Are you a senior citizen and your bank is still deducting TDS on your interest income which is less than Rs 50,000 in a financial year? Here’s good news for you. The Central Board of Direct Taxes has clarified that in the case of senior citizens, no TDS (tax deducted at source) is required to be ‘deducted at source’ u/s 194A of the Income Tax Act, where the amount of such income during a financial year doesn’t exceed Rs 50,000 in aggregate.
In a circular, CBDT has said that it has been brought to its notice that in case of senior citizens, some TDS deductors and banks are deducting TDS despite the amount of income not exceeding Rs 50,000. “The same is not in accordance with the law as the Income-Tax Act provides that no tax deduction at source under section 194A shall be made in the case of Senior Citizens where the amount of such income or, the aggregate of the amounts of such income credited or paid during the financial year does not exceed Rs 50,000,” it said.
CBDT further said that under sub-rule (5) of Rule 31A of the I-T Rules, 1962, the Director General of Income-tax (Systems) is authorized to specify the procedures, formats and standards for the purposes of furnishing and verification of the statements or claim for refund in Form 26B and shall be responsible for the day-to-day administration in relation to furnishing and verification of the statements or claim for refund in Form 26B in the manner so specified.
“In exercise of the powers delegated by the CBDT(Board) under sub-rule (5) of Rule 31A of the I-T Rules, 1962, the Principal Director General of Income-tax (Systems) hereby clarifies that no tax deduction at source under section 194A shall be made in the case of Senior Citizens where the amount of such income or, the aggregate of the amounts of such income credited or paid during the financial year does not exceed Rs 50,000.”
It may be noted that earlier a deduction of Rs 10,000 in respect of interest income was provided to all taxpayers. However, to provide a dignified life to senior citizens, significant incentives were given to them in the Budget 2018-19 by FM Arun Jaitley. One such incentive was given in the form of exemption of interest income on deposits with banks and post offices up to Rs 50,000 without TDS under Section 194A. For this purpose, a new Section 80TTB was inserted in the I-T Act to provide deduction for interest income up to Rs 50,000. This benefit is also available on interest income from all FDs and recurring deposit schemes.
