Tax Deducted at Source
According to the TDS rules, if interest income exceeds Rs 10,000 in a year, 10%
tax will be deducted at source. If the investor has not furnished his PAN details,
the TDS rate will be higher at 20%. However, if the investor's total taxable income
is below the basic exemption limit, he can submit a declaration to avoid TDS. From
15G is to be used by individuals below 60 years, HUFs and trusts, etc. Senior citizens
and those above 80 years must use Form 15H.
When can the bank deduct tax at source?
Before we explain as to who can submit form no. 15G and who can submit 15H, let
us first understant when bank deducts tax on the interest payable. The bank will
deduct tax at source once the amout of interest to be credited in respect of all
the fixed deposits taken together exceeds Rs 10,000 in a financial year.
The limit of Rs. 10,000 is applicable for each branch of a bank and not for all
the branches of a bank taken together. So each branch of the bank will see whether
the interest for the whole year on all the FDs eceed the threshold of Rs. 10,000.
One interesting point to be noted here, which many people are not aware, is that
banks are not required to deduct any TDS on interest credited on your savings bank
account even the amount of interest may be very substantial.
Please note that in case of fixed deposits made for longer duration where the interest
will be paid to you only on maturity, the bank will deduct tax at source on the
interest accured for thr year even though no interest in fact has been paid to you.
Who can submit Form No. 15G?
First and foremost only a person who is resident in India can submit form no. 15G.
So an NRI cannot submit this form. Any person other than a company can submit form
no. 15G. So any Individual and HUF can submit this form.
However it is not that every Individual or HUF can submit form no. 15G. Only the
individual or HUF, whose tax on the estimated income for the year is nil and the
amount of interest income from all the sources does not exceed the minimum exemption
limit, can submit this form. So for being eligible for you to submit this form,
you need to satisfy both the above conditions. In a situation where due to various
deductions the tax payable on total income may be nil but if the total amount of
interest income exceed Rs. 2.00 lakhs you cannot submit this form.
Who can submit Form No. 15H?
Any residen individual who is above sixty years of age or completes sixty years
during the financial year can submit form no. 15H provided his tax liability on
the basis of his estimated income is nil for the financial year though the total
amount of interest from all sources may exceed Rs. 2.50 lakhs, the minimum amount
liable for tax. So only senior citizens can submit this form.
What precautions to be taken while submitting form no. 15G and 15H?
Please ensure to submit your PAN details to the bank while submitting the form no.
15G or 15H. In case you fail to provide your PAN number to the bank, the bank will
deduct TDS @ 20% against the applicable rate of 10% even if you have submitted form
ni. 15G and 15H.
We would advise you to submit a copy of your PAn card by way of seperate letter
and obtain written acknowledgement for the same.
Please obtain acknowledgement for form no. 15G or 15H while submitting it. So it
is advisable to get the form submitted personally rather than sending it through
post so as to ensure proper acknowledgement.
What if the bank has already deducted tax before submission of the form?
The form no. 15G or 15H as the case may be, should be submitted at the beginning
of the year so as to avoid a situation where bank has already deducted the tax before
you submit the form. However in case the bank deducts the tax in spite of you having
submitted the form or before you actually submit the same, the bank will not refund
the tax already deducted, as the bank would have already deposited the tax with
the government. In such a situation the only option available with you is to file
your income tax return and claim the amount of TDS a refund.