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Section 194P
Deduction of tax by a specified bank in case of specified senior citizen
Section 194P was inserted in the Income Tax Act, 1961 vide the Finance Act, 2021, which was made applicable w.e.f. 1st April, 2021. This Section provides conditional relief to the senior citizen above the age of 75 years from filing the Income-tax return under Section 139 of the Income Tax Act.
Applicability and rate of TDS
Section 194P requires deduction of tax at source on the basis of rates in force by a specified bank, being a notified banking company, on the total income of specified senior citizen for the relevant assessment year, computed after giving effect to
- Deduction allowable under Chapter VI-A and
- Rebate allowable under section 87A
Exemption from filing return of income - The specified senior citizen is exempted from filing his return of income for the assessment year relevant to the previous year in which the tax has been deducted under this section.
Meaning of certain terms
| S. No. | Term | Meaning |
|
(i) |
Specified bank |
A banking company which is a scheduled bank and has been appointed as agents of Reserve Bank of India under section 45 of the Reserve Bank of India Act, 1934 |
|
(ii) |
Specified senior citizen |
An individual, being a resident in India, who
|
Prescribed form and manner for furnishing declaration with the bank [Rule 26D]
|
Sub-rule |
Provision |
|
1 |
Form No. and manner of furnishing the form -The declaration required to be furnished by the specified senior citizen to the specified bank shall be in Form no. 12BBA to be furnished in paper form duly verified. |
|
2 & 3 |
Specified bank deduct tax at source considering the declaration furnished - On furnishing of the declaration in Form No. 12BBA, the specified bank would compute the total income of such specified senior citizen for the relevant assessment year, after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A, 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 has to be given based on the evidence furnished by the specified senior citizen during the previous year. |
|
4 |
Specified bank responsible for keeping and maintaining declaration and evidence furnished by the senior citizen - The declaration referred to in sub-rule (1) and evidence for claiming deduction under Chapter VI-A referred to in sub-rule (3) 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. |
ILLUSTRATION
Mr. Sharma, a resident Indian aged 77 years, gets pension of ₹ 52,000 per month from the UP State Government. The same is credited to his savings account in SBI, Lucknow Branch. In addition, he gets interest @8% on fixed deposit of ₹ 20 lakh with the said bank. Out of the deposit of ₹ 20 lakh, ₹ 2 lakh represents five year term deposit made by him on 1.4.2021. Interest on savings bank credited to his SBI savings account for the P.Y.2021-22 is ₹ 9,500.
- From the above facts, compute the total income and tax liability of Mr. Sharma for the A.Y. 2022-23, assuming that he has not opted for section 115BAC
- What would be the amount of tax deductible at source by SBI, assuming that the same is a specified bank? Is Mr. Sharma required to file his return of income for A.Y.2022-23, if tax deductible at source has been fully deducted? Examine.
- Is Mr. Sharma required to file his return of income for A.Y.2022-23, if the fixed deposit of ₹ 20 lakh was with Canara Bank instead of SBI, other facts remaining the same.
SOLUTION
Computation of total income of Mr. Sharma for A.Y.2022-23.
|
Particulars |
₹ | ₹ | |
|
I |
Salaries Pension (52,000 x 12) Less - Standard deduction u/s 16(ia) |
50,000 |
|
|
II |
Income from Other Sources Interest on fixed deposit (₹ 20 lakh x 8%) Interest on savings account |
1,60,000 9,500 |
5,74,000
1,69,500 |
|
Gross total income |
7,43,500 |
||
|
Less - Deductions under Chapter VI-A |
|||
|
Under Section 80C |
|||
|
Five year term deposit (₹ 2 lakh, restricted to ₹ 1.5 lakh) |
1,50,000 |
||
|
Under section 80TTB |
|||
|
Interest on fixed deposit and savings account, restricted |
|||
|
to 50,000, since Mr. Sharma is a resident Indian of the |
|||
|
age of 77 years. |
50,000 |
2,00,000 |
|
|
Total Income |
5,43,500 |
||
|
Computation of tax liability for A.Y.2022-23 Tax payable [₹ 43,500 x 20% + ₹ 10,000] Tax liability |
18,700 748 |
||
|
19,448 |
|||
| 19,450 | |||
- SBI, being a specified bank, is required to deduct tax at source u/s 194P and remit the same to the Central Government. In such a case, Mr. Sharma would not be required to file his return of income u/s 139.
- If the fixed deposit of ₹ 20 lakh is with a bank other than SBI, which is the bank where his pension is credited, then, Mr. Sharma would not qualify as a “specified senior citizen”. In this case, Mr. Sharma would have to file his return of income u/s 139, since his total income (without giving effect to deduction under Chapter VI-A) exceeds the basic exemption limit.
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