Form 15G and 15H is a self declaration required to be furnished under section 197A (1) and (1A) of Income tax act 1961, for non deduction of tax on certain receipts like interest on fixed deposits.
In certain cases, banks and financial institutions are required to deduct tax (TDS) on interest income as per the provisions of income tax act 1961.
For instance, banks in India are required to deduct tax (TDS) under section 194A when interest income is more than Rs. 40,000 per year per bank.
To calculate this limit of Rs. 40,000, bank will include all the time deposits held by them in all the branches. Banks are required to deduct TDS at the rate of 10% on your interest income irrespective of taxable income as they are unaware that you are not liable to tax.
For senior citizens, the limit fixed is Rs. 50,000. This means, if the recipient is a senior citizen, then tax has to be deducted from interest if during the financial year it exceeds Rs. 50,000.
Also Read: Why tax is deducted on interest on fixed deposit
To avoid tax deduction from your interest income, you are required to inform the bank that you are not liable to tax. This will enable bank not to deduct tax (TDS) from your interest income. This intimation or request can be submitted in Form 15G or 15H to the bank requesting not to deduct TDS from interest amount.
Please remember, you need to satisfy following two conditions to get eligible for submitting form 15G based on your age;
- Tax liability on your estimated income calculated as per the provisions of Income tax act 1961 should be nil.
- The total income received during the financial year before allowing deduction under chapter VI should not exceed the basic exemption limit of the previous year for which the form is submitted.
If your final tax on the estimated total income is nil and your age is 60 years or more, you have to submit form 15H instead of 15G. This means, senior citizens can furnish form 15H if the aggregate total income is more than the basic exemption limit with a tax liability is zero.
Applicability of form 15G or 15H
The only difference between form 15G and 15H is that the second form (i.e. 15H) is required to be submitted by an individual of the age of 60 years or more (i.e. senior citizens). The first one is applicable to other individuals (i.e. non-senior citizens) and a Hindu Undivided Family (HUF).
These forms can only be submitted by individuals whose tax liability on their total income is zero.
You are not required to submit form 15G or 15H to bank if interest on your deposit is not expected to exceed Rs. 40,000 per year per bank.
However, in certain cases banks mistakenly deduct tax (TDS) in absence of these forms. Therefore, we suggest you to submit form 15G or 15H to all those banks if you are not liable to tax.
In addition to bank interest on fixed deposits, one can also submit form 15G or 15H while withdrawing EPF balance before completion of 5 years of continuous service and in cases where rental payments exceed Rs 1,80,000 per year but as a house owner you are not taxable.
Tips on submission of form 15G and Form 15H
We suggest you to submit form 15G or 15H with a valid PAN card copy attached to it if you have not submitted at the time of opening the bank account or deposit.
In absence of PAN, bank will be deducting tax (TDS) on interest income at the rate of 20%. As your have not given your PAN, you will not be getting credit of these tax amount to your account.
To avoid future dispute, we suggest you to collect acknowledgement copy from bank, post office or places where you have submitted these forms.
As per RBI guidelines dated 31st May 2013, bankers are bound to issue acknowledgement stating that form 15G or 15G has been received by them.
If you are taxable as per income tax act 1961, then do not submit form 15G or 15H. As per law you may face imprisonment for incorrect information or false declaration.
Both of these forms have a validity of one financial year. Next year if you want to claim non deduction of tax or lower deduction of tax, you need to submit fresh form 15G or 15H to the bank or financial institutions.
What will happen if tax has been deducted even though you are not liable?
In certain cases, it may happen that bank has deducted tax (TDS) in absence of form 15G or 15H.
This type of situation may arise when you have not submitted form 15G or 15H to the bank or bank has not updated it in CBS.
In this type of situation, bank should have deposited the TDS amount with the income tax department against you PAN.
At the end of the year, after filing TDS return with tax department, bank will issue a TDS certificate in Form 16A mentioning details of TDS payments.
You can also see these details in form 26AS of your income tax account.
To get back the deducted tax amount, you are required to file your income tax return for that previous year with the tax department.
After filing your tax return showing that you are not liable to tax, the amount deducted earlier will be refunded back along with interest if any to the bank account mentioned in Income Tax return.
