As we all know Fixed deposits are investment tools offered by banks and other financial institutions to deposit money to yield a good rate of interest as benefits. Banks have to deduct TDS where interest income is more than Rs.10,000 in a year. The bank encompasses all deposits held in all its branches to calculate this limit. What can you do to halt bank from deducting TDS on interest, if your total income is not taxable?
The FD certificate mentions “If the depositor is not liable to pay income tax and the interest to be paid in a financial year does not exceed the maximum amount which is not chargeable to income tax, the depositor may submit a declaration in Form No. 15G / 15H so that income tax is not deducted at source.”
Which means if your total income is below the taxable limit, you can submit Form 15G and 15H to the bank requesting them not to deduct any TDS on your interest.
There are different rules as to who can submit Form No. 15G and Form No. 15H.
What is Form 15G and Form 15H?
Form No. 15G and Form No. 15H are self-declaration forms which declare that your total income for the previous is not taxable. These forms are needed to be filed by the assessee to his banker in order to behest for nil/ lower deduction of TDS (tax deducted at source) on interest on fixed deposit.
The assessee is supposed to submit these forms before the end of the financial year or first payment of interest whichever is earlier. An assessee is required to fill and submit the new form for every financial year as one form is valid for a single year.
PAN is a prerequisite to furnish these forms. In case you fail to include your PAN number to the bank, the bank will deduct TDS @20% instead of the standard applicable rate of 10% even if you have submitted Form No. 15G and 15H.
Some banks facilitate assessee to fill & submit the forms online through the bank’s website.
Form No. 15H: For senior citizens
Form No. 15G: For other than senior citizens
Conditions That Certifies Your Eligibility To Submit Form 15G or 15H:
Section 197A of the Income Tax Act, 1961, states that if an individual is a resident in India and its estimated total income of the previous year is less than the minimum liable to income-tax, then that individual will get interested on securities, dividends and other interest without deduction of tax at source.
The facility of claiming payments of interest on securities, dividends, etc., under section 197A is solely for the individuals who are resident in India.
To submit Form 15G, the following conditions must be fulfilled
A person should be an individual or HUF or trust or any other assessee but not a company or a firm
A person must be a Resident Indian
A person should be less than 60 years old
Tax calculated on your Total Income should be nil / zero.
The total interest income for the year should be less than the basic exemption limit of that year.
To submit Form 15H, the following conditions must be fulfilled:
A person should be an individual
A person must be a Resident Indian
A person should be 60 years old or will be 60 years old during the year for which the form is submitted.
Tax calculated on your Total Income should be nil / zero.
The bank is required to deduct tax at source when interest on fixed deposits & recurring deposits calculated together exceeding Rs. 10,000/- in a financial year, for all the branches of the bank taken together, for the bank with core banking, otherwise the threshold of Rs. 10,000/- is to be calculated for each branch excluding the saving bank account. This limit of Rs. 10,000 is applicable for each branch of a bank and not for all the branches of a bank considered all together. So each branch of the bank will confirm if the interest for the whole year on all the FDs exceeds the threshold of Rs. 10,000.
The tax deducted is directly paid to the government on the account of the customer and Form 16A is issued by the banks which is a TDS certificate expressing the details of the TDS paid to the government on behalf of costumes.
If FDs are made for the lengthy time period where the interest is payable at the time of maturity, the bank will deduct tax at source on the interest accrued for the year even if no interest is received by you till that time.
As mentioned earlier Form 15G and Form 15H are valid only for the financial year in which you have furnished these forms so these should be submitted at the beginning of every year in order to bypass a situation when a bank has already deducted the tax before form submission. Because in case of late submission of Form, the bank will not refund the tax already deducted as it gets deposited with the government. In this situation, you left with an only choice to file your income tax return and claim the number of TDS a refund.
Resubmission of these forms is required to apply for nil TDS again in the new financial year. The purpose of these forms is to save TDS and not to ignore tax or file your tax return. Tax return filing is still a necessity if your total income before the deductions exceeds the basic tax exemption limit.
So if you are eligible to file the Form No. 15G & 15H same, make sure to do the same before the bank deducts any TDS on interests.
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