Very often people have idle funds with them so they invest in most popular and traditional way that is FD with banks. FDs don’t require any minimum amount as investment. It also provides fixed and stable returns. The returns received by taxpayers in form of interest is taxable under ‘Income from other sources’. If the total interest received by taxpayer during a financial year is more than Rs. 10,000/-, then banks and financial institutions are required to deduct tax (TDS) on such interest. In this scenario, tax gets deducted even if total income of taxpayer does not exceed the basic exemption limit.
In such cases, taxpayers can save their tax on FDs. Here’s how-
Taxpayers are required to submit Form 15G/15H to the banks. These are self declaration forms to be submitted either at the time of investing in FDs to avoid TDS. Form 15H is for senior citizens i.e. individuals born on or after 1st April, 1955 for Financial year 2015-16 and Form 15G is applicable for rest of the individuals. Both the forms are applicable only to Residents and have validity of only 1 financial year. Hence these forms are required to submitted at the starting of every financial year.
Bank demands these forms from taxpayers. But generally taxpayers don’t know about its contents and corresponding terms. So let us discuss the conditions for applicability of both forms & its contents one by one:
A. Form 15G is applicable to Resident Individuals (other than senior citizens), HUF, Trust etc. if the tax on estimated total income for the year including interest is NIL ; and Estimated total income (before claiming eligible deductions) for the year is less than basic exemption limit (i.e. Rs 2,50,000/- for FY 2015-16).
- Eg. During financial year 2015-16, Mr. A (age 30 years) has estimated his salary income Rs. 3,60,000/- and interest income on F.D. Rs. 20,000/-. He is planning to pay LIC premium of Rs. 25,000/-. In this case, his aggregate estimated income before deduction of LIC premium comes to Rs. 3,80,000/- (3,60,000+20,000) which exceeds basic exemption limit of Rs. 2,50,000/-, hence Mr. A is not eligible to submit form 15G.
B. Form 15H is applicable only to Resident senior citizens i.e. individual who is of age 60 years or more if the tax on estimated total income including interest is NIL.
- Eg. During financial year 2015-16, Mr. P (age 63 years) has estimated his interest income on FDs of Rs. 3,50,000. He is planning to pay LIC premium of Rs. 1,20,000 deductible u/s. 80C. Here, estimated income before deductions exceeds basic exemption limit, however tax payable is NIL (considering deductions). Hence Mr. P is eligible to submit Form 15H.
C. Details required to be furnished in Form 15G/15H:
- Basic details such as Name, address, occupation, contact details, PAN (if allotted), Assessment year etc are required to be entered in the forms
- Estimated total income for the year,
- Details of investments in shares, securities like bonds and debentures, mutual funds and loan given to any person.
- Particulars of withdrawals from National Saving Scheme,
- Declaration stating that all facts provided in facts are correct.
Some additional points regarding Form 15G/H:
- Non Resident Indians are not eligible to submit Forms 15G/15H.
- Individuals having income more than basic exemption limit can not submit Form 15G/15H.
- Company/ Firm/ LLP are not eligible to submit Form 15G/15H.
- Remember the validity of these forms is only one financial year, so fresh forms are required to be submitted at the beginning of every year. These forms are further submitted to Income Tax Department by the banks.
- These forms are just to prevent or minimize TDS and not a substitute for filing of return. Hence, in case your income exceeds basic exemption limit, you will have to file the return.
What to do if taxpayer fails to submit Form 15G/15H?
- Many times taxpayers are not aware about these forms, as a result Banks deduct TDS on their FDs.
- TDS once deducted and paid to the Government could not be directly refunded.
- Hence the only option available is to file the income tax return and claim the refund of TDS.