Simplified Laws Guide to Taxation and Legal Concern This is in continuation of my previous article ‘Invest in FD but still save income tax on Interest’.
TDS on Interest
When bankers pays the interest on FD, they have to deduct tax at 10% (called TDS) u/s 194A if the interest is over Rs.10,000/- per year.
TDS Exemption on Interest to Resident Individuals
The tax deduction on Interest may not be necessary for those persons whose taxable income is less than Rs.2 Lakhs (i.e., the basic exemption limit for payment of income tax).So, to exclude such persons from TDS provisions, the government has introduced a form, which has to be signed and submitted by the deposit holder to the bank. On receipt of these forms, the banker is obliged to pay the entire interest without deducting taxes.
Form 15H: This is the declaration form which has to be submitted to the bank by the deposit holder who is of age 65 years or above.
Form 15G: This is the declaration form which has to be submitted to the bank by the deposit holder who is less than 65 years old.
The validity period of Form 15G/15H is one Financial Year. So in order to avail tax exemption in the subsequent financial years, the deposit holder has to submit the form every year.
Precautions to be taken while submitting the forms to the banker:
- Please obtain an acknowledgment from the Bank for submitting Form15G/H
- Ensure that your PAN Details are correct in the form. If required submit a photocopy of the Card alongwith 15G/15H. (If you fail to do the same, Bank shall deduct tax @ 20% even if you have submitted Form 15G Or 15H)
- Check whether the banker has updated your PAN in your account.
Non Resident Indian (NRI) can’t submit these forms to avail TDS exemption on interest income. Similarly, Firms or Companies are not allowed to submit Form 15H/G and TDS exemption.
Only Resident Individuals, Hindu-Undivided Family, Trust, Association of Persons or Body of Individuals can submit Form No. 15G.
