Forms 15G and 15H – tools to save tax?
Banks often ask depositors to file Form No. 15G or 15H every year. There are different rules regarding filing of Form No. 15G and Form No. 15H.
The submission of Form No. 15G and 15H in banks, post office , etc. help people to save Tax Deducted at Source (TDS) on the interest paid or payable to them from the said financial institution.
People often have various questions in their minds regarding the submission of forms 15G and 15H to the banks so that interest can be made free of deduction of tax at source (TDS).
When is tax deducted at source on interest?
Tax is deducted at source (TDS) when the interest paid or payable by the payer bank is more than Rs. 10,000/- per annum. If the yearly interest is not more than Rs. 10, 000/- by a bank, no tax is deducted at source.
TDS is the tax which is paid in advance by the payee and its credit can be claimed by the payee during filing the income tax return though the same can be avoided by submitting form No. 15Gor 15H as the case may be.
When is from 15G filed?
Anybody who is resident in India can submit form No. 15G but an NRI cannot submit the same. To file Form 15G, one needs to fulfill the following conditions:
1. He should be a non-senior citizen;
2. The total tax on his estimated total income as per the Income Tax Act should be nil;
3. The total amount of interest income received by him in the relevant financial year should not be more than the basic exemption limit for that year;
4. He should be a resident.
If the above conditions are satisfied, one can file Form 15G and his total interest income could be received by him without deduction of tax at source.
When is from 15H filed?
Any resident, who is more than 60 years old or has completed the age of 60 years during the financial year, can file form No. 15H if his tax liability as per his estimated total income is nil. Form No. 15H can be submitted by the senior citizens even if their total interest amount from the payer is more than Rs. 2.50 Lacs which means more than the basic exemption limit.
Distinction between form 15G and 15H:
Form 15G can be submitted by any person who is below 60 years of age. On the other hand, form 15H can be filed by the senior citizens only.
Form 15G can be filed by HUFs also but form 15H can be filed only by individuals. Form 15G cannot be filed by anybody whose income from interest exceeds the basic exemption limit applicable to him.
How are the forms filed?
The forms No. 15G & 15H are filed in duplicate and once the payer puts them on record, the total interest is to be paid to the depositor without deducting tax at source.
For which types of income can such forms be submitted?
These Forms can only be used for payments like dividends, interest on securities, national saving schemes, etc. For other types of payments these forms cannot be filed.
Points to remember while filing the Forms:
One should ensure to quote the correct Permanent Account Number (PAN) on the forms at the time of filing form No. 15G or 15H. If a taxpayer fails to provide PAN, the tax would be deductible from him at the rate of 20%. A taxpayer should keep the copy of an acknowledgement of the from filed to the deductor with the PAN to ensure that tax is not deducted.
These Forms should be filed in duplicate, out of which one is forwarded to the income tax department. The tax authorities can make inquiries regarding the declaration submitted by any depositor. The form is required to be filed at the beginning of each financial year to avoid deduction of tax before its receipt.
If one has FD at different branches of same bank, these forms should be filed at each branch where the deposits lie. For example, if Mr. A has FD at three different branches of a bank B, then he should file the forms at every branch of bank B separately.
New forms are required to be filed every year and they are examined every year. If such forms are once submitted, they are valid for the entire financial year. For the subsequent years, the forms are required to be submitted to receive the interest without deduction of tax at source.
TDS is deductible on FDs only. No TDS is deductible on interest in saving bank accounts or recurring deposit accounts.
If a FD is made for a long duration where interest is to be paid on maturity, the bank is required to deduct tax at source on the interest accrued for the relevant financial year though no interest is actually paid. One should ensure to submit form No. 15G or 15H every year even if the FD does not mature in that particular year.
Any false or wrong declaration made in the forms shall attract penalty under section 277 of the Income Tax Act, as such these forms should not be signed without going through the same very carefully. Any false declaration shall make one liable to prosecution ranging from 3 months to 7 years depending upon the nature of default. Taxpayers can be penalized no matter such wrong details have been stated intentionally or without any intention. Even ignorance of law cannot be an excuse in such cases.
Whether form15G or 15H has been filed or not, an individual should clearly declare his income at the time of filing his income tax return.
What happens if TDS is deducted in spite of filing form 15G/ 15H?
If a bank deducts the tax in spite of submitting the form or before submitting the same, the bank cannot refund the tax so deducted, as it would have already deposited the same with the government. In such cases the only option is to file the income tax return and claim a refund of the TDS.