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  • Writer's pictureShreyanth Nalam

Do TDS provisions undermine exemption from payment of Advance Tax for Senior Citizens?

A very interesting random thought that struck me in this year's filing season was when I was filing a senior citizen's ITR. In this blog post, I write my views on applicability of TDS provisions for senior citizens while exempting them from payment of Advance Tax (for those not deriving income from business or profession).

As per Section 208 of the Income Tax Act, 1961, every person whose estimated tax liability for the year is INR 10,000 or more, tax in the form of “advance tax” is liable to be remitted to the Government as per the due dates and the corresponding percentage of tax that is to be remitted as prescribed. A resident senior citizen is not liable to pay advance tax if he does not have income from business or profession. Section 234B and 234C provide for the interest due to the Government in case the tax is not remitted in accordance with section 208 during the assessment year.

Most often, senior citizens derive income from deposits made with banks and financial institutions to sustain their livelihood post their retirement. Section 194A of the Income Tax Act, deals with tax to be deducted at source with respect to payments made in the form of interest from other than securities. This is essentially the interest received from banks from fixed deposits among others. Banks/co-operative societies are required to deduct tax @ 10% if the aggregate interest payouts in a year exceeds INR 40,000 (INR 50,000 for senior citizens).

Respite from the above TDS provision has been provided by the Government for senior citizens whereby senior citizens can submit a declaration by way of Form 15H to their respective banks where deposits are held each year if their income for that particular year is less than the basic exemption limit. Thus, avoiding TDS deductions for the year and removing difficulties by creating more monies in the hands of such individuals. However, in not all cases the interest amounts are within the basic exemption limit as many people park their entire retirement funds, pension funds and emergency medical funds as deposits with banks/financial institutions where the interest payouts each month serve as sustenance.

The spirit of exempting senior citizens from paying advance tax is to relieve senior citizens from the task of working out the taxes based on the provisions of the act on their own and remitting taxes in respective due dates (on a quarterly basis). Only senior citizens carrying out business or profession are not relieved from this task, as it is believed by the law makers that such persons employ various resources in the form of staff, advisors, consultants among others enabling them to be in compliance with the nitty gritties of the Act.

The inclusion of TDS provisions for various natured inward remittances from certain class of remitters even in cases for senior citizens is to achieve the dual purpose of creating liquidity in the hands of the Government for performance of its sovereign duties and at the same time relieving the hardships from senior citizens of performing the task of working out the taxes based on the provisions among others and remitting the same.

On a concluding note, I am of the opinion that Advance Tax provisions and TDS provisions are complimentary to each other and either do not undermine the others' purpose.

Disclaimer - It is to be noted that all reasonable care has been taken by the author to avoid errors. The author accepts no responsibility for any error crept in any manner and shall not bear any kinds of losses/damages incurred by a reader on account of such errors. This article should be treated only for informational and knowledge gain purposes only. The author shall not accept any responsibility for any loss occurred by anyone on acting on this article. 

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