Tag: 15G for senior citizens

Income Tax Exemption for Senior Citizens over 75: Conditions and Benefits

Section 194P of the Income-tax Act,1961 was introduced in Budget 2021 to provide conditional relief to senior citizens above the age of 75 years from filing the income tax return. Section 139 of the Income Tax Act governs the filing of income tax returns by every individual with income above the basic exemption limit. 

However, Union Budget 2021, to provide relief in terms of compliance burden for filing returns, exempted senior citizens above 75 years of age from filing the income tax return, subject to the following conditions:

Conditions for exemption under section 194P

  • Senior citizens should be of age 75 years or above. 
  • Senior citizens should be ‘Resident’ in the previous year. 
  • He must have pension income and interest income from a bank account (savings or deposits) only. Interest income must be accrued/earned from the same bank in which he is receiving his pension.
  • The senior citizen will submit a declaration containing some details (mentioned below) to the bank.
  • The bank must be specified, and a ‘specified bank’ is a banking company as notified by the Central Government. Such banks will be responsible for the TDS deduction of senior citizens after considering the deductions under Chapter VI-A and rebate under 87A. 

Once the specified bank, as mentioned above, deducts tax for senior citizens above 75 years of age, there will be no requirement to furnish income tax returns by senior citizens.

Filing a declaration by a senior citizen

The specified bank, as mentioned above, shall deduct TDS based on a declaration submitted by the senior citizen to the bank. 
The declaration should contain the below-mentioned details :

How will the taxable income be calculated under the new section?

A senior citizen must submit a declaration using Form No. 12BBA. Once the older citizen has filed the declaration, the bank will compute the gross total income (pension plus interest income). To calculate net taxable income, the bank will also consider the deductions, tax exemptions, and rebates available to elderly citizens under Section 87A. After deductions and rebates, the bank would now deduct TDS for older persons.

The bank will request proof of deductions and tax exemptions that the senior person is entitled to when filing the declaration. If they choose the previous income tax regime, this will be required. If the older citizen chooses the new income tax regime, no investment proof will be required.

Benefits to senior citizens under 194P

Upon collection of deduction details, the specified bank calculates the net taxable income, deducts the calculated tax in the form of TDS under section 194P, and reports it to the department. The TDS amount will be reflected in Form 26AS just like any other TDS amount. 

Then the provisions of section 139 (return filing) will not apply to senior citizens aged 75 years and above. This means that if the specified bank deducts TDS under this section, then the senior citizen need not file their ITR. This will be a relief for such taxpayers.

Format of Form 12BBA

https://www.winmansoftware.com/files/Forms/Blanks/Form_12BBA.dot

Who is exempted from ITR filing?

Senior citizens aged 75 years or more having pension income and interest income from the same bank where such pension income is received, not having any other income other than the mentioned 2 income are exempted from filing income tax returns upon submission of declaration in Form 12BBA to the bank.

Which tax regime will be applied while deducting TDS u/s 194P?

Once the taxpayer has filed the declaration, the bank calculates net taxable income after considering the deductions, tax exemptions, and rebates available to elderly citizens under Section 87A, then applies the beneficial tax regime to the taxpayer to arrive at the TDS to be made u/s 194P.

Which tax regime will be applied while deducting TDS u/s 194P?

Once the taxpayer has filed the declaration, the bank calculates net taxable income after considering the deductions, tax exemptions, and rebates available to elderly citizens under Section 87A, then applies the beneficial tax regime to the taxpayer to arrive at the TDS to be made u/s 194P.

What are the deductions limit u/s 80C and 80D for Senior citizens?

SectionsEligible investments for tax deductionsMaximum Deduction
80CInvestment made in Equity Linked Saving Schemes, PPF/SPF/RPF, payments made towards Life Insurance Premiums, principal sum of a home loan, SSY, NSC, SCSS, etc.Rs 1,50,000
80DFor the policy taken for Self & Family + Parents (above 60 years)Rs 1,00,000

What is Form 15H for senior citizens?

Form 15H are self-declaration form that an individual submits to the payer requesting not to deduct TDS on the income as their income is below the basic exemption limit. 

For this, providing PAN is compulsory. Some banks allow you to submit these forms online through the bank’s website.

What is the age limit for 194P?

Relaxation from filing the ITR is available to resident senior citizens aged 75 years or older.

Information Available on Form 26AS

Summary of Form 26AS Form 26AS is an essential statement that provides various details related to tax deductions, collections, payments, refunds, and high-value transactions. This form comprises several parts, including details of tax deducted at source, tax collected at source, tax paid, paid refunds, SFT transactions, TDS defaults, and turnover as per GSTR-3B.

One can access Form 26AS through the TRACES portal or the net banking facility of their bank. It is beneficial for taxpayers as it enables them to review their financial transactions involving TDS/TCS, compute income, claim tax credits, and verify refunds.

Notably, a new version of Form 26AS was introduced on 1 June 2020, expanding its scope to include additional data such as specified financial transactions, tax demands, tax refunds, and pending/completed income tax proceedings. This update aims to enhance tax compliance and accuracy in tax payments.

Form 26AS is a statement that shows the below information:

The new AIS, effective 1 June 2020, will also include information on specified financial transactions, pending and completed assessment proceedings, tax demands, refunds and the existing data presented in the form.

Structure and Parts of Form 26AS?

  • Part A: Details of Tax Deducted at Source
    • Part A1: Details of Tax Deducted at Source for 15G/15H
    • Part A2: Details of Tax Deducted at Source on the Sale of Immovable Property u/s194(IA)/TDS on Rent of Property u/s 194IB/TDS on Payment to Resident contractors and professionals u/s 194M (For Seller/Landlord of Property/ Payee of resident contractors and professionals)
  • Part B: Details of Tax Collected at Source
  • Part C: Details of Tax Paid (other than TDS or TCS)
  • Part D: Details of Paid Refund
  • Part E: Details of SFT Transaction
  • Part F: Details of Tax Deducted at Source on the sale of Immovable Property u/s194(IA)/TDS on Rent of Property u/s 194IB/TDS on payment to resident contractors and professionals u/s 194M (For Buyer/Tenant of Property/Payer of resident contractors and professionals)
  • Part G: TDS Defaults* (processing of Statements)
  • Part H: Details of Turnover as per GSTR-3B

Part A:   
Details of Tax Deducted at Source

Part A of Form 26AS contains TDS details deducted from your salary, interest income, pension income, prize winnings, etc. It also includes the TAN of the deductor and the amount of TDS deducted and deposited to the government. This information is provided every quarter.

Part A1:   
Details of Tax Deducted at Source for 15G/15H

Details of income where no TDS has been deducted are given here since the taxpayer has submitted Form 15G or Form 15H. You can verify the status of the TDS deduction if you have submitted Form 15G or Form 15H. If you have not submitted Form 15G or Form 15H, this section will display ‘No transactions present’.

Part A2:   
Details of the following entries are mentioned here:

  • TDS on sale of immovable property u/s194(IA) (for the seller of property)
  • TDS on rent of property u/s 194IB (for the landlord of property)
  • TDS on payment to resident contractors and professionals u/s 194M (for a payee of resident contractors and professionals)

That is, it will show entries if you have sold the property/rented the property, received payments for contractual or professional service during the year, and TDS was deducted on the same.

Part B:   
Details of Tax Collected at Source

Part B shows the Tax Collected at Source (TCS) by the seller of goods. Entries in Form 26AS will show the seller’s details who have collected tax from you.

Part C:   
Details of Tax Paid (Other than TDS or TCS)

If you have deposited any tax yourself, that information will appear here. Details of advance tax. as well as self-assessment tax, are present here. It also contains challan details (BSR code, date of deposit, CIN) through which the tax was deposited.

Part D:   
Details of Paid Refund

Information regarding your refund will be presented in this section if any. The assessment year to which the refund pertains, along with the mode of payment, the amount paid and interest paid, and the date of payment, are mentioned.

Part E:   
Details of SFT Transaction

Banks and other financial institutions must report high-value transactions to the tax authorities. High-value purchases of mutual funds, property purchases, and corporate bonds are all reported here.

Part F:   
Details of Tax Deducted at Source on the sale of Immovable Property u/s194(IA)/TDS on Rent of Property u/s 194IB/TDS on payment to resident contractors and professionals u/s 194M

When you have bought a property/paid rent to the tenant/paid for contractual work or professional fees, and deducted TDS on such payments, this section will show details of the TDS deducted & deposited by you.

Part G:   
TDS Defaults*(Processing of Statements)

This part shows TDS defaults (after processing of TDS returns). However, they do not include demands raised by the assessing officer.

Part H:   
Details of Turnover as per GSTR-3B  
This part shows the taxpayer’s turnover as reported in the GSTR-3B return.

How to view Form 26AS?

You can view Form 26AS through the following two modes:

  • The TRACES portal
  • The net banking facility of your bank account

Form 26AS can be downloaded on the TRACES website. Below are the steps to view and download Form 26AS from the TRACES website.

Step 1: Visit the e-filing website

Step 2: Enter your user ID- It can be either PAN or Aadhaar number. If the user ID is invalid, error message will be displayed. Continue with valid user ID details.

Step 3

  • Enter the password and continue.

Step 4

  • The following screen will appear. Go to ‘e-file’. Click on ‘Income Tax Returns’ and select ‘View Form 26AS’ in the drop-down.
  • View Form 26AS

Step 5

  • Click on ‘Confirm’ to the disclaimer so that you are redirected to the TRACES website (don’t worry, this is a necessary step and is completely safe since it is a government website).
  • TRACES Website

Step 6: You are now on the TRACES (TDS-CPC) website. Select the box on the screen and click on ‘Proceed’.

Step 7: Click on the link at the bottom of the page – Click ‘View Tax Credit (Form 26AS)’ to view your Form 26AS.

Step 8: Choose the Assessment Year and the format you want to see Form 26AS. If you want to see it online, leave the format as HTML. You can also choose to download it as a PDF. After you have made your choice, enter the ‘Verification Code’ and click on the ‘View/Download’ button.

Step 9: After the download, you can view Form 26AS by opening it.

How to view Form 26AS from net banking facility?

The facility to view Form 26AS is available to a PAN holder having a net banking account with any authorised bank. You can view your Form 26AS only if your PAN number is linked to that particular account. This facility is available for free. The list of banks registered with NSDL through which you can view your Tax Credit Statement (Form 26AS) are as below:

How to use the income tax department’s e-filing website?

The first step is to either login or register on the e-filing website. After entering your PAN number under the ‘Taxpayer’ tab, the website will tell you if you’re already registered. 

If you’ve e-filed before, the chances are that you might already be registered. Please search your email inbox for ‘incometax.gov.in’ to look for information that might be useful.

Log in through your user ID and password, and you can use the portal for income tax-related compliances.

Note: Your user ID is your PAN number. If you don’t remember your password, you need to reset your password.

Benefits of Form 26AS

  • Form 26AS provides important information about tax deducted/collected and deposited with the government tax authorities by the authorised deductors/collectors.
  • A taxpayer can view all financial transactions involving TDS/TCS for the relevant financial year in Form 26AS.
  • Form 26AS helps in the computation of income and to claim the tax credits when filing an Income Tax Return (ITR) on income. 
  • Form 26AS helps in computation of income and to claim the tax credits at the time of filing Income Tax Return (ITR) on income. 
  • A taxpayer can confirm the verification of refunds during the applicable financial or assessment year using Form 26AS.

New Form 26AS effective from 1 June 2020

With effect from 1 June 2020, the taxpayers’ data will be available in a new Form 26AS, which is as follows:

The government is yet to notify or clarify the specified financial transactions reportable in the new Form 26AS. The new form is in line with the Budget 2020 announcement to facilitate compliance and correct payment of taxes.

How Can Senior Citizens Avoid TDS on Fixed Deposit?

Fixed Deposits have been considered the safest type of investment for long. It comes at a fixed interest rate that ensures assured returns and power of compounding. Additionally, this investment option also features a flexible tenure, which adds to the benefits of investors.

Interest earned on an FD shall attract TDS (Tax Deducted at Source) at 10%. The TDS on Fixed Deposit for senior citizens has been fixed at 10%, if their annual income from such investment is more than Rs.50,000. However, if you are a senior citizen, you must know that there are provisions that allow you to avoid this TDS. 

Read on to know more.

Ways for Senior Citizens to Avoid TDS on FD?

Your bank deducts interest income on FDs before submitting the corpus in your bank account. However, you can avoid this taxation if your annual salary is less than Rs.2.5 Lakhs. There are different ways to avail this exemption, such as:

1.Form 15G

Form 15H is a self-declaration form that you can submit to the bank requesting exemption of income tax on Fixed Deposit interest because your income is less than the basic exemption limit.

It is necessary to provide PAN for this purpose. Furthermore, some banks allow you to submit these forms online via their websites. In this regard, note that you need to submit this at the beginning of the financial year for a hassle-free exemption process. 

At the same time, senior citizens can file Form 15H even if their interest income exceeds the basic tax exemption limit. This is because their taxable income after necessary deductions stays below the exemption limit.

2. Form 12BBA

Senior citizens aged 75 and above seeking exemption from filing income tax can fill out and submit form 12BBA to their respective banks from this year.

This exemption is available to senior citizens who only receive pension and interest from fixed deposits. Furthermore, all senior citizens are eligible for this exemption. The only condition is that the pension and interest income should be deposited in the same bank.

About Form 12BBA

Apart from Form 15H, TDS on Fixed Deposit for senior citizens is also eligible for exemption by filling out the Form 12BBA. This is a comprehensive form that will request information on tax deductions to be claimed under sections 80C to 80U, tax rebates claimed under section 87A that reduce taxable income below the Rs.5 Lakhs exemption and overall income from pension and fixed deposit (FD) interest.

According to the Central Board of Direct Taxes (CBDT), once the form is submitted, the bank will compute the taxpayer’s total income after deducting tax deductions and rebates under Section 87A and deduct tax on the derived income based on slab rates. Furthermore, to ensure that senior citizens have no difficulty filling out the form, the CBDT has directed banks to assist eligible seniors in properly filling out the form. 

In this regard, the bank will file the Income-Tax Return (ITR) on behalf of the senior citizen taxpayer.

Besides, submitting Form 12BBA will also save senior citizens the trouble of obtaining a refund on tax deducted at source (TDS) on FD interest. According to IT laws, 10% TDS is deducted on interest income exceeding Rs.50,000 earned by a senior citizen. For taxpayers in the 5% and 10% tax brackets, the 10% TDS will result in a higher tax outgo than his/her tax slab.

Points to Remember Regarding TDS on Fixed Deposit for Senior Citizens

Here are a few crucial points to keep in mind regarding taxation of FD interest income for citizens above the age of 60:

  • In the case of fixed deposit investments, all individual residents 60 years of age or older qualify as senior citizens.
  • According to section 194A of the Income Tax Act, TDS on FD cannot be deducted in the case of deposits held by senior citizens if the earnings do not exceed Rs.50,000 during the fiscal year.
  • TDS on fixed deposits for senior citizens is deducted when the interest is credited, not when the FD matures. So, if you have a three-year FD investment, TDS on FD interest will be deducted at the end of each year and not at the end of the third year.
  • The tax deduction rate for resident Indians is 10%, or 20% if you have not provided PAN.
  • NRIs have to pay TDS on Fixed Deposits at the rate of 30%.

Knowing the above-mentioned pointers will help you gain more insight into the working of TDS on FDs. At the same time, before investing in this investment instrument, consider conducting thorough research. In this regard, you can resort to platforms like Bajaj MARKETS. This is a diversified marketplace featuring various Fixed Deposit offers by banks and financial institutions. You can draw a comparison between them and choose an account that best suits your needs.

There are two major ways through which you can obtain exemption of TDS on Fixed Deposit for senior citizens. Additionally, if your annual interest income is less than Rs.50,000, you become exempt from TDS.