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Solution to Save Tax Deduction (TDS) on Interest Income
I am sure most of you will agree with me, when I say tax deduction on Interest credits by banks/financial institutes could be avoided!
Yes, this is possible!
Just fill Form 15G/Form 15H (depending on the applicability) and submit to your bank in the first quarter of the beginning of the financial year to avoid TDS i.e. tax deduction
Let us discuss in detail what is Form 15G and Form 15H? Who can submit these forms? How to submit them and the precautions to be taken while filing these forms.
Form 15G and 15H are self-declaration forms filed with the banks or financial institutions who deduct TDS on the interest income earned/accrued to not deduct TDS on the interest income.
Normally, people have a myth that interest on fixed deposits is calculated at the time of maturity. Instead, it is calculated and TDS on interest on the same is deducted periodically which reflects in your Form 26AS.
These forms need to be filed every year by the assessee. Forms can be submitted by -
Banks or public financial institutions while crediting in your account periodic interest deduct TDS on term deposits. In case of interest earned on saving bank accounts, it shall be offered for taxation as income from other sources. But, there is no deduction of tax for the same. Tax Benefits on interest income are as below:
So for non senior citizen cases if you have any interest income from term or recurring deposits below basic exemption limit of 2.5 lakhs, you can opt Form 15G to avoid deduction of Tax.
Note: No TDS on saving bank account is deducted by banks and financial institutions.
You might be tangled among the applicability and effectiveness of both these forms. Both the forms are similar yet distinguished in following ways
|Form 15G||Form 15H|
|Applicable on||Form 15G can be submitted by any person (other than company or firm)||Form 15H can be submitted only by resident Individuals|
|Age Limit||Applies to residents below 60 years of age||Applies to resident senior citizen ( aged 60 years and above )|
|Interest Income shall fall below basic exemption limit||Interest income shall be below basic exemption limit not chargeable to tax||Interest income may or may not be below basic exemption limit not chargeable to tax|
|Provision under Income Tax Act||As per Section 197A (1) and (1A)||As per Section 197A (1C)|
Lets understand the insights about Form 15G and Form 15H, more transparently with the help of examples below
|Mr Aditya||Mr Shekhar||Mrs Bhalla|
|Income from Interest on various Fixed deposits||60,000||2,80,000||2,70,000|
|Gross Total Income||2,60,000||3,80,000||3,70,000|
|Deductions under chapter-VI-A like u/s 80C etc||1,20,000||1,50,000||2,00,000|
|Taxable income after Chapter VI -A deductions||1,40,000||2,30,000||1,70,000|
|Basic exemption Limit||2,50,000||2,50,000||3,00,000|
|Net taxable income i.e Taxable Income||NIL||NIL||NIL|
|Applicability of Form 15G||YES||NO||NO|
|Reasons||Form 15G is applicable because a. Mr Aditya is not a senior citizen b. Has interest income below taxable limit c. Final Tax Liability is NIL||Form 15G is NOT applicable because Although the tax liability is NIL, interest income exceeds the basic exemption limit.||Form 15G is NOT applicable because Mrs Bhalla is a senior citizen and in this case form 15H shall apply|
|Mr Sharma||Mr Verma||Mrs Chopra|
|Salary/ Pension Income||1,50,000||1,00,000||2,00,000|
|Income from Interest on various Fixed deposits||2,80,000||3,20,000||1,20,000|
|Gross Total Income||4,30,000||4,20,000||3,20,000|
|Deductions under chapter-VI-A like u/s 80C etc||1,50,000||1,50,000||1,50,000|
|Taxable income after Chapter VI -A deductions||2,80,000||2,70,000||1,70,000|
|Basic exemption Limit||3,00,000||3,00,000||2,50,000|
|Net taxable income i.e Taxable Income - Basic Exemption Limit||NIL||NIL||NIL|
|Applicability of Form 15H||YES||YES||NO|
|Reasons||Form 15H is applicable because
a. Mr Verma is a senior citizen
b. Final tax liability is NIL
|Form 15H is applicable because
a. Mr Sharma is a senior citizen
b. Final tax liability is NIL
|Form 15H is NOT applicable because
Mrs Chopra is NOT a senior citizen and in this case Form 15G shall apply
Note : For Form 15H we need not check whether the interest income falls below the threshold limit ( maximum amount not chargeable to tax) or not.
Forms 15G / H can be submitted for these transactions namely
Some precautions if taken care of during the complete process will ease out the things. An illustrative list of such precautions could be drawn as under
Form 15G/15H can be submitted even if your total income exceeds the basic exemption level.Form-15G cannot be submitted if total interest income for the year exceeds the basic exemption limit. The Income Tax Act states that Form 15G/15H can be issued to those who provides an estimate of their total income on which tax is zero and total income comes after considering deductions and allowances.
The process for online submission of Form 15G and 15H has been much simplified since its introduction in year 2015. Now users have the option to opt for physical submission of form or just login with internet banking credentials and submit these Forms. In addition to this some banks like HDFC do not even lay requirement to opt for internet banking to file form 15G / 15H. Learn how
ICICI Bank ICICI prescribes following steps for online furnishing of Form 15G/ 15H
The other option to file Form 15G / H to ICICI bank is through Insta Banking Kiosk:
OR Click on the links below for Submitting Form 15G and 15H respectively, fill the details and submit to HDFC bank online.
Some basic informations like Name of taxpayer / individual , address, communication details and estimated income etc together with verification and declaration shall be signed and submitted. The forms are divided into two parts as shown below. The first part needs to be filled by you and the second one by the authority you are submitting respective form to. Both these forms seem to be identical but there is an important difference among two. Form 15H has an additional column for Date of Birth to keep a track apparently that, you can furnish this form only if you are aged 60 years or above. For more details find the specimen copies of both the forms attached hereto below.
No NRI cannot submit these forms.
Any wrong declarations made shall attract prosecution and fine under section 277 of the Income Tax Act 1961. In case tax sought to be evaded
You can file these forms only if your total tax liability is NIL and all other eligibility conditions as specified above are successfully met.
No, the forms are no alternate to filing your Income Tax Return. Even if you have made disclosure about your income in these forms you need to comply with filing requirements of IT return separately.
In case after filing form 15G/H, your tax liability does not comes to zero then you have to pay the taxes. Moreover, this may amount to wrong or false declaration and can attract you repercussions as mentioned above u/s 277. So be very vigilant before filing these forms.
Not Really, actually they are submitted to the authority from which you will receive income and on such income the respective authority is liable to deduct the TDS. No separate compliances are required to be undertaken at your part.
Yes, it will be better if any income accrues to you which can be tax deductible, then you need to submit the forms to every branch of the organisation from where such income is due. Also, you can ask this from the respective bank / branch.
Anyone not submitting PAN shall attract TDS @20%.
No, even in case where bank has deducted your tax after duly filing Form 15G/H you cannot demand for refund from bank. The only route open is to file your Income Tax Return and claim refunds in it.
It is suggested to file your form at the beginning of the year so as to avoid a situation where bank has already deducted your taxes.
It is suggestive to obtain the same. It help to lesser the cases of wrong declaration claims made by banks Also, you get a valid proof in hand in case TDS is deducted or wrong deducted.
There are no harsh consequences to it. It is just that you will now be required to file income tax return to validly claim TDS refund.
Form 15G can be submitted by both. But form 15H can only be submitted by Resident Individual.
If Form 15G is not submitted then deductor will deduct TDS even if the Income of the deductee is not taxable.
There is no provision for any limit. It is submitted when total interest Income of the assessee is below basic exemption limit.There is zero tax liability.
Total income as per Form 15G is income estimation on which no tax is required to be paid.
No, interest income on FD/RD are taxable. However if tax on total income is nil then assessee can submit form 15G/Form 15H
No, Only an assessee whose tax liability is nil and subject to other conditions are eligible to submit form 15G / Form 15H
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