TDS or ‘Tax Deducted at Source’ can be a hindrance for those whose income depends upon interest from fixed, bank or recurring deposit investments. This is particularly relevant for those falling in the lowest tax bracket as well as senior citizens who cannot afford to lose a significant portion of their income due to taxation. Unless the investment itself is entirely tax free or is below the tax exempt limit of Rs. 10,000, TDS is applicable at a rate of 10% of the interest income. These deductions take place at the time when the interest is paid by the financial institution to its customers.
However, there are certain procedures that can be followed either before or after Tax deduction at source (TDS) deductions are made, to avail tax deduction after TDS deducted in certain cases. For example, Senior Citizens can avail a deduction of up to Rs. 50,000 in interest income as per Section 80 TTB, introduced by finance Act 2018 to the Income Tax Act. Individuals other than Senior Citizens can avail the deduction of Rs. 10,000 as per Section 80 TTA for interest on deposits in savings bank accounts or post offices.
A commonly employed method of availing exemption over Tax deduction at source (TDS) that can be followed in some cases is by submitting forms 15G and 15H at the start of a financial year or quarter depending upon the conditions of the fixed deposit income source. While both forms are contingent on different eligibility criteria, they are valid for a single financial year and can be an effective means for exemption on TDS deductions.
Additionally they are only applicable to an individual or HUF(Hindu Undivided Family)resident that possesses a taxable income less than the lowest tax bracket after all tax deductions have been made. For the financial year of 2019- 2020 the lower limit of this slab was an income of Rs. 2.5 lakhs.
Though both forms are declarations that are used exclusively for claiming certain income withoutTDS, they differ in the following manners:
a. 15G: Applicable to resident individuals or HUF with an annual taxable income below Rs. 2.5 lakhs under the age of 60. This declaration helps to claim certain income without deduction of tax (TDS).
b. 15H: Applicable for those aged between 60-80 years of age with a taxable income less than Rs. 3 lakh per annum. In the case of those aged 80 and above, their taxable annual income should not exceed Rs. 5 lakh.. This declaration helps to claim certain income without deduction of tax (TDS).
3. Conditions For Requesting The Form:
a. 15G: This form can only be requested if the tax on your total income, accounting for other deductions is zero. Additionally, the interest you earn over this period on your deposit account should not exceed the tax exempt limit of Rs. 2.5 lakhs.
b. 15H: This form can be requested if your interest income exceeds the tax exempt limit, provided that your overall taxable income does not exceed this limit as well.
Both 15G and 15H forms are generally available online from the portals of various banks, the procedures to be followed may vary slightly in each case. Additionally, these forms can also be filled in other cases involving TDS such as:
It is important to remember that in all these cases the conditions with respect to overall taxable income must be met with respect to both 15G and 15H forms. Hence it is important to understand the various tax exemptions/deductions that can be availed while keeping the tax exempt income limit in mind. One such deduction may be available through the Invest 4G Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance which allows for tax deductions on premiums as per Section 80C of the Income Tax Act of 1961.
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