, AKM Global, a consulting firm.
Moreover, as per Kapil Rana, founder & chairman, HostBooks, the liability to make necessary tax deduction will be transferred to the paying bank that means paying bank will deduct the tax as per the slab applicable on such senior citizen after giving effect to the deduction allowable under Chapter VI-A, rebate allowable under section 87A provided such person has furnished a declaration to the specified bank containing such particulars in such form and verified in such manner as may be prescribed.