As per Income Tax Rules, Banks and Corporate need to deduct TDS on the Interest payment made to the deposit holder, if the payment exceeds a specified Limit.
But if the Deposit holder’s total income in a financial year does not exceed the taxable limit, then they may request for the exemption on this TDS deduction by submitting form 15G or 15H as the case may be to the Institution paying the Interest or dividend.
This article is about Form 15G and 15H, and covers the following points:
Table of contents:
What is form 15G and 15H?
Most of the Fixed-income investment products are taxable in nature. You have to add the interest earned through them in your total income and do the self assessment to file an Income Tax return accordingly.
The interest payment by some of these products is subject to TDS too. Nowadays even the dividends are also taxable.
There are rates and threshold limits specified, over and above every institution is required to deduct TDS on the interest/dividend payments.
In the case of bank deposits, the threshold limit is Rs 50,000 for Senior citizens and Rs 40,000 for others. If the Interest Income is over and above this threshold, then the bank will deduct TDS @10% on the total Interest Payment. (Check the TDS rates on other payments here)
But there is a way to avoid this TDS deduction on Interest Income.
If your total income is below the basic exemption limit, i.e. Rs.2.50 lakhs for individuals, Rs. 3 lakhs for senior (above 60 years) and 5 lakhs for super senior (above 80 years) citizens and the tax liability is nil, you may submit form 15G and 15H to the bank to avoid TDS deduction on your interest.
Form 15G and Form 15H are basically self-declaration form(s) you can submit to prevent TDS deduction on the interest income earned on bank deposits or bonds.
These forms to be used when your total income falls below the exemption limits for the financial year and you do not owe any taxes.
Form 15H is for senior citizens (above 60 years) and form 15G is for all other individuals. Remember, having a PAN is mandatory too and you are required to submit this form every financial year.
Who can submit Form 15G and Form 15H?
It can be submitted:
- By a resident individual below 60 years of age or HUF
- If, the tax liability for the financial year is zero
- And, the total interest income should be below the exemption limit i.e. Rs. 2,50,000.
For example, if your income from salary for FY 2020-21 is Rs.1.40 lakhs and interest income is Rs.3 lakhs and you claim a deduction of Rs.1.50 lakhs u/s 80C and 40,000 as the standard deduction, although your taxable income comes at Rs.2.50 lakhs you are not eligible to submit it. (Also Read: List of Income Tax Deductions under section 80)
Form 15H can be submitted:
- By all resident individuals aged 60 years or above i.e. senior citizens
- If no tax liability exists for the financial year.
In the case of Form 15H, there is no condition that the interest income should be below the exemption limit, but the senior citizen’s total taxable income i.e. after claiming all the deductions should be less than the exemption threshold. (Also Read: Tax benefits available for senior citizens)
How to submit Form 15G and 15H?
You would have to submit form 15G/15H in all the banks where you hold your deposits. Although, the Bank would deduct TDS only when the cumulative interest across all branches and accounts exceeds the threshold limit of Rs. 40,000/50,000 as the case may be.
Some banks now-a-days allow the submission of these forms online through net banking facilities as well. You need not go to all branches and submit it physically.
The process to fill form 15G/15H online varies across banks, start filling up only when you are clear with the process. Though i believe the Interface may be different, but once you reach the point of filling the form, it should be same.
If submitting online, do not forget to download the acknowledgement slip for future reference.
When should you submit Form 15G/15H?
Ideally, you should submit at the beginning of every financial year to ensure that the bank does not deduct TDS on the interest income.
However, in some situations, you may submit in between the financial year as well.
Let’s assume that you have a bank FD on which you are already getting an interest income beyond the threshold limit of 40,000, and during the year, you opened another FD/RD.
In this case, first, you need to submit form 15G /H at the time of opening the second FD/RD to avoid TDS on the same. Also, you need to re-submit form 15G/H for the old fixed deposits, declaring a change in the aggregate interest income for the FY.
Where to submit Form15G, other than banks?
The main purpose of this is to save TDS on interest income but there are some other incomes too on which you can avoid TDS deduction by submitting form 15G or 15H, as the case may be:
- Dividend Income and Interest from corporate bonds:
From FY 2020-21, dividends are made taxable in the hands of the investors. If the dividend income from equity shares or mutual funds exceeds Rs. 5,000 in a financial year then TDS would be deducted on the same by the company or fund house. (Also Read: All you wanted to know about mutual fund taxation)
The same rule is applied to corporate bonds as well. If you are eligible, you may submit form 15G or 15H to the respective companies or AMC to avoid TDS deduction.
- Premature EPF withdrawal:
If you fulfill the eligibility conditions and you have withdrawn your EPF before 5 years of continuous service, amount not exceeding 50,000, you may submit form 15G for pf withdrawal on the EPFO website or the regional EPFO office to avoid TDS on the same. (Read: 5 EPF rules that you should know)
- Life insurance proceeds:
If your taxable income is nil then you may also submit it to the life insurance company requesting not to deduct TDS on the maturity proceeds (taxable) of the life insurance policy. (Read: TDS on life insurance policies)
- Post-office schemes:
TDS on interest received from taxable post-office schemes like- National Savings Scheme (beyond Rs. 2,500) can also be avoided by submitting form 15G or 15H. (Also Read: Safe Investment options)
What happens if I forget to submit form 15G/15H?
First thing to note is that TDS deduction does not mean that your tax liability is over, neither does it mean that your income is taxable.
Bank deducts TDS every quarter. In case you forgot to submit form 15G or15H and the bank has already deducted TDS for this quarter, submit it at the earliest to avoid TDS for the remaining financial year.
Some common FAQs on 15G and 15H forms
a) Form 15G is meant for individuals below 60 years and 15H is for senior citizens.
b) 15G can be used by HUFs , while 15H is meant for individuals only.
c) To submit form 15G your total interest income shall not exceed the basic exemption limit, while there is no such restriction while submitting form 15H.
No, NRIs are not eligible to submit form 15G /H.
If you are a non-working spouse or minor child whose income needs to be clubbed with parent/spouse, you are not eligible to submit form 15G as per income tax rules. TDS on such income would be deducted in the name of the depositor in such a case.
You should intimate the bank regarding the same. The bank will make changes and deduct TDS accordingly. You should report the full income in the income tax return and pay the taxes. A wrong submission/misuse of these forms may attract penalties and imprisonment as well.
No, interest income beyond the threshold limit of 40,000 for non-senior and 50,000 for senior citizens is taxable. Form 15G/H is submitted only to avoid TDS if your tax liability is zero.
No, you have to submit it to the income provider, they would prepare and submit it to the Income-tax department, on your behalf.
Please note, Taxation is an ever changing subject. Though we try our level best to keep the article updated with latest information, still before acting on any of the information, it is advisable to consult the respective experts and authorities.