Mr. Suresh Narayan is 63 years old and earns a total income of Rs. 2,00,000 a year from pensions, investments and interest on savings. He is not liable to pay tax because his income is lower than the minimum taxable limit. Yet, 10 per cent of his interest income will be deducted at source by the bank or financial institution. He does not want this to happen, and then go through the hassle of claiming refund while filing his tax returns. The solution? 15H! Submit Form 15H right at the beginning of the year and you can prevent banks and financial institutions from deducting tax at source. In this article, we will see who can file Form 15H and Form 15G and what is the purpose of these two forms.

Background: TDS Norms

Tax laws mandate that a bank or financial institution must deduct TDS (tax deducted at source) at 10% while paying out interest on instruments like fixed deposits if it the interest amount exceeds Rs.10,000 in a financial year for individuals or Rs.5000 for company deposits. In the Union Budget 2018, this limit has been increased to Rs.50,000 for senior citizens or those above the age of 60 years under the new Section 80TTB of the Income-Tax Act. In other words, the banks will not deduct a TDS if the interest income is lower than Rs.10,000 or, in the case of senior citizens, Rs.50,000.

What if your interest income exceeds these limits but your annual income is less than the minimum taxable bracket – or less than Rs.2,50,000? In that case, your taxable income is nil, and to avoid TDS on your interest income, you must submit Form 15G or 15H.

What Is Form 15G And Form 15H?

You must submit Form 15G or Form 15H to request the bank not to deduct tax at source on interest earned on fixed deposits over Rs.10,000 or, in the case of senior citizens, Rs.50,000.

If your annual income is below the minimum taxation bracket -- that is less than Rs.2,50,000 if you are below 60 years, less than Rs.3,00,000 for senior citizens (aged between 60 years and 80 years of age) and less than Rs.5,00,000 for super senior citizens or those above the age of 80 years, then you can submit Form 15G/H to the bank, requesting them not to deduct TDS.

An Individual is not eligible for Form 15G/H if -

• their total annual income exceeds minimum exemption limit

• their interest income exceeds minimum exemption limit

Form 15H

Form 15H is a declaration by a senior citizen or anyone above 60 years of age that their taxable income for the financial year is nil and therefore the TDS should not be deducted by the bank on the interest paid by it.

Conditions You Must Fulfil to Submit Form 15H -

• Only those INDIVIDUALS who are 60 years old or will be 60 in the year of filing or those older than 60 years can submit Form 15H

• The total tax for the previous financial year should be zero.

• Total income in the previous year should be lower than the minimum tax bracket, that is lower than Rs.3,00,000 for senior citizens and Rs.5,00,000 for super senior citizens.

• You should be a resident Indian.

When Should You Submit Form 15H?

It is strongly recommended that Form 15H be submitted before you receive your first interest payment. That way you can receive the interest income in full without losing money as TDS deduction.

Form 15G

If you are below the age of 60, have invested in some fixed products and expect to receive interest income exceeding Rs.10,000, but your total taxable income is less than Rs.2,50,000, you must submit Form 15G to the bank to prevent TDS deduction on the interest income.

Conditions you must fulfil to submit Form 15G -

• Only individuals, trusts and HUFs or Hindu Undivided Family other than a company or firm can file Form 15G.

• You should be an Indian resident.

• Tax payable should be nil

• Taxable income should be less than Rs.2,50,000.

When Should You Submit Form 15G?

Like Form 15H, it is better to submit Form 15G before receiving the first interest payment, to prevent TDS cut.

Purposes For Submitting Form 15G/Form 15H

You should submit Form 15G/ Form 15H not just to save TDS on interest income, but to prevent TDS deductions on certain other counts.

• TDS for EPF withdrawal

You can submit Form 15G/H to prevent TDS deduction on PF withdrawal before the completion of 5 years of service. Generally, TDS is deducted on your EPF (Employees Provident Fund) when you withdraw EPF funds above Rs.50,000 before 5 years of continuous service. But keep in mind, that you must still meet the above conditions for Form 15G/H.

• TDS on interest income earned from corporate bonds

TDS is deducted on interest accrued in corporate bonds above Rs.5,000. If you meet the above criteria, you can submit Form 15G/H to prevent this deduction. If the interest earned on these bonds is less than Rs.5,000, you will not lose anything by means of TDS deduction.

• TDS on income from post office deposits

TDS on interest income earned from post office deposits can also be prevented by filing Form 15G/H on meeting the conditions outlined earlier requirements.

• TDS on rent

If you receive rent above Rs.1.8 lakh a year, you are liable for TDS. You can submit Form 15G/H to stop your tenant from deducting TDS.

Form 15G/Form 15H Examples

To brush up your understanding of who must file Form 15G/Form 15H, let us look at some examples.

• Mrs. Saraswati is 40 years old. Her annual income is Rs.2,35,000. The interest receipts on her FDs are Rs.50,000. Does she need to submit Form 15G/Form 15H? Yes. Saraswati must submit Form 15G (not Form 15H because she is less than 60 years of age). Her taxable income is less than Rs.2,50,000 a year. Therefore, her net tax for the financial year is nil. So, she must file Form 15G at the beginning of the financial year to prevent TDS (since her interest income exceeds Rs.10,000.)

• Mr. Suresh Narayan is 63 years old. His annual income is Rs.2,00,000. His interest income from two FDs is Rs. 15,000 and Rs.4,000 respectively. Should Mr. Suresh submit Form 15G/Form 15H? Yes, Mr. Suresh must submit Form 15H (he is a senior citizen). His total income in a year is Rs.2,00,000 which is lower than the minimum taxable income for senior citizens (Rs.3,00,000). So, he has no tax liability. But banks will deduct TDS from the interest income because his interest income from one FD exceeds Rs.10,000. To prevent this deduction, Mr. Suresh must file Form 15H.

• Miss Carol earns Rs.3,50,000 a year. She is set to receive Rs.5,000 from one FD she has opened with a nationalised bank. Will Miss Carol need to submit Form 15G/Form 15H? Miss Carol is not eligible for Form 15G/H since her annual income is higher than the minimum taxable income of Rs.2,50,000.

• What if Miss Carol’s annual income was less than Rs. 2,50,000? If her income had been lower than Rs.2,50,000, she still needn’t have submitted Form 15G since the interest income is lower than Rs.10,000.