In India, according to the Income Tax Act, financial institutions must deduct TDS on your interest income earned on deposits including FDs. These institutions deduct tax at source (TDS) on interest income on FDs if it exceeds Rs.5,000 or Rs.10,000 for company and bank FDs respectively.
Senior citizens are exempt from this tax up to interest earnings of Rs.50,000 on bank deposits. However, if your income is below the taxable limit, you can submit Form 15G and Form 15H and claim no TDS.
How to submit Form 15G/15H?
You can submit these forms physically or online through the Income Tax website. To submit Form 15G and Form 15H and claim the benefits of having no TDS deducted, you need to meet the following conditions:
- You must submit Form 15H if you are a senior citizen.
- You must submit Form 15G if you are not a senior citizen.
- You should be an individual to submit Form 15H and an individual, HUF, trust or other assessee, but not a company or a firm in order to submit Form 15G.
- You must be a resident of India.
- You must have a PAN card.
- You must submit fresh Form 15G and Form 15H for every financial year.
- To submit Form 15G, your total interest income for a financial year should be less than the basic exemption limit of that year.
- To submit Form 15H, the tax calculated on your total income should be nil.
It is better to submit the forms at the start of the financial year to ensure that the financial institutions do not deduct TDS. If you forget to submit Form 15G and Form 15H within the allotted timeframe, your TDS may already have been deducted.
In such cases, you should submit the forms as soon as possible as TDS is deducted quarterly and you can save any further deductions for that year. To retrieve the TDS deducted so far, file your income tax return and claim a refund. The income tax department will refund the excess TDS deducted.
Purposes of Form 15G or Form 15H
You can also submit the form for reasons other than TDS deduction such as:
If you withdraw your EPF balance before completing 5 years of continuous service in an organisation, then TDS is deducted on your EPF withdrawal under Section 192A of the Income Tax Act. To prevent this, submit Form 15G or 15H when you withdraw your EPF amounting to more than Rs.50,000.
Income from corporate bonds
If your income from corporate bonds exceeds Rs.5,000, you will attract TDS. So, you can submit Form 15G or Form 15H to the issuer requesting them not to deduct TDS on the interest income.
Post office deposits
You can also submit Form 15G and 15H to post offices if your income from investment made in their schemes doesn’t exceed your taxable limit.
TDS is also deducted on rental income if it exceeds Rs.1.8 lakhs in a financial year, which is paid by the person making the payment. If you are paying over Rs.1.8 lakh, submit Form 15G or 15H to avoid such deductions. This amount can range from 2% on plants and machinery to 10% on land, building or furniture fitting.
If you are an insurance agent, TDS will be deducted if your insurance commission exceeds Rs.15,000 in a financial year. You can submit Form 15G or Form 15H to negate this.
Now that you know how to save TDS by submitting Form 15G and Form 15H, you can consider investing in FD offered by a reputed financial institution like Bajaj Finance. When you invest in Bajaj Finance Fixed Deposits, you earn high-interest rates of up to 9.10% if you are a senior citizen opting for a cumulative FD for a period between 36 and 60 months. You can start an FD with an amount as low as Rs.25,000 and gain additional interest on renewal.
Keeping in mind the benefits of Form 15H and Form 15G on FDs, use the FD Calculator to compare the best interest rates offered by various financial institutions and select one that best serves your needs.