A viral message on social media said that citizens over 75 no longer need to pay income tax. 

A part of the post goes like this, “The Modi government will not have to pay tax to the senior citizens of the country, because, on the completion of 75 years of India's independence, senior citizens above 75 years of age will no longer have to pay tax on their income. According to the information given by the Central Board of Direct Taxes, the central government has changed the law to provide tax exemption to senior citizens, which includes important changes between Rule 31, Rule 31A, Form 16 and 24Q, and senior citizens above 75 years of age will have to submit a 12-BBA application to the bank to get tax exemption.”

While this sounds legit and would be good news for senior citizens over 75, there has been no such announcement. In fact, a PIB fact check clarified that it is fake news. 

Section 194P

However, Section 194P of the Income Tax Act, introduced by the Finance Act 2021, aims to simplify the tax compliance process for senior citizens. Under this provision, individuals aged 75 years or above, with a pension income and interest income from specified banks or financial institutions, are exempt from filing income tax returns, provided they meet specific criteria.

To avail of this benefit, the senior citizen must have pension income and interest income from the same bank or financial institution. The bank or financial institution will then compute the applicable tax based on the individual’s total income, including any deductions under sections like 80C or 80D.

The institution is responsible for deducting tax at source (TDS) on the pension and interest income of the senior citizen, ensuring the correct tax is paid. This eliminates the need for senior citizens to file returns, as long as the TDS is accurate and matches their tax liability.

The aim of Section 194P is to provide relief to senior citizens, particularly those who find the tax filing process cumbersome, by reducing their compliance burden. It ensures that the tax is deducted at source and eliminates the need for filing a return, streamlining tax obligations for eligible individuals.