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Exemption to Senior Citizens from filing of Income Tax Return: Budget 2021-22

exemption-to-senior-citizens-from-filing-of-income-tax-return-budget-2021-22

In the Union Budget 2021, the Finance Minister Nirmala Sitharaman announced that senior citizens above the age of 75 years, who only have pension and interest as a source of income will be exempt from filing the income tax returns. Thus in these cases, a senior citizen is not required to file his income tax return irrespective of the quantum of income.


While presenting the Union Budget for the year 2021-22, Finance Minister Nirmala Sitharaman begun the direct tax proposals with the relief given to senior citizens. She expressed her gratitude towards senior citizens of the country in the following words:


I begin my direct tax proposals by offering my 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 75th year of Independence of our country, when we continue our endeavour with renewed vigour, 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, I propose exemption from filing their income tax returns. The paying bank will deduct the necessary tax on their income.


The income tax provisions and conditions for exemption from return filing by a senior citizen is discussed below.


Relaxation for certain category of senior citizen from filing return of income-tax


Section 139 of the Act provides for filing of return of income. Sub-section (1) of the section provides that every person being an individual, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income.



In order to provide relief to senior citizens who are of the age of 75 years or above and to reduce compliance for them, it is proposed to insert a new section to provide relaxation from filing the return of income, if the following conditions are satisfied:-


(i) The senior citizen is resident in India and of the age of 75 or more during the previous year;


(ii) He has pension income and no other income. However, in addition to such pension income he may have also have interest income from the same bank in which he is receiving his pension income;


(iii) This bank is a specified bank. The Government will be notifying a few banks, which are banking company, to be the specified bank; and


(iv) He shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed.


Once the declaration is furnished, the specified bank would be required to compute the income of such senior citizen after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A of the Act, for the relevant assessment year and deduct income tax on the basis of rates in force. Once this is done, there will not be any requirement of furnishing return of income by such senior citizen for this assessment year.


This amendment will take effect from 1st April, 2021.


For this purpose, a new section 194P is introduced in the Income Tax Act, 1961 vide Clause 47 of the Finance Bill, 2021.


Insertion of new section 194P.


Deduction of tax in case of specified senior citizen


47. After section 194-O of the Income-tax Act, the following section shall be inserted, namely:––


‘194P. (1) Notwithstanding anything contained in the provisions of Chapter XVII-B, in case of a specified 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.


(2) The provisions of section 139 shall not apply to a specified senior citizen for the assessment year relevant to the previous year in which the tax has been deducted under subsection (1).


Explanation.–– For the purposes of this section,––


(a) “specified bank” means a banking company as the Central Government may, by notification in Official Gazette, specify;


(b) “specified senior citizen” means an individual, being a resident in India––


(i) who is of the age of seventy-five years or more at any time during the previous year;


(ii) 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


(iii) has furnished a declaration to the specified bank containing such particulars, in such form and verified in such manner, as may be prescribed.’.


Explaining the provisions of Section 194P 


Clause 47 of the Bill seeks to insert a new section 194P of the Income-tax Act relating to deduction of tax in case of a specified senior citizen.


Sub-section (1) of the said section seeks to provide that notwithstanding anything contained in the provisions of Chapter XVII-B, in case of a specified 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.


Sub-section (2) of the said section seeks to provide that the provisions of section 139 shall not apply to a specified senior citizen for the assessment year relevant to the previous year in which the tax has been deducted under sub-section (1).


Explanation to the said section seeks to define the following expressions for the purposes of the said section,––


(a) “specified bank” means a banking company as the Central Government may, by notification in Official Gazette, specify;


(b) “specified senior citizen” means an individual, being a resident in India–


(i) who is of the age of seventy-five years or more at any time during the previous year;


(ii) 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


(iii) has furnished a declaration to the specified bank containing such particulars, in such form and verified in such manner, as may be prescribed.


Now, under the Income Tax Act, 1961 we have three categories of senior citizens-


1. Senior Citizen whose age is 60 years and above

2. Senior Citizen whose age is 75 years or more

3. Senior Citizen whose age is 80 years and above


This shall apply from 1st April, 2021 which means such senior citizens can avail the benefit of relaxation from the filing of return of income for the income earned in the current financial year 2020-21 or from the AY 2021-22 itself. For the financial year 2019-20, this relaxation shall not apply. Readers are  aware that for the FY 2019-20 or AY 2020-21, the belated return can be filed upto 31-03-2021.





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