In the routine banking process, Banks deduct tax at source (TDS) on the interest earned on Fixed Deposits, if it is above Rs. 10,000 Per Annum. The TDS is deducted at the rate of 10% (w.e.f. April 1, 2010 If no PAN is furnished or submitted PAN is invalid then TDS will be deducted @ 20%). Hence to get the income tax refund in case higher TDS has been deducted or TDS was not required to be deducted at all, then you have to file the income tax return for claiming of refund. To avoid all these exercises you may just need to declare that you do have not any taxable income during the beginning of the financial year.
Now may be thinking if it is so, then whatever is your income you can declare it as NIL and get the exemption from such deductions at source. Let me tell you, your thinking is wrong! There are certain conditions needs to be satisfied before you claim such benefits.
There are Form 15G and Form 15H available which can help you avoid TDS incase you do not have to pay income tax at the end of the year.
What is Form 15G: It is applicable to Declaration under section 197A(1) and section 197A(1A) of the Income-tax Act, 1961 to be made by an individual or a person not being a company or firm claiming certain receipts without deduction of tax.
What is Form 15H: It is applicable to Declaration under section 197A(1C) of the Income-tax Act, 1961 to be made by an individual who is of the age of 60 years or more claiming certain receipts without deduction of tax.
In short; Form 15G is meant for non-senior citizens whereas Form 15H is meant for senior citizens only and the aggregate of the interest income received for these individuals during the financial year should not exceed the basic exemption slab for Form 15G while no such condition exists for Form 15H.
Both the Forms are same, but the only difference is that the Form 15G has to be filed by persons below 60 years of age, HUFs and trusts etc, where Form 15H has to be filed by persons above 60 years of age.
Here, the word person refers to individual or person (not being a company or firm). So, HUF and Association of Persons can also use this form.
The Income Tax department has modified the Form 15H and Form 15G as per amended notification dated February 19, 2013 for the Assessment Year 2013-14. The New Form No. 15G and 15H is applicable to all Taxpayee who do not want TDS Deduction on their Income or other under section 203 of the Income-tax Act, 1961.
Certain points to remember while submitting Form 15G & 15H
- Effective from April 1, 2010 PAN is mandatory for making declaration using Form 15G & 15H.
- Irrespective of the fact that Form15G & 15H has been filed or not, such income has to be mentioned under proper head while filing the return.
- These Forms are deposited in two copies, one of which is forwarded to the IT department. So, the Income Tax Authorities can make further inquiries regarding the same income.
- It should be deposited at the beginning of each Financial year.
- These Forms should be deposited at each and every branch where the deposit has been made. For example, if you have made deposits at three different branches of HDFC Bank, then you have to submit the Forms at each branch separately.
- These Forms can only be used for payments like dividends, interest on securities, interest other than interest on securities, national saving schemes, interest on units. For other types of payments, these forms cannot be used.
- These Forms are not applicable for NRIs.
- If anyone has opted for monthly interest, he should deposit the Form at the start of financial year compulsorily as the TDS could be done from the starting month itself if he fails to submit the same.
For better understanding of the usage of these forms and the respective provisions, let’s take go by two situations;
Situation – 1:
Mr Sanjeev, who is 57 years old and his total income is Rs. 3,00,000, of which Rs. 2,20,000 is earned by way of interest from bank deposits. Mr. Sanjeev also invests Rs. 1,00,000 under Section 80C and pays a medical insurance premium of Rs. 15,000.
Now the question arrises; Is Mr. Sanjeev eligible to furnish Form 15G to save the TDS?
To find out the answer of the said question, let’s see whether Mr. Sanjeev satisfies the prescribed two conditions.
The first condition is that Mr. Sanjeev’s final tax liability should be nil. Though Mr. Sanjeev’s gross income is Rs. 3,00,000, on account of his Section 80C and Section 80D deductions of Rs. 1,00,000 and Rs. 15,000 respectively, the net income falls to Rs. 1,85,000 and consequently he is not liable to pay any tax. Therefore, Mr. Sanjeev satisfies the first condition.
However, we see that since his interest income of Rs. 2,20,000 is more than the basic exemption limit of Rs. 2,00,000, thus he does not satisfy the second condition and hence he is not eligible to furnish Form 15G to the interest paying organisation.
On the other hand Form 15H imposes just the first condition, in that, the final tax on the investor’s estimated total income computed as per the provisions of the Income Tax Act should be nil. The second condition imposed by Form 15G is not applicable in the case of Form 15H.
Situation – 2:
Mr. Ramesh, 69 years old, has a total income of Rs. 3,00,000, out of which Rs. 45,000 is earned from the senior citizens saving scheme and the rest from bank deposits. He invests Rs. 50,000 in PPF.
Here the question is; Is Mr. Ramesh eligible to furnish Form 15H?
As pointed out earlier, here Mr. Ramesh has to do is to ascertain his final tax liability. It doesn’t matter what amount he receives from which source; this information is irrelevant for Form 15H. We find that Mr. Ramesh’s net income works out to Rs. 2,50,000 (Rs. 3,00,000 – Rs. 50,000). As the basic exemption limit for Mr. Ramesh is also Rs. 2,50,000 (on account of him being a senior citizen), his net tax liability is nil and hence he is indeed eligible to submit Form 15H.
Now you must be clear whether you can use these Forms to save TDS or not. Ask your further queries or share your views.