RELIEF TO SENIOR CITIZENS IN FILING INCOME TAX RETURNS

[Mr. M. GOVINDARAJAN]

Budget speech

In her Budget Speech for the year 2021-22, the Finance Minister announced a scheme of relief to the senior citizens in filing income tax returns.  She told that she began her direct tax proposals by offering her pranaam to our senior citizens. Many of them, despite having foregone several basic necessities of their own, have strived to build our nation.   Now in the 75^th year of Independence of our country, when we continue our endeavor with renewed vigor, we shall reduce compliance burden on our senior citizens who are 75 years of age and above. For senior citizens who only have pension and interest income, she proposed exemption from filing their income tax returns. The paying bank will deduct the necessary tax on their income. 

New Section 194P

To give effect to the budget speech a new section 194P was inserted under Section 53 of Finance Act, 2021.  The newly inserted section 194P came into effect from 01.04.2021.

Specified bank

The expression ‘specified bank’ is defined as a banking company as the Central Government may, by notification in Official Gazette, specify.  The Central Government is yet to notify the banks as ‘specified banks’.

Specified senior citizen

The Income Tax Act, 1961 categorized senior citizens into two types-

• Senior citizen (60 years and above);
• Super Senior citizen (above 80 years).

The Finance Act, 2021 introduced a new classification – Specified Senior Citizen. 

The expression ‘specified senior citizen’ is defined as an individual, being a resident in India–

•  who is of the age of seventy-five years or more at any time during the previous year;
• who is having income of the nature of pension and no other income except the income of the nature of interest received or receivable from any account maintained by such individual in the same specified bank in which he is receiving his pension income; and
• has furnished a declaration to the specified bank containing such particulars, in such form and verified in such manner, as may be prescribed.

Obligations on specified bank

Section 194P imposes an obligation on the specified banks to file returns with the Income Tax Department on behalf of certain senior citizen.  The specified bank shall,  after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A, compute the total income of such specified senior citizen for the relevant assessment year and deduct income-tax on such total income on the basis of the rates in force.

Declaration

Vide Notification No. 99/2021, dated 02.09.2021, Rule 26D was inserted in the Income Tax Rules.   The newly inserted Rule 26D provides for furnishing of the declaration and evidence of claims by specified senior citizens to specified banks under Section 194P. 

The declaration required to be furnished by the specified senior citizen to the specified bank under section 194P shall be in Form no. 12BBA (newly inserted) to be furnished in paper form duly verified.

On furnishing of the declaration in Form No. 12BBA, the specified bank shall, after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A, compute the total income of such specified senior citizen for the relevant assessment year and deduct income-tax on such total income on the basis of the rates in force.

The effect to the deduction allowable under Chapter VI-A shall be given based on the evidence furnished by the specified senior citizen during the previous year.

The declaration and evidence for claiming deduction under Chapter VI-A shall be properly maintained by the Specified Bank and shall be made available to the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax, as and when required.

The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall specify procedure for furnishing of particulars of Form No. 12BBA and evidence by the specified banks to the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax, as and when required.  The procedure in this regard is yet to be specified by the Principal Director General of Income Tax (Systems).

Form 12BBA

The declaration under Form 12BBA was newly inserted vide the abovesaid Notification for giving declaration by specified senior citizens.  The following particulars are to be furnished by the specified senior citizens in the said form-

• Name and address of the person;
• PAN or Aadhaar card;
• Previous year;
• Date of birth;
• Name of the specified bank;
• Name of employer from which pension is drawn;
• Pension payment Order (PPO) Number;

The specified senior citizen is to certify that the information given above is complete and correct and that he/she did not have any income other than the income of the nature of pension and/or interest which is received or receivable only in the account(s) of the specified bank stated above.

Amendment of Rule 3 and 3A

The above said notification amended Rule 31A(1)(a) and (b) and also inserted a new Rule 31A(3B).

After this amendment Rule 31A(1) provides that every person responsible for deduction of tax under Chapter XVII-B, shall, in accordance with the provisions of sub-section (3) of section 200, deliver, or cause to be delivered, the following quarterly statements to the Director General of Income-tax (Systems) or the person authorized by the Director General of Income-tax (Systems)-

1. Statement of deduction of tax under section 192 and section 194P in Form No. 24Q;
2. Statement of deduction of tax under sections 193 to 196D (other than section 194P)  in-

1. Form No. 27Q in respect of the deductee who is a non-resident not being a company or a foreign company or resident but not ordinarily resident; and
2.  Form No. 26Q in respect of all other deductees.

The newly inserted Rule 31A (3B) provides that the Specified bank responsible for deduction of tax under section 194P shall furnish evidence produced by the specified senior citizen for claiming deduction under Chapter VI-A to the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) or to any other person authorized by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as and when required.

Form 16

The above said notification also amended Form 16, the certificate which should be given under section 203 of the Income Tax Act, 1961  for tax deducted at source on salary paid to an employee under section 192 or pension/interest income of specified senior citizen under Section 194P.

Applicability

This scheme will come into effect for the Assessment year 2022 – 2023 of the previous year 2021-2022.