Are senior citizens not liable to pay advance tax? Answers to your personal finance queries

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Q. As per Sec. 234B of the I-T Act, senior citizens without professional income are not liable to pay advance tax. As of now, banks are deducting 10% tax on fixed deposit interest earned in the case of senior citizens also. This tax deduction is tantamount to compulsory deduction of advance tax payment. Could you help clarify this?

P.S. Kalyanaraman

A. As per Section 208 of the I-T Act, every person whose estimated tax liability for the year is ₹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.

A resident senior citizen is not liable to pay advance tax if he does not have income from business or profession. Sections 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.

Section 194A of the Act deals with TDS 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 and co-operative societies are required to deduct tax at 10% if the aggregate interest payouts in a year exceeds ₹40,000 (₹50,000 for senior citizens).

In case of senior citizens to whom tax is being deducted in the form of Section 194A, they may submit a declaration through Form 15H to their respective banks where deposits are held each year wherein their income for that particular year is less than the basic exemption limit thus avoiding TDS for the year and removing difficulties by creating more monies in the hands of such individuals.

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 on due dates. Only senior citizens carrying out business or profession are not relieved as it is believed by the lawmakers that such persons employ various resources in the form of staff, advisers, consultants, among others.

The inclusion of TDS provisions for various- natured inward remittances from remitters, even 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 and remitting the same.

Advance tax and TDS provisions are complementary and do not undermine each other’s purpose.

Q. I am a government employee. I have invested ₹80,000 in NPS tier I account via salary deduction. My total Section 80C savings is about ₹2 lakh. Can I claim the rebate of ₹2 lakh by bifurcating the amount into ₹1.50 lakh for 80C and ₹50,000 for 80CCD1B? Or, will I have to invest ₹50,000 more to claim rebate under 80CCD 1B?

Saurabh Pahuja

A. Amounts contributed by your employer towards NPS is covered under 80CCD(1) and 80CCD(2) towards employee and employer contributions respectively through salary disbursement.

Any voluntary contribution towards NPS shall only be covered under 80CCD(1B), thus the additional ₹50,000 benefit prescribed cannot be claimed by you under 80CCD(1B) as no voluntary contribution has been done by you.

Section 80CCD(1) is covered under the limit of 80CCE of ₹1.50 lakh and as mentioned by you, it is exhausted. With respect to 80CCD(2), you may claim a maximum deduction of 14% of basic plus DA (for central government staff) or 10% of basic plus DA (for non-central government staff) and the same is outside the purview of ₹1.50 lakh (80CCE) and ₹50,000 (80CCD(1B)).

Kindly contact your human resources department to ascertain the break-up of contributions towards NPS under 80CCD(1) and 80CCD(2). If felt necessary, an additional amount can be invested voluntarily under 80CCD(1B) to claim deduction of up to ₹50,000.

(The author is a partner, GSS & Associates, Chartered Accountants, Chennai)