Banks have a statutory obligation to deduct tax from the interest payable to you and at the same time, Income tax department discourages resident assessee from filling income tax return if their total income does not exceed the maximum non-taxable limit [Rs. 2.5 lakh for an Individual Tax payer].
If we combine both statements, conflict arises in the case where taxable income does not exceed maximum non-taxable income.
Suppose you have invested Rs 20 lacs in a Bank FD at an interest rate of 8 %, that’s Rs 1.6 lacs per year. Now ideally you are not supposed to pay any tax on this because this income is less than the limit. But bank cuts the TDS @10% and pays Rs 16,000 to the govt as TAX (Note that TDS is deducted once interest income exceeds Rs.10,000 under section 194A).
To get back this Rs. 16,000/-, you have to file income tax return and then wait for the tax refund to come back.
To overcome such situation Income tax department has provided a solution by which an assessee can declare his estimated income in a financial year and avoid deduction of tax at source.
Submission of form 15G/15H provides relief to the payer/Bank from its statutory liability to deduct tax at source (TDS). Submission of these forms is completely discretionary i.e. not mandatory.
Eligible to submit Declaration
Declaration in form 15G/15H can be submitted by any person other than a company or firm. i.e. resident individual and HUF are eligible to submit these forms.
|Choose Correct Form|
|You are||Age||TDS will be Deducted if interest income exceeds||To Avoid TDS, Submit Form||Expected Annual income is up to|
|An Individual||Below 60 years||Rs.10,000||15G
[Not Eligible to submit 15G, If interest income exceeds Rs.2.5 lakh]
|A Senior Citizen||60 years or more but below 80 years||Rs.50,000
[Affect of section 80TTB]
|A Very Senior Citizen||80 years or more||Rs.50,000
[Affect of section 80TTB]
Example: Mr.Bhosle, 48 yrs age earning interest of Rs.20,000/- p.a on fixed deposit held in a bank. He should submit form 15G if his expected total taxable income is not more than Rs. 2.5 lakh (after all deductions like 80C).
Suppose, Mr. Bhosle earns Rs.3,00,000 p.a as interest on FD and his total deduction is Rs.1.2 lakh under 80C. His total taxable income will be Rs. 1.8 lakh (below 2.5 lakh). In this situation, Mr. Bhosle is not eligible to submit form 15G even if his total taxable income is below Rs.2.5 lakh. [Section 197A(1B)]
Factors to be kept in mind before submitting form 15G/15H
Factor 1: Taxable income should be within the maximum non-taxable limit;
Factor 2: Disclosure of PAN details is mandatory
Due dates for Submission
These forms have to be furnished separately for each financial year. It is advised that you do the same at the beginning of the year to avoid any wrong deduction of TDS.
For eg – If you have a 5 year FD, you’ll have to furnish Form 15G/Form 15H separately for each year.
By submitting form 15G/15H, you can avoid TDS and Income tax return (ITR) filling. You should always check the eligibility before submitting these forms. A false declaration may lead to penalty and imprisonment.