The TDS rules which come into effect starting July 1 may see banks TDS or tax deducted at source at higher rates for some taxpayers.
This is because no exception has been given for cases where an individual is not eligible to file an income tax return (ITR), according to Mint report.
For senior citizens aged 80 or above this is potentially bad news as banks may deduct TDS at higher rate owing to higher interest income as this demographic is known to keep most of their life-long savings in bank deposits.
A resident taxpayer only needs to file ITR if their income exceeds the basic exemption limit. Those below the age of 60 years who have an income of less than Rs 2.5 lakh per year are exempt from filing ITR. This exemption limit for super senior citizens (above the age of 80 years) is Rs 5 lakh per annum. So super senior citizens who have an interest income of upto Rs 5 lakh are not required to file ITR.
It is not be noted that TDS is deducted at double the rate or 5%, whichever is higher, in case a resident has not filed ITR for the past two years, according to the income tax act. The same is applicable in case TDS of Rs 50,000 has been deducted in those past years.
As per existing rules, banks deduct TDS at 10% on interest income of more than Rs 40,000 and Rs 50,000 in case of senior citizens.
Under the rules which come into effect beginning July 1, the TDS applicable can be 20% in this case.
For example, in case the income interest is Rs 500,000 then 10% TDS works out to Rs 5,000 and so banks may deduct TDS at 20% instead of 10% in such a case.
While presenting the Union Budget 2021-22, Finance Minister Nirmala Sitharaman said senior citizens above 75 years having only pension, interest income are not required to file income tax return (ITR).