The Central Board of Direct Taxes (CBDT) has clarified that the senior citizen does not require to pay ‘deducted at source’ under section 194A of the Income Tax Act where the amount of such income during a financial year doesn’t exceed Rs 50,000 in aggregate.
A recent circular issued by the Board clarified that in case of senior citizens, some TDS deductors and banks are deducting TDS despite the amount of income not exceeding Rs 50,000.
Section 194A deals with the deduction of TDS on interest other than interest on securities like Interest on Fixed Deposits, Interest on Loans and Advances other than banks. This Section is only applicable to a resident. Thus, the provisions of section 194A are not applicable in case of payment of interest to a non-resident.
“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 Income Tax 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.”
Earlier, a deduction of Rs 10,000 in respect of interest income was provided to all taxpayers.
