Banks have moved the Finance Ministry to ease the procedural hassles relating to tax compliance being faced by depositors belonging to the senior citizen and economically weaker categories.
The lenders have made a pitch that they should be allowed to act upon declarations in Form 15G (declaration made by an individual below 60 years claiming certain receipts without deduction of tax) and Form 15H (declaration made by an individual over 60 years) although the person filing the declaration does not have a permanent account number (PAN).
Given that the golden agers park a substantial portion of their lifetime savings in fixed deposits and people belonging to the economically weaker sections (EWS) are increasingly being financially included, banks have represented that acting on the abovementioned declaration without PAN will alleviate the hardship caused to the EWS and to the aged.
Further, banks have also buttressed their case by stating that this move would reduce the administrative burden involved in granting refunds.
As the situation obtains now, in the absence of PAN, declarations for non-deduction of tax at source in Form 15G or Form 15H cannot be acted upon and interest earned by the EWS and senior citizens becomes subject to tax deduction at the higher rate of 20 per cent, against the normal rate of 10 per cent.
"Many senior citizens are not in a position to stand in queues and complete the long-drawn procedural formalities associated with obtaining a PAN.
In the case of those in the economically weaker sections of society, many migrate for employment. Hence, they are unable to submit proof of residence or identity proof for obtaining PAN," said Mr S.V. Sharma, chartered accountant.
The requirement of quoting PAN in Form 15G and Form 15H is to map bank accounts held by a depositor in various banks. This helps the tax authorities to get a holistic picture on whether the depositor is liable to pay tax.
Anomaly in tax treatment
Though the tax rate applicable to income in the hands of senior citizens underwent a significant change in the Finance Act 2010, wherein the threshold age for applying these rates was reduced to 60 years, the corresponding change to enable such persons to file declaration in Form 15H has not been made.
The Ministry's attention has been drawn to the aforementioned anomaly.
Rectification of the anomaly would lead to uniformity in the treatment given to persons over 60 years of age not only under the Income-Tax Act but also for various other matters, such as concession in fare given by the Railways. This would also put an end to frequent grievances of such customers.
Tax slabs
Currently, senior citizens (between 60 and 80 years of age) drawing an income up to Rs 2.50 lakh are not subject to any tax.
Thereafter, the income-tax slabs are: Rs 2,50,001 to 5,00,000 (10 per cent tax); Rs 5,00,001 to 8,00,000 (20 per cent tax); and Rs 8 lakh and above (30 per cent).
In the case of very senior citizens, the IT slabs are: up to Rs 5 lakh (no tax); Rs 5,00,001 to 8,00,000 (20 per cent); and above Rs 8 lakh (30 per cent).
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