Section 194P was introduced in the Finance Act 2021 and it is applicable from 1st July 2021. This section deals with the deduction of tax at source on payment of income to senior citizens who are above 75 years of age.
According to section 194P, a senior citizen who is 75 years or older and has income only from a pension and interest from a bank or post office is exempted from filing income tax returns. However, to avail of this exemption, the senior citizen must furnish a declaration to the bank or post office from which he or she is receiving income.
If a senior citizen meets the above criteria and has provided the declaration to the bank or post office, then the bank or post office will deduct tax at source on the income received by the senior citizen. The bank or post office will also be responsible for filing the income tax return on behalf of the senior citizen.
It is important to note that this exemption is only available to senior citizens who have income only from pension and interest from a bank or post office. If the senior citizen has any other income, then he or she will be required to file income tax returns and will not be eligible for this exemption.
The deduction of tax at source under section 194P will be at the rate of 0% provided the senior citizen has furnished the necessary declaration to the bank or post office. However, if the senior citizen fails to furnish the declaration, then tax will be deducted at the applicable rate.
Final Conclusion
In conclusion, section 194P is a beneficial provision for senior citizens who have income only from pension and interest from a bank or post office. It simplifies the process of filing income tax returns for senior citizens and also ensures that they do not have to bear the burden of tax compliance.
Here are some frequently asked questions related to Section 194P of the Income Tax Act:
- Who is eligible for the exemption under Section 194P of the Income Tax Act? Senior citizens who are 75 years or older and have income only from pension and interest from a bank or post office are eligible for exemption from filing income tax returns under Section 194P. However, the senior citizen must furnish a declaration to the bank or post office from which he or she is receiving income to avail of this exemption.
- What is the role of banks and post offices under Section 194P? Banks and post offices are responsible for deducting tax at source on the income received by senior citizens who meet the eligibility criteria under Section 194P. They will also file the income tax return on behalf of the senior citizen if necessary.
- Is the exemption under Section 194P applicable to all types of income received by senior citizens? No, the exemption under Section 194P applies only to senior citizens who have income only from pension and interest from a bank or post office. If the senior citizen has income from other sources, he or she will not be eligible for this exemption.
- What happens if the senior citizen fails to furnish the necessary declaration to the bank or post office? If the senior citizen fails to furnish the declaration to the bank or post office, the tax will be deducted at the applicable rate. In such cases, the senior citizen may be required to file income tax returns as per the existing provisions of the Income Tax Act.
- Can senior citizens still file income tax returns even if they are eligible for exemption under Section 194P? Yes, senior citizens can file income tax returns even if they are eligible for exemption under Section 194P. However, if they meet the eligibility criteria, they are not required to file income tax returns.
- Is the exemption under Section 194P applicable only to Indian senior citizens? Yes, the exemption under Section 194P applies only to senior citizens who are residents of India.
- When did Section 194P come into effect? Section 194P was introduced in the Finance Act 2021 and it came into effect on 1st July 2021.
