From this financial year senior citizens aged 75 years and above with income only from pension and interest can get an exemption from filing income tax and avoid 10% TDS on the interest received on their fixed deposits.
Banks are required to deduct TDS at a rate of 10 percent if the FD holder has submitted his/her PAN details for FD interest that exceeds Rs 40,000 in a year. If neither the PAN nor the Forms 15G and 15H are submitted, then banks deduct 20 percent TDS. For senior citizens aged 60 years and above, the limit is Rs 50,000 income from FD interest in a year and banks charge 10 percent TDS thereafter. However, from this financial year, senior citizens aged 75 and above can submit Form 12BBA for claiming the benefit of not filing an income tax return under Section 194P.
Senior citizens whose income is only from pension and FD interest are eligible for this exemption. Another condition is that both pension and interest income of the senior citizen should be deposited in the same bank.
Form 12BBA seeks details on total income from pension and FD interest, tax deductions to be claimed under Section 80C to Section 80U, tax rebate claimed under Section 87A that brings down taxable income below Rs 5 lakh exemption and a declaration confirming receipt of income only from pension and interest.
According to the Central Board of Direct Taxes (CBDT) notice, after submission of the from, the specified bank will compute the total income after considering the tax deductions under Section 80C to Section 80U and rebate under Section 87A and deduct tax on the derived income based on the slab rates.
The CBDT has instructed banks to assist eligible seniors in duly filling the form to ensure senior citizens do not face problems. Once the bank deducts tax under Section 197P, the specified senior citizens are not required to file ITR since Section 139 would not apply to them. Form 12BBA will also save senior citizens from the hassle of getting refund on tax deducted at source (TDS) on FD interest, as per a Livemint report.