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Form 15G & 15H to Save TDS on Interest Income

Form 15G & 15H to Save TDS on Interest Income

What Is The Difference Between Forms 15g And 15h
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The interest you receive from bank accounts and deposits is fully taxable. Thus, the bank is supposed to deduct TDS from it every year if your interest exceeds Rs 40,000. The limit is Rs 50,000 for senior citizens. But what if your total taxable income in a financial year is less than the maximum tax-exempt limit; i.e. Rs 2.5 lakhs?

You can submit Forms 15G and 15H to avoid TDS deduction on your interest income in such a case.

What is Form 15G?

Form 15G is a declaration that can be filled out by fixed deposit holders (individuals less than 60 years of age and HUFs) to ensure no TDS is deducted from their interest income for the fiscal year. Form 15G is available under Section 197A of the Income Tax Act of 1961. Form 15G allows you to declare your annual income to the bank and request them to stop deducting TDS on your interest income.

Important features of Form 15G:

a) You can submit Form 15G as an individual taxpayer whose age is below 60 years, an HUF and a Trust.
b) You should submit Form 15G before the payment of any interest by the bank.
c) You will need to submit the form to all the branches and banks where you have an interest-bearing deposit.
d) The eligibility for the Form comes into picture when your taxable income does not lead to a tax liability for the financial year.
e) The facility is only available to resident Indians.
f) The total interest income you will receive in the financial year should be less than the minimum taxable income of Rs 2.5 lakhs.

What is Form 15H?

Form 15H is a self-declaration form that can be submitted by senior citizen aged 60 years or above to avoid TDS liability on interest earned from investments in fixed deposits (FD) and recurring deposits (RD). Form 15H is a part of Section 197A, Subsection 1C of the Income Tax Act, 1961. This declaration allows you to receive full interest on your deposits without any tax deductions.

Important Features of Form 15H

a) You can submit Form 15H if you have attained the age of 60.
b) Your taxable income for the financial year should be up to the maximum exempt. amount; i.e., Rs 3 lakhs and Rs 5 lakhs in the case if you are above 80 years of age.
c) You will need to submit the form at every bank branch you have a deposit.
d) Ideally, you should submit the form with the deposits. This will help you avoid waiting for ITR processing to get your money back.
e) Form 15H is necessary for:

  • The bank deposit where your interest will exceed Rs 10,000 for the financial year.
  • If you have invested in bonds and debentures and the interest from these instruments exceeds Rs 5000 in the financial year.

Example to Understand who can Submit Form 15G and Form 15H

Here’s an example of Form 15G and Form 15H eligibility in different income and age scenarios:

Age 30 years 50 years 62 years 81 years
Salary Rs. 120,000 Rs. 120,000 - -
Pension - - Rs 120,000 Rs 200,000
FD interest income Rs. 105,000 Rs. 260,000 Rs 280,000 Rs. 330,000
Total income before Section 80 deductions Rs. 2,25,000 Rs. 710,000 Rs 400,000 Rs. 530,000
Deductions under Section 80 Rs. 24,000 Rs. 130,000 Rs 100,000 Rs. 55,000
Taxable income Rs. 2,01,000 Rs. 5,80,000 Rs 300,000 Rs. 475,000
Minimum exempt income Rs. 2,50,000 Rs. 2,50,000 Rs 300,000 Rs. 500,000
Age Below 60 Below 60 Above 60 Above 60
Tax on total income is Nil Yes No Yes No
Interest income is less than the basic exemption limit Yes No N.A. N.A.
Eligibility for Form 15G/15H Form 15G Not Eligible Form 15H Form 15H

Notes from the example:

i. At the age of 50, your total interest income exceeds the maximum tax-exempt income limit of Rs 2.5 lakhs for the age. This criteria alone disqualifies you from using Form 15G.

ii. At the age of 62, even though the interest income exceeds Rs 2.5 lakhs you are eligible for using Form 15H. This is because the interest income remains below the maximum exempt income of Rs 3 lakhs for the age.

iii. Similarly, at the age of 81, the maximum exempt income is Rs 5 lakhs. Thus, if your interest income does not exceed Rs 5 lakh you will be eligible for using Form 15H. However, your total taxable income should also remain below this limit.

When to Submit Form 15G & Form 15H?

You should ideally submit your Form 15G or Form 15H at the beginning of the financial year. Provided your expected income in the financial year will not exceed the maximum tax-exempt amount. This will help you avoid any TDS on interest for the financial year.

Covid-19 Relaxation: The government had given a relief of one quarter for submitting Form 15G and Form 15H in the Financial Year 2020-21. Thus, the Forms submitted for FY 2020-21 remained valid up to June 30, 2021, under extended validity.

What to do if you Forget to Submit Form 15G & Form 15H?

Submitting Form 15G and 15H is an annual activity. So, it’s easy to forget. If you have had the bank deduct TDS due to this delay in submission you should not worry. Use the following routes to minimise the TDS flow and recover the amounts:

1. Submit Form 15G/15H Immediately

The first thing to do is to submit Form 15G or 15H as soon as possible. This will avoid any further deductions. Also, you will usually have up to 90 days after the new financial year begins to submit the form. If you missed this timeline, submit it within the next quarter. Banks credit interests usually every quarter. So, you can still save TDS on future interest payments.

2. File your Income Tax Return

When you file ITR you can give an accurate estimate of your taxable income and rebates. The TDS deductions in the previous year appear in your Form 26AS. This amount should also include any TDS deducted by banks on the interest paid to you. This amount will be adjusted against your total tax liability for the financial year. If you had been eligible for Form 15G or 15H your tax liability will be nil. Thus, the amount of TDS (as appearing on Form 26AS) must be returned to you.

Other Ways to File Form 15H & 15G

You can submit Form 15G and Form 15H to avoid TDS deductions on the interest payments by the bank. However, banks are not the only places you can use Form 15G and 15H. The following payments also face TDS deductions and you can use Forms 15G and 15H to avoid TDS:

1. TDS on EPF Withdrawals

If you wish to withdraw your EPF balance before completing five years of service a TDS may apply to the amount. EPFO will deduct TDS on the withdrawal amount if it exceeds Rs 50,000. The TDS rate is 10% for such withdrawal if you have provided PAN. If not, the rate goes to 34.606%.

2. TDS on Corporate Bond Interest Payments

If your interest income from the corporate bond investment exceeds Rs 5000 in a financial year TDS will apply to the amount. However, you can submit Form 15G or 15H to avoid this.

3. TDS on Post Office Deposits

The post office will apply TDS to the interest payment under Senior Citizen Savings Scheme if the amount exceeds Rs 50,000. You can submit Form 15H to avoid the TDS.

4. TDS on Rental Income

If you are receiving rent on a property from a firm or association of persons TDS may apply on the receipts. The lessee (party paying the rent) should deduct TDS at 10% on the rental payments if it exceeds Rs 2.4 lakhs in a financial year. You can submit Form 15G or 15H to avoid TDS if rentals are your only income in the financial year.

Difference Between Form 15G and Form 15H

The differences between Form 15G and Form 15H can be classified as given below:

Form 15G Form 15H
Who can file? Resident Indians below 60 years of age
Hindu Undivided Family (HUF)
Trusts
Resident Indians aged 60 years or above
When to submit? Total taxable income is below Rs 2.5 lakhs
Or Interest received is the only income for the financial year.
[&] Interest payment is below Rs 2.5 lakhs
Total taxable income is below Rs 3 lakhs (5 lakhs for 80 years and above)
Or Interest received is the only income for the financial year.
[&] Interest payment is below Rs 3 lakhs
Why submit? Save TDS on interest payments Save TDS on interest payments
Where to submit? Banks
EPFO
with a Lessee who is a Corporate or AOP
Bond issuer
Banks
Post-Office
EPFO
with a Lessee who is a Corporate or AOP
Bond issuer
Validity Valid for one financial year
Except for FY 2020-21 when the validity was extended till 30th June 2021
Valid for one financial year
Except for FY 2020-21 when the validity was extended till 30th June 2021
Where to get the forms? Banks, Post Offices, Insurers, Income Tax website Banks, Post Offices, Insurers, Income Tax website
Compulsory document PAN PAN

How to Fill Form 15G Online?

Some banks and financial institutions may allow you to fill Form 15G and 15H online. You can submit the following details to complete your declaration:

1) Name & PAN (compulsory)

2) Tax status – Individual, HUF or Trust

3) Previous Year (for which you are submitting the Form)

4) Residential status in the Previous Year

5) Residential address and contact details (Mobile, e-mail)

6) Option A – select Yes, if your taxable income was more than the maximum exempt limit in the past six Previous Years

7) Mention the latest year when your taxable income exceeded the maximum exempt limit

8) Estimated income for which the Declaration is Made – estimated income of the current Previous Year

9) Estimated Total Income of the P.Y. – This is the income of the current PY that you have already received

10) Details of Other Form 15G (or 15H) filed in the P.Y. – enter the number of forms filed during the previous year and the aggregate income amount for those years

11) Details of income for which declaration is filed – provide the income sources, nature, Income Tax Section, and amounts of income

FAQs on Form 15G and Form 15H

As an NRI you cannot submit Form 15G and Form 15H for TDS deductions. These Forms are only available to resident Indians. Also, TDS deduction is compulsory on income payments to NRIs.

No, filing Form 15G and 15H only means that your estimated total taxable income for the previous year will be less than the maximum exempt limit. However, if your actual total taxable income exceeds this limit, you will need to pay tax on it. This will include the taxable part of interest income; i.e. interest received over the exempt limit of Rs 10,000.

Yes, you should submit Form 15G or 15H at all bank branches where you have a deposit. You can also submit Form 15H to the Post-Office branch where you have a Senior Citizen Savings Scheme Account (SCSS). The interest exceeding Rs 50,000 per year from SCSS will attract TDS.

If you have submitted Form 15G or 15H and end up with a taxable income. You will need to pay tax on your total income at the end of the financial year. This tax liability will also include the tax on interest income. Also, you need to pay at least 100% of your total advance tax liability before the 15th of March. TDS deductions help you meet this requirement effortlessly. So, ensure that you submit Form 15G or 15H only if you are confident about receiving incomes totaling less than or close to the maximum exempt limit.

Form 15G is a declaration form under section 197A of the Income Tax Act, 1961. The Form can be used for declaring your total taxable income when it is less than the maximum exempt limit. That means, your total taxable income for the financial year does not make you liable to pay any taxes. Thus, financial institutions paying any amount as income to you should not apply TDS to it.

If you are withdrawing from your EPF balance before completing five years of continuous service your withdrawal may attract TDS. TDS will apply if your withdrawal amount is more than Rs 50,000. You can submit Form 15G to avoid TDS payment if your total taxable income for the year will not exceed the maximum exempt limit (Rs 2.5 lakhs for FY 2022-23).

Banks and a few other financial institutions allow you to submit Form 15H online. You can either log on to the internet banking portal of the respective bank or send a signed copy of the form and PAN card to customer care.

You can submit Form 15G with the following:

a) Bank branches where you have deposits
b) Post Office Branch where you have a deposit
c) EPFO with withdrawal forms
d) Your brokers while investing in corporate bonds
e) Life insurance companies via agents

No, the income tax department does not need Form15G or 15 H. You can simply file your ITR and declare your taxable incomes there.

You will need Form 15G while withdrawing from your EPF balance if you fall into the following category:

a) You are withdrawing from EPF before completing five years of continuous service
b) Your withdrawal amount is more than Rs 50,000

Penalty for a wrong declaration under Form 15G or 15H includes a fine and imprisonment as per section 277 of the Income Tax Act, 1961. If you fail to declare the income received without TDS after submitting the Form in your ITR, it will amount to tax evasion and the penalty may range from:

a) Prison terms ranging from six months to seven years if the amount exceeds Rs 25 lakhs
b) Prison term from three months to two years for other amounts

No, Forms 15G and 15H are not alternatives to your annual ITR. These forms are mere declarations for the convenience of the taxpayers with low income. You will still need to file your ITR for completing your tax assessment and claim any refunds on tax paid.

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