Monday, October 11, 2010

Is PAN necessary for senior citizens without taxable income?

Is PAN necessary for senior citizens without taxable income?

QUESTION: In Tax Forum in The Hindu dated August 2, 2010, please refer to the answer to query “Should a senior citizen have PAN to file Form 15H?” If the interest amount is more than Rs.10,000 per annum received from a bank (Rs.5,000 from others) and if the senior citizen contends that the interest amount is the sole income for him for his very livelihood, he can submit Form 15H so that no tax should be deductible and the entire amount, that is, principal plus interest thereon will have to be paid to the investor.

To file Form 15H, he has to be a PAN holder. The exemption granted to a senior citizen thereon is on the quantum of amount of interest and not the requirement for mentioning PAN.

ANSWER: The view taken by the reader is what is taken by all the deductors including banks. Sub-section (2) of Sec. 206AA specifically provides that no self-declaration of nil liability under Sec. 197A will be valid unless Permanent Account Number (PAN) is furnished. Senior citizens are not spared from this provision.

Sec. 197A(1B) bars self-declaration even for those with nil liability, if the aggregate amount of income from interest on securities (Sec. 193), other interest (Sec. 194A) and income from units of mutual funds (Sec. 194K) from which tax is deductible exceeds the minimum expected limit of Rs.1.60 lakh (for financial year 2010-11).

There is an exception for this condition for senior citizens under Sec. 197A(1C) of the Act. But Sec. 206AA requires PAN for all with no exception for senior citizens. There is no conflict in these provisions, which have to be read together.

Since there is no minimum limit for exemption for tax deduction from interest on securities under Sec. 194, a senior citizen without taxable income, having, say, an income of Rs.500, would also require PAN to avoid tax deduction at 20 per cent.

The only consolation in all these cases is that such deductions of tax at source are not absolute. An assessee can always file return and make an application for refund, subject, no doubt, to the condition that the deductors had filed the appropriate statement in Form 26AS with the assessee's PAN

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