To relax the compliance burden on senior citizens, the FM in her budget speech announced that pensioners and other senior citizens aged 75 years and above with just interest income shall be exempted from ITR filing provided the paying bank makes the necessary deduction after considering the aggregate of pension and interest income as the case may be. So, here the onus is on the bank to compute the tax and make the necessary deductions for such tax payers.
Know more about the announcement here and how senior citizens can avail the exemption.
Now as is things are easier said than done, to first make the provision clear which had been at first misunderstood by most taxpayers following in the category, it is the relaxation from filing ITR and not filing taxes.
Other points attached to the relaxation that one must know
- Only senior citizens aged 75 years and above and having just pension and interest income shall be allowed this exemption from ITR filing.
- Also, there was later put forward another clause that the pension account and FD shall be with the same bank, such that considering the aggregate of the income, paying bank deducts the applicable tax on both the income sources, eliminating the need to do so separately.
- Now in case the person is having interest income from FDs which are with 2 or more banks or is earning income from other fixed income sources, he or she shall not be entitled for the exemption.
- Similarly such pensioners with income from mutual funds, insurance, debt securities and the like shall also not be able to avail of the exemption.
- And also in a case when excess tax has been paid to the government, they will need to claim it by filing the ITR.
As of now more clarity is sought from the CBDT on the provision and Archit Gupta Founder and CEO, ClearTax said "So far it appears that the bank account, bank deposits and pension income must all be in the same 'specified bank.' For senior citizens having accounts in different specified banks and seeking exemption from filing income-tax returns will require these banks to be connected with each other to seek information such as total income and corresponding tax liability and TDS thereon".
And on the Chapter VI deductions, Archit Gupta said, "One way that this can happen is that the senior citizen will intimate the bank about any tax deductions she wants to claim as eligible under chapter VI-A, so that TDS can be adjusted by the 'specified bank'. All chapter VI-A deductions should be allowed to be claimed. The presumption is not that the senior citizen does not have taxable income, rather all TDS is taken care of and only two types of incomes are earned - interest and pension - and therefore adjustment of TDS towards deductions claimed will be allowed by the specified bank," Gupta opined.
What may be the case if the senior citizen taxpayer has income from other savings schemes such as SCSS and other post office schemes?
If the SCSS is maintained with the same paying or specified bank, he or she may be able to club that income and get the tax deductions made by the paying bank and if there are other income sources such as from post office schemes than he or she may not be able to apply for ITR filing exemption.
- And now why despite the relaxation given senior citizens with these 2 above specified income stream should file ITR
- The ITR form applicable to such taxpayers with income from pension and interest is ITR Sahaj which is a simple form with pre-filled information.
- And now for claiming exemption and for the bank to deduct the tax on the income source, you would need to provide the documentation for due validation which may turn out to be a cumbersome process, so in comparison e-filing could still be a better way out. And the process of ITR filing has even be made simpler because of the pre-filled ITR returns.
Moreover, the fine print on the provision is still awaited and as for many of such taxpayers it may not be necessary that both interest and pension is earned in the same bank. Also, it is at present how many banks will figure in the list released by the ministry for the purpose and what documentation banks ask from such taxpayers to validate that they are not hiding income elsewhere. So, without going into too much complexity that the scheme still has because of the details awaited, senior citizens with these 2 income sources shall be better of filing their income tax returns or ITRs.