A Guide to Section 393(8)(iii) of the Income Tax Act, 2025 | Draft Income Tax Rules, 2026
Introduction
India’s tax law has always recognised that senior citizens deserve special treatment — reduced compliance burdens, higher exemption limits, and simpler procedures. In a major step forward, the Draft Income Tax Rules, 2026 have introduced Form 125, a new declaration form that allows senior citizens aged 75 years and above to skip filing their Income Tax Returns (ITR) entirely, provided they meet prescribed conditions.
Under the new Income Tax Act, 2025, Rule 208 describes that Form No. 125 has to be submitted by specified senior citizens for furnishing of declaration and evidence of claims under Section 393(1) of the Income Tax Act, 2025. Simply put, Form 125 in the new Act has replaced Form 12BBA in the old Act (Income Tax Act, 1961), and Section 194P has been replaced by Section 393(8)(iii).
The intent, in essence, remains the same — but the new form and rules bring with them a modernised approach to compliance for India’s elderly taxpayers.
Background: How It Started — Section 194P and Form 12BBA
The concept of exempting elderly taxpayers from ITR filing is not new. Section 194P was introduced in the Income Tax Act, 1961 through the Finance Act, 2021. This section allows senior citizens to avoid filing income tax returns upon fulfilling certain conditions. Senior citizens above 75 years of age, meeting specified criteria, are not required to file their ITR.
The Central Board of Direct Taxes (CBDT) notified a new Rule 26D, under which senior citizens were required to submit Form 12BBA with the specified bank to claim the benefit of Section 194P. The board also amended Form 16, Form 24Q, Form 26QC and Form 26QD to incorporate necessary changes related to provisions of Section 194P.
Now, with India’s new Income Tax Act, 2025 coming into effect, Form 12BBA has been renamed and revised as Form 125, carrying forward the same beneficial intent with certain upgrades.
What Is Form 125?
Seniors aged 75 years and above need to fill Form 125 to declare their pension and bank interest income to avoid filing ITR themselves. Banks compute tax and deduct TDS after verifying Form 125.
The new form introduces important updates: Form 125 has inserted an additional column for Email ID and Contact Number. Also, a separate line item has been inserted asking whether the specified senior citizen is opting for the new tax regime or not.
Beyond these additions, the new Draft Rule 208 and Form No. 125 remain unchanged in substance as compared to the old tax rules on this matter.
Who Is Eligible?
To be eligible for exemption from ITR filing, the senior citizen must fulfil the following criteria: they must be 75 years or older during the financial year, must be a resident of India for the relevant financial year, must have only pension income and interest income from the same bank where the pension is received, and no other income source is permitted. The pension and interest must be credited through a “specified bank” notified by the Central Government, and a declaration in Form 125 must be submitted to the specified bank.
In short, the exemption is deliberately narrow — designed for pensioners with a simple, single-source income profile.
How Does the Process Work?
The mechanism is straightforward and entirely bank-driven:
Step 1 — Submit Form 125 to the Bank A senior citizen must submit a declaration using Form 125 (previously Form 12BBA). Once the declaration is filed, the bank will compute the gross total income (pension plus interest income).
Step 2 — Bank Calculates Tax To calculate net taxable income, the bank will also consider the deductions, tax exemptions, and rebates available to elderly citizens under Section 87A. After deductions and rebates, the bank will deduct TDS for older persons. The bank will request proof of deductions and tax exemptions that the senior person is entitled to when filing the declaration.
Step 3 — No ITR Required Seniors aged 75 and above won’t need to file an income tax return (ITR) if their specified bank handles the TDS deduction. This deducted amount is reported to the tax department and will appear in Form 26AS, just like any other TDS.
New vs. Old Tax Regime — Which Applies?
If the senior citizen opts for the old tax regime, they must provide investment proofs to the bank to claim deductions. Under the new tax regime, such proofs are not required, as most deductions are not applicable.
The new column in Form 125 specifically asks the senior citizen to indicate their chosen tax regime, making this process more transparent and bank-friendly.
What Deductions Can the Bank Factor In?
Even though the senior citizen is not filing an ITR, they are not denied deductions. Section 80C eligible investments include Equity Linked Saving Schemes, PPF/SPF/RPF, life insurance premiums, principal home loan amounts, SSY, NSC, SCSS, with a maximum deduction of ₹1,50,000. Section 80D covers policies taken for self and family plus parents (above 60 years), with a maximum deduction of ₹1,00,000.
The bank incorporates these deductions while computing net taxable income before deducting TDS — ensuring the senior pays only what is genuinely owed.
Tax Slabs Applicable to Senior Citizens
Under the current framework, senior citizens aged 60–79 enjoy a basic exemption of ₹3 lakh, while super senior citizens aged 80 and above enjoy an exemption of ₹5 lakh under the old tax regime. Tax rates vary accordingly: from no tax on income up to ₹3 lakh to 30% on income exceeding ₹10 lakh.
Additionally, the rebate under Section 87A further reduces tax liability for those with modest income, making many seniors effectively tax-free even after computation.
What Does the Continuity of This Relief Mean?
The relief available to specified senior citizens continues under the new Income Tax law with Section 393(8)(iii) replacing the earlier Section 194P. The intent remains the same — the law still exempts senior citizens, being resident individuals aged 75 years or above with pension and interest income from the same specified bank, from the requirement of filing a return of income.
This legislative continuity reassures pensioners and their families that the benefit they have been availing since 2021 will seamlessly carry forward under the new Income Tax Act, 2025.
Important Limitations to Keep in Mind
The exemption is not universal for all senior citizens above 75. A senior is not eligible if they:
- Have income from rent, capital gains, dividends, or any business/profession
- Receive interest from a bank other than the one where their pension is credited
- Are a Non-Resident Indian (NRI) for the relevant financial year
- Prefer to file ITR voluntarily (which remains an option — the exemption is a right, not a mandate)
If the senior citizen needs to provide details of multiple bank accounts or deductions, it may actually be easier to file the ITR. Giving all this information to the specified bank means they will ask for more details, bills, documents, and statements.
Why This Matters: The Bigger Picture
India has a rapidly ageing population, and the compliance burden of annual ITR filing — navigating online portals, digital verification, Form 26AS reconciliation — can be genuinely challenging for citizens in their late seventies or eighties. The income tax department is attempting to make the process more intuitive, especially for older citizens with basic income streams.
Form 125, under the new Income Tax Act, 2025, is therefore not just a form — it is a policy statement: that the State recognises its obligation to protect the dignity and ease of living of its oldest taxpayers, and that full tax compliance should not require them to battle digital bureaucracy every year.
Summary Table
| Feature | Details |
| Applicable Law | Section 393(8)(iii), Income Tax Act, 2025 |
| Earlier Provision | Section 194P, Income Tax Act, 1961 |
| Form Name | Form 125 (replaces Form 12BBA) |
| Age Eligibility | 75 years and above |
| Income Eligibility | Pension + interest from same specified bank only |
| Who Deducts Tax? | The specified bank |
| Proof Required? | Only under old regime |
| ITR Filing Required? | No, once Form 125 is submitted |
| Effective From | April 1, 2021 (continued under new Act) |
Conclusion
Form 125 is a compassionate and practical reform that honours India’s commitment to elder welfare. By allowing banks to act as de facto tax intermediaries for the country’s oldest pensioners, the government has effectively removed a significant administrative burden from those who have already contributed decades of productive years to the nation’s economy.
If you are 75 or above — or have a parent or grandparent in that age group — the message is simple: submit Form 125 to your pension bank, provide the necessary deduction proofs if needed, and let the bank take care of the rest. No portal, no ITR, no annual tax-filing stress.
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