To provide relief to senior citizens aged above 75 years, the government, in its Budget 2021, has proposed an exemption for them from filing Income tax returns (ITRs). However, this exemption is available only to those who fulfill certain conditions and experts feel that this will limit the number of senior citizens who can benefit from this.
Only those senior citizens who don’t have any income other than pension income and interest income can avail of the benefit. The interest income should be from a bank account as will be specified by the government.
“The intention of bringing in this exemption is good, but it is unlikely that many senior citizens will meet the condition of not having any income apart from pension income. Generally, senior citizens invest in instruments such as small saving schemes like senior citizen saving schemes from which they earn interest which is fully taxable. They may also be getting a dividend or rental income,” said Ameet Patel, partner, Manohar Chowdhry & Associates.
Also, the condition that the senior citizen should have a bank account with only one bank is unlikely to be met by many, he added.
There is no bar on the amount of pension a senior citizen may be earning. The exemption is only from filing tax returns. The senior citizen will have to pay tax as per the marginal slab rates. The specified banks will deduct the tax and submit it on behalf of the taxpayers.
The senior citizen will have to submit a declaration to the banks saying he or she doesn’t have any other income apart from the pension and interest income. The bank will deduct the TDS after considering the deduction allowable under Chapter VI-A and rebate allowable under section 87A of the Act.
Experts feel that the conditions will limit the benefit to a limited number of senior citizens.
“The government has said it will be available to those who have pension accounts with banks as will be specified by the government. So, this may also restrict many senior citizens to avail off the benefit as they may not have accounts with the specified banks. The choice of the bank generally depends on the past employer for retired people. In many organisations they continue with the salary account for crediting pension. In smaller organisations a person may get the liberty to hold bank accounts of their choice. Generally, bigger organisations don’t give this liberty,” Prakash Hegde, a Bengaluru-based chartered accountant.
“The benefit of this may be available to a handful of people because of the stringent conditions like limiting the income to pension and interest from the same bank as may be notified by the government. It would have been better if they would have allowed it across all banks. People generally like to diversify their deposits across banks as a risk control measure, therefore, it is highly unlikely that they will not have an account with any other bank,” said Gautam Nayak, a chartered accountant.