Form 15G and 15H: How to Avoid TDS on Interest Income
- adityas41
- Feb 24
- 8 min read
As a responsible citizen, paying taxes is an essential duty. However, there are certain provisions in the Income Tax Act that allow you to avoid or reduce your tax liability in specific situations. One such provision is the option to submit Form 15G or 15H to avoid TDS (Tax Deducted at Source) on your interest income. In this post, we'll dive deep into what Form 15G and 15H are, who can use them, and how they can help you save tax on your interest earnings.
Understanding TDS on Interest Income
Before we get into the details of Form 15G and 15H, let's first understand how TDS works on interest income.
When you earn interest from sources like bank deposits, post office schemes, or company deposits, the payer (such as the bank or company) is required to deduct tax at source (TDS) before crediting the interest to your account.
The current TDS rate on interest income is 10% if your PAN (Permanent Account Number) is provided, and 20% if PAN is not provided.
For example, if you have a fixed deposit of Rs. 1,00,000 earning 7% interest per annum, the interest amount would be Rs. 7,000. If TDS is applicable, the bank will deduct Rs. 700 (10% of Rs. 7,000) as tax and credit only Rs. 6,300 to your account.
While TDS helps the government collect tax revenue throughout the year, it can sometimes lead to unnecessary tax deductions for individuals who are not liable to pay tax or whose actual tax liability is lower than the TDS rate. That's where Form 15G and 15H come into the picture.
What are Form 15G and 15H?
Form 15G and 15H are self-declaration forms that you can submit to your bank or other interest payers to request them not to deduct TDS on your interest income. These forms are a way of informing the payer that your estimated total income for the year is below the taxable limit, and hence, you're not liable to pay tax on your interest earnings.
Form 15G: Form 15G is for individuals below 60 years of age, other than companies and firms. It's a declaration that your estimated total income for the year (including the interest income) is below the basic exemption limit, which is currently Rs. 2.5 lakhs for individuals below 60 years.
Form 15H: Form 15H is for senior citizens aged 60 years or above. It's a declaration that your estimated total income for the year (including the interest income) is below the basic exemption limit for senior citizens, which is currently Rs. 3 lakhs for those aged 60-80 years and Rs. 5 lakhs for those above 80 years.
By submitting Form 15G or 15H, you're essentially telling the payer that you're not liable to pay tax on your interest income, and hence, they should not deduct TDS. This allows you to receive your interest earnings in full without any tax deduction.
Who Can Submit Form 15G and 15H?
Not everyone can submit Form 15G or 15H to avoid TDS on their interest income. These forms are meant for specific categories of individuals who meet certain conditions. Here's who can use these forms:
Eligibility for Form 15G
To submit Form 15G, you must satisfy all of the following conditions:
You're an individual below 60 years of age (other than a company or firm).
Your estimated total income for the year (including the interest income) is below the basic exemption limit of Rs. 2.5 lakhs.
You have a valid PAN (Permanent Account Number).
The interest income is not from an account/deposit held jointly with another person.
If you meet all these conditions, you can submit Form 15G to your bank or other interest payers to avoid TDS on your interest income.
Eligibility for Form 15H
To submit Form 15H, you must satisfy all of the following conditions:
You're a resident individual aged 60 years or above.
Your estimated total income for the year (including the interest income) is below the basic exemption limit for senior citizens (Rs. 3 lakhs for those aged 60-80 years, Rs. 5 lakhs for those above 80 years).
You have a valid PAN (Permanent Account Number).
The interest income is not from an account/deposit held jointly with another person.
If you meet all these conditions, you can submit Form 15H to your bank or other interest payers to avoid TDS on your interest income.
It's important to note that if your estimated total income exceeds the basic exemption limit at any point during the year, you must inform the payer immediately and withdraw the Form 15G/H declaration. Failure to do so can attract penalties and legal consequences.
How to Submit Form 15G and 15H?
Submitting Form 15G or 15H is a simple process that you can complete with your bank or other interest payers. Here's a step-by-step guide:
Obtain the Form: You can download Form 15G and 15H from the Income Tax Department's website or obtain them from your bank or post office. Many banks also provide these forms on their own websites for easy access.
Fill the Form: Fill in all the required details in the form, including your name, address, PAN, estimated total income for the year, and the amount of interest income. Be sure to provide accurate information, as any misrepresentation can attract penalties.
Submit to the Payer: Submit the duly filled and signed form to your bank or other interest payer. You can do this in person at the branch or send it by post/courier. Some banks also allow online submission of these forms through their net banking portals.
Acknowledgement: Once the payer receives your form, they'll acknowledge it and stop deducting TDS on your interest income from the date of receipt of the form.
It's important to note that you need to submit separate forms for each interest payer. For example, if you have fixed deposits in two different banks, you need to submit Form 15G/H to each bank separately.
Also, these forms are valid only for one financial year. You need to submit fresh forms at the beginning of each financial year if you want to continue avoiding TDS on your interest income.
Benefits of Submitting Form 15G and 15H
Submitting Form 15G or 15H can offer several benefits to individuals who are not liable to pay tax on their interest income:
Avoid Unnecessary TDS: By submitting these forms, you can avoid unnecessary deduction of tax at source on your interest earnings. This is especially beneficial for individuals whose total income is below the taxable limit.
Receive Interest in Full: When TDS is not deducted, you receive your interest earnings in full without any tax cut. This can be helpful in managing your cash flows and liquidity.
Save Time and Effort: If TDS is deducted on your interest income, you need to claim a refund of the excess tax paid when filing your income tax return. This can be a time-consuming and tedious process. By avoiding TDS altogether, you can save the time and effort required for claiming refunds.
Avoid Mismatch in TDS Credit: Sometimes, there can be mismatches or delays in the reflection of TDS credit in your Form 26AS (tax credit statement). This can lead to discrepancies when filing your income tax return. By not having TDS deducted, you can avoid such mismatches and simplify your tax filing process.
However, it's crucial to keep in mind that submitting Form 15G/H doesn't exempt you from paying tax on your interest income altogether. If your total income for the year exceeds the basic exemption limit, you're still required to disclose your interest earnings and pay tax on them while filing your income tax return.
Consequences of Wrong Declaration
Submitting Form 15G or 15H is a self-declaration of your income and tax liability. It's important to provide accurate and truthful information in these forms. Any false declaration or misrepresentation can attract serious consequences:
Penalty: If you make a false statement or provide inaccurate information in Form 15G/H, you can be liable to pay a penalty of Rs. 1,000 under Section 277 of the Income Tax Act.
Prosecution: In severe cases of false declaration, the Income Tax Department can initiate prosecution proceedings against you, which can result in imprisonment and fines.
Tax and Interest: If it's found that you've submitted Form 15G/H despite having a tax liability, you'll be required to pay the tax due along with interest on the unpaid amount.
Therefore, it's crucial to assess your income and tax liability carefully before submitting Form 15G or 15H. If you're unsure about your eligibility or have any doubts, it's advisable to consult a tax professional for guidance.
How Fiscal Flow Can Help
Managing your tax compliance can be a complex and time-consuming process, especially when it comes to aspects like TDS and declarations. That's where Fiscal Flow comes in. As a leading tax and compliance service provider in India, we can help you navigate the intricacies of Form 15G and 15H and ensure error-free submissions. Here's how:
Eligibility Assessment: Our team of tax experts can help you determine whether you're eligible to submit Form 15G or 15H based on your age, income, and other criteria. We'll guide you on the documents and information needed to support your declaration.
Form Filling and Submission: We can assist you in filling out Form 15G or 15H accurately with all the required details. Our team will ensure that the forms are duly signed and submitted to your interest payers well within the deadlines.
Tracking and Follow-up: Once the forms are submitted, we'll keep track of the acknowledgements from the payers and follow up in case of any delays or discrepancies. We'll also help you withdraw the declarations if your income exceeds the exemption limit during the year.
Tax Planning and Optimization: Our tax professionals can help you plan and optimize your investments and income sources to minimize your tax liability. We'll provide personalized strategies based on your financial goals and risk appetite.
Income Tax Return Filing: At the end of the financial year, we can assist you in preparing and filing your income tax return, taking into account your interest income and other sources. We'll ensure that your return is accurate, compliant, and filed within the due dates.
With Fiscal Flow, you can have the peace of mind that your tax declarations and compliance are being handled by experts. We stay updated with the latest changes in tax laws and regulations, so you don't have to worry about missing any deadlines or committing any errors.
Conclusion
Form 15G and 15H are powerful tools that can help you avoid TDS on your interest income if you meet the eligibility criteria. By submitting these self-declaration forms to your interest payers, you can receive your interest earnings in full without any tax deduction.
However, it's essential to use these forms responsibly and provide accurate information. False declarations can attract penalties and legal consequences. If you're unsure about your eligibility or have any doubts, it's always advisable to seek professional guidance.
That's where partnering with a trusted tax compliance service like Fiscal Flow can make all the difference. Our expert team can help you assess your eligibility, prepare and submit the forms accurately, and manage your overall tax compliance seamlessly.
Remember, tax planning is not just about saving tax but also about aligning your investments and income with your financial goals. By optimizing your tax position and ensuring timely compliance, you can make the most of your hard-earned money and achieve your aspirations with confidence.
So, if you're looking to avoid TDS on your interest income and streamline your tax compliance, consider submitting Form 15G or 15H with the help of Fiscal Flow. We're here to simplify taxation for you and help you navigate the complex world of tax laws with ease.
