Turning 75 this year? Here is a gift from the FM in Budget 2021. You need not go through the hassle of contacting your chartered accountant and filing your tax return for the financial year 2021-22.
The FM announced an exemption from filing I-T returns for such senior citizens if they earn income only from pension and interest. This will reduce compliance burden for such individuals.
But there are some conditions. “If such senior citizens have other investment incomes such as capital gains, then tax compliance in the form of filing of income tax return continues,” says Mayur Shah, Tax Partner – People Advisory Services, EY India.
This is in line with the central government’s attempt at easing the tax compliance process, particularly for individual tax-payers through faceless assessment, appeal and pre-filled income tax return forms.
However, relaxation on filing returns comes with certain other caveats too. For one, the bank in which you receive your pension and interest income (from deposits) must be the same. Moreover, this bank has to be a ‘specified’ bank. The central government will notify a list of such ‘specified’ banks soon. You will still have to deal with some documentation – you have to furnish a declaration to your specified bank. Next, the bank will compute your income after factoring in rebate under section 87A and deductions available under chapter VI-A (sections 80C, 80D and so on), and deduct taxes as applicable.
These conditions could turn out to be hitches as senior citizens will still have to furnish some details to their bank. “While relaxation on filing returns is a welcome measure, the various conditions make it restrictive. For example, for a senior citizen to be eligible to avail of this relaxation, the bank in question has to be a specified bank. Also, it is not yet clear if she can have multiple bank accounts where deposits yield interest income. However, it is still beneficial to senior citizens as ultimately it will be the bank’s responsibility to calculate taxes and deduct TDS as applicable,” says Karan Batra, Founder, Chartered Club, a tax consultancy firm.
While further clarity is awaited, you might have to declare interest income from other banks in the declaration. “Senior citizens will have to declare their tax-saver investments and other deductions in the declaration submitted to the specified bank. This could be similar to the declaration (Form 12BB) that employees submit to their employers. In the same form, it is possible that there will be a provision to declare interest income from other banks too. The specified bank will then calculate the tax liability and deduct TDS as applicable. The senior citizen need not go through the hassle of paying self-assessment tax or calculating their tax payable,” says Chetan Chandak, Director, Taxbirbal.in
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