What can you do to make sure the bank does not deduct TDS on interest if your total income is not taxable?
Banks have to deduct TDS when your interest income is more than Rs.40,000 in a year for individuals other than senior citizens (for senior citizens, the limit is Rs.50,000) under section 194A of the Income Tax Act. The bank aggregates the interest on deposits held in all its branches to calculate this limit.
However, if your total income is below the taxable limit, you can submit Form 15G and 15H to the bank and request them not to deduct any TDS.
Form 15G and Form 15H are self-declaration forms that a taxpayer submits to the bank requesting not to deduct TDS on interest income as their income is below the basic exemption limit.
For this, providing PAN is compulsory. Some banks allow you to submit these forms online through the bank’s website.
Type of Form | FORM 15G | FORM 15H |
Type of Taxpayer | Resident Individual with age less than 60 years or HUF or trust or any other assessee but not a company or a firm | Resident individual aged 60 years or more i.e. Senior citizen. |
Condition | 1. Tax calculated on your total income is Nil | 1. Tax calculated on your Total Income is Nil |
2. The total interest income subject for the year is less than the basic exemption limit of that year, which is Rs.2.5 lakhs(old regime) or Rs.3 lakhs(new regime) for financial year 2023-24 (AY 2024-25) |
| |
Only for Residents | Please note that benefits of Form 15G and 15H cannot be claimed by Non-residents. |
Age | 50 years | 21 years | 65 years | 68 years |
Salary | Rs. 1,80,000 | – | – | – |
Pension | – | – | Rs. 1,00,000 | – |
FD interest income | Rs. 85,000 | Rs. 2,60,000 | Rs. 1,80,000 | Rs. 3,30,000 |
Total income before Section 80 deductions | Rs. 2,65,000 | Rs. 2,60,000 | Rs. 2,80,000 | Rs. 3,30,000 |
Deductions under Section 80 | Rs. 45,000 | Rs. 30,000 | Rs. 10,000 | Rs. 55,000 |
Taxable income | Rs. 2,20,000 | Rs. 2,30,000 | Rs. 2,70,000 | Rs. 2,75,000 |
Basic Exemption limit | Rs. 2,50,000 | Rs. 2,50,000 | Rs. 3,00,000 | Rs. 3,00,000 |
Age | less than 60 years | less than 60 years | more than 60 year | more than 60 year |
Tax on total income is Nil | Yes | Yes | Yes | Yes |
Interest income is less than basic exemption limit | Yes | No | N.A. | N.A. |
Eligible to submit Form 15G/15H | Yes, Form 15G | Cannot submit | Yes, Form 15H | Yes, Form 15H |
Form 15G and Form 15H are valid for one financial year. So, please submit these forms every year at the beginning of the financial year. This will ensure that the bank does not deduct any TDS on your interest income.
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A lot of taxpayers forget to submit Form 15G and Form 15H on time. In such a situation, the bank might have already deducted the TDS. Based on your situation, you can do any of the following.
While these forms can be submitted to banks to make sure TDS is not deducted on interest, there are a few other places too where you can submit them.
TDS on EPF withdrawal
TDS is deducted on EPF balance if withdrawn before 5 years of continuous service.
If you have had less than 5 years of service and plan to withdraw your EPF balance of more than Rs.50,000 , you can submit Form 15G or Form15H. However, you must fulfil conditions (listed above) to apply for these forms. It means the tax on your total income including EPF balance withdrawn should be nil.
TDS on income from corporate bonds
If you hold corporate bonds, TDS is deducted on them if your income from them exceeds Rs 5,000. You can submit Form 15G or Form 15H to the issuer requesting non-deduction of TDS.
LIC maturity proceeds
With effect from October 2014, if the amount received from a policy exceeds Rs 1 lakh and if the maturity proceeds are taxable, 1% TDS shall be deducted by the insurer before paying.
From 1st September 2019, TDS is 5% on the amount of income comprising the proceeds paid or payable upon maturity.
In case of failure to submit PAN details of the deductee to the LIC companies, TDS to be deducted at the rate of 20%.
You can submit Form 15G/Form 15H to request that no TDS be deducted since tax on your total income is nil.
TDS on post office deposits
Post offices that are digitised also deduct TDS and accept Form 15G or Form 15H, if you meet the conditions applicable for submitting them.
TDS on rent
TDS is deducted on rent exceeding Rs 2.4 lakh annually. If tax on your total income is nil, you can submit Form 15G or Form 15H to request the tenant to not deduct TDS (applicable from 1 April 2019).
TDS on Insurance Commission
TDS is deducted on insurance commission, if it exceeds Rs 15000 per financial year. However, insurance agents can submit Form 15G/Form 15H for non deduction of TDS if tax on their total income is nil.
TDS on Dividends
If the dividend income exceeds Rs. 5000, then TDS is required to be deducted. Form-15G/Form-15H can be submitted for non/lower deduction of TDS.
If you are a TDS deductor, the Income-tax Act requires you to allot a Unique Identification Number or UIN to everyone who submits the Form 15G/Form 15H. You must file a statement of Form 15G/Form 15H on a quarterly basis and must retain these forms for 7 years.
Do not submit the form if such income has to be Clubbed with the income of another person
Do not submit Form 15G, if your income has to clubbed with someone else. Interest income from an FD for a non-earning spouse or a child has to be clubbed with the income of the depositor. In such a case Form 15G is not valid. PAN of the depositor is mandatory and TDS should be deducted in the name of the depositor.
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