Tax Deducted at Source (TDS) is nothing but tax paid in advance on behalf of the payee and credit for the same can be claimed by the payee at the time of filing the income tax return. TDS is deductible if interest paid is exceeding Rs.10000 per annum in case of banks and Rs.5000 per annum in case of others. But in income tax rules, there is a privilege given for small investors a)whose final tax amount on his estimated total income is nil and also b) the aggregate of interest income etc. received during the financial year is not exceeding the basic exemption limit for that year. The said privilege is that he can request the payee of the interest amount not to deduct TDS by submitting applicable form no. 15 G/H.
Form no. 15 G is applicable to all except senior citizens who are more than 60 years. In their case, both a and b conditions are applicable. Form 15 H is applicable to senior citizens for claiming the benefit of non-deduction of TDS. For senior citizens, condition a only applicable. There is no limit for interest receipts over basic exemption limit.
Filing a wrong form without being eligible to do so would be illegal and could involve payment of interest on the tax payable and also attracts penal consequences.
Crucial points to remember while submitting Form 15G & 15H:
- We should ensure to mention Permanent Account Number (PAN) on the forms while submitting form No. 15G or 15H. In case, taxpayer fails to provide PAN to the deductor, the tax would be deductible @ 20%. They should check periodically whether they are receiving full interest without TDS after submission of form 15G and 15H.
- Forms are to be submitted in duplicate, one of which is forwarded to the IT department and other for payee organization.
- The form should be submitted at the beginning of each financial year or at the time of deposit itself so as to avoid a situation where payer has already deducted the tax before its receipt.
- If a person is making Fixed Deposits in different branches of same bank then these forms should be deposited at each and every branch where the deposit has been made.
- These Forms can only be used for payments like dividends, interest on securities, interest other than interest on securities, national saving schemes etc.
- Every financial year, these forms are to be submitted afresh after satisfying the conditions. If any new deposit is made in between the year, again forms are to be given.
- No TDS is deductible by banks on interest payable in saving bank accounts and recurring deposit accounts
- In case of bank Fixed deposit is made for longer duration, even if interest will be paid on maturity only, the bank is required to deduct tax at source on the interest accrued for that year even though no interest in fact has been paid. So, depositor should ensure to submit form No. 15G/H on yearly basis even if FD doesn’t mature in that year.
- Any false or wrong declaration attracts penalty under section 277 & so it should not be signed blindly. Such false declaration is liable for prosecution which may range from 3 months to 7 years depending upon the quantum of default.
- Since interest paying organizations are submitting details to income tax dept also in Part A1 in form 26AS, income tax dept knows the quantum of amount of interest escaped TDS against submission of form no.15G/H. So tax payers have to take precaution to include all interest received in their income tax calculation and they can cross check with 26 AS before filing IT return.