Senior citizens tax myth: Why bank TDS on interest income doesn’t mean you can skip filing ITR
Senior citizens enjoy several tax benefits under the income tax rules. However, simply because a bank has deducted tax at source (TDS) on interest income does not necessarily mean that a senior citizen is exempt from filing an Income Tax Return (ITR).
The requirement to file an ITR depends on several factors, including the taxpayer’s total income, age, residential status and the nature of income earned during the financial year.
When does an individual have to file an ITR?
Under the income-based criteria, an individual is generally required to file an ITR when their total income, before considering certain deductions and exemptions, exceeds the applicable basic exemption limit.
Under the old tax regime, the basic exemption limit is ₹2.5 lakh for individuals below 60 years of age. For resident senior citizens aged 60 to 80 years, the limit is ₹3 lakh, while for resident super senior citizens aged 80 years and above, it is ₹5 lakh.
Under the new tax regime, the basic exemption limit is ₹4 lakh, regardless of the taxpayer’s age or residential status.
It is important to remember that the obligation to pay tax and the obligation to file an ITR are separate. Therefore, a bank deducting TDS from interest income does not automatically remove the requirement to file a return.
Special exemption for certain senior citizens aged 75 and above
The income-tax law provides a specific relaxation for certain resident senior citizens aged 75 or older.
Under the Income-tax Act, 2025, this provision is covered under Section 393, corresponding to Section 194P of the Income-tax Act, 1961. Eligible senior citizens can avoid filing an ITR if they satisfy all the prescribed conditions.
The exemption is therefore not available merely because a person has crossed the age of 75. The source and nature of income, the bank from which the income is received and other specified requirements also matter.
What conditions must a senior citizen meet?
To qualify for the exemption, the individual must be a resident senior citizen aged 75 years or above.
The person’s income must consist of pension income and interest income received or receivable from an account maintained with the same specified bank from which the pension is being received.
The senior citizen must also submit the prescribed declaration, Form No. 125, to the specified bank.
Once these requirements are fulfilled, the bank takes responsibility for determining the individual’s tax liability.
What does the bank do?
The specified bank is required to calculate the senior citizen’s tax liability after considering the applicable deductions, rebate and other relevant provisions. It then deducts the tax payable, where applicable.
If prescribed conditions are satisfied and the bank has deducted the applicable tax, the eligible senior citizen does not have to separately file an ITR.
This provision is intended to simplify tax compliance for qualifying elderly taxpayers whose income is limited to pension and interest from the specified bank.
What if interest comes from another bank?
This is an important point for senior citizens with fixed deposits or savings accounts across multiple banks.
For example, an 82-year-old resident may receive a pension through one specified bank but earn interest from a fixed deposit maintained with another bank. In such a situation, the exemption under this specific provision would not be available because the interest income is not from an account maintained with the same specified bank from which the pension is received.
Similarly, if the senior citizen has any other source of income apart from the specified pension and interest income, the conditions for the exemption may not be satisfied.
In such circumstances, the normal provisions governing ITR filing would need to be examined.
Age alone does not remove ITR filing requirement
Being a senior citizen or even a super senior citizen does not automatically mean that an individual can stop filing an ITR.
The special relaxation for taxpayers aged 75 years or above is conditional. The taxpayer must meet the prescribed requirements relating to residency, pension, interest income, the specified bank and the required declaration.
Therefore, senior citizens should not assume that the TDS deducted by their bank is sufficient to eliminate their ITR filing obligation. They should first check whether they qualify for the specific exemption and whether all the conditions have been met.
