Submit Form 15 G or 15 H before year-end to avoid tax deduction

Of late I have been receiving queries from readers about submission of forms to banks, so as to ensure that the bank does not deduct tax at the time of paying or crediting the interest. In order to address those queries this article is about Forms 15 G and 15H, which banks normally ask depositors to fill. Let us see in in detail who can submit these forms and how to file them.

When does bank deduct tax on interest?

The bank will deduct tax if the interest being credited or paid, in respect of all fixed deposits with the bank taken together exceeds Rs 10,000 in a financial year. This limit is applicable for all the branches of a bank taken together if it has implemented core banking. For senior citizens this limit for TDS (Tax Deduction at Source) is Rs 50,000 from the current year.

Many people may not be aware that banks are not required to deduct any tax on interest credited on your saving bank accounts irrespective of the amount being credited. Please note that in case of FDs made for longer duration, where the interest will be paid to you only on maturity, the bank will deduct tax in respect of interest accrued year after year, even when no interest in fact has been paid to you.

Who can submit Form 15G?

Only, individual or Hindu Undivided Family (HUF) who are resident for income tax purposes, can submit Form 15G. So a Non-resident Indian and a Company cannot submit this form. Only an individual or HUF, whose tax liability on the estimated income for the year is nil and the amount of interest income from all sources is not likely exceed the minimum exemption limit, which is Rs 2.5 lakh for the current year, can submit this form.

So for being eligible to submit Form 15 G, you need to satisfy both the conditions enumerated above. In a situation where due to various deductions, the tax payable on your total income may be nil, but if the total amount of interest income is expected to exceed Rs 2.5 lakh, you are ineligible to submit this form. There is no option to submit this form to some banks and not to all, to make the tax deduction equal to the amount of tax liability.

Who can submit Form 15H?

Any resident individual who is above 60 years of age or completes 60 years during the financial year can submit Form 15H, provided his tax liability on the basis of his estimated income is nil for current financial year, even if the total amount of interest from all sources may exceed Rs 3 lakh, which is the exemption limit for senior citizen. So only senior citizens who do not have any tax liability can submit this form.

Precautions to take while submitting the forms

Please ensure to submit your PAN details to the bank when you submit Forms 15G or 15 H. In case you fail to provide your PAN to the bank, the bank will deduct TDS @ 20% against the applicable rate of 10% even if you have submitted the forms. I would advise you to submit a copy of your PAN card by way of separate letter and obtain written acknowledgement. It is advisable to submit the forms personally rather than sending it through post, so as to ensure proper acknowledgement for record purposes. You could also submit these forms online as well on the website of the bank.

What if the bank has already made TDS?

These forms should be submitted at the beginning of the year so as to avoid a situation where the bank has already deducted the tax before you submit the form. However, in case the bank deducts the tax in spite of you submitting the form or before you submit the same, the bank will not refund the tax already deducted, as it would have been deposited with the government. In such a situation the only option available is to file your income tax return and claim the amount of TDS as refund.

So even if you have not submitted the relevant form at the beginning of the year, you can still submit the same before the year end so as to avoid tax deduction at the end of the year, as the interest is generally credited at the end of the year by the bank.

SAVE TAXES

• Individuals or HUFs whose interest income from all sources is lesser than Rs 2.5 lakh and their tax liability for the year is nil should fill Form 15 G
   
• Those above 60 years or completing 60 years in the current financial year can submit Form 15H if their tax liability is nil even if interest from all sources exceeds Rs 3 lakh

The writer is a tax and investment expert