Submit 15 G or 15 H before the year end to avoid tax deduction from your interest

Of late I have been receiving many queries from the readers about submission of forms to the banks so as to ensure that the bank does not deduct tax at source. In order to address those queries I am writing this article about form No. 15 G and 15H which banks normally ask depositors to fill in and file. Let us discuss this in detail as to who can submit these forms and care to be taken while submitting these forms.

 When can the bank deduct tax at source?

Before I explain as to who can submit form no. 15 G and who can submit 15 H, let us first understand when bank deducts tax on the interest payable. The bank will deduct tax at source once the amount of interest to be credited in respect of all the fixed deposits with the bank taken together exceeds Rs. 10,000 in a financial year. This limit of Rs. 10,000 is applicable for all the branches of a bank taken together, which has implemented core banking. For senior citizens this limit for deduction of tax at source by banks is raised to Rs. 50,000/- from current year.

One interesting point to be noted here, which many people are not aware, is 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 fixed deposits made for longer duration where the interest will be paid to you only on maturity, the bank will deduct tax at source on the interest accrued for every year even though no interest in fact has been paid to you.

 Who can submit form No. 15G?

First and foremost only any person who is resident in India, for income tax purpose, can submit form No. 15G. So an NRI can not submit this form.  Any person except a Company can submit form No. 15 G. So any Individual and HUF can submit form No. 15G. However it is not that every Individual or HUF can submit form No. 15G. Only the individual or HUF, whose tax on the estimated income for the year is nil and the amount of interest income from all the sources does not exceed the minimum exemption limit which is Rs. 2.50 lakhs 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 total income may be nil but if the total amount of interest income is expected to exceed Rs. 2.50  lakhs, you are ineligible to submit this form. You do not have 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 No. 15H?

Any resident Individual who is above sixty years of age or completes sixty years during the financial year can submit form No. 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. 3.00 lakhs, which is the exemption limit for senior citizen.  So only senior citizens who does not have any tax liability can submit this form.

 What precautions to be taken while submitting form no. 15G and 15H?

Please ensure to submit your PAN details to the bank when you submit the form No. 15G or 15 H. In case you fail to provide your PAN number to the bank, the bank will deduct TDS @ 20% against the applicable rate of 10% even if you have submitted form no. 15G and 15H. I would advise you to submit a copy of your PAN card by way of separate letter and obtain written acknowledgement. Please obtain written acknowledgement for form no. 15 G or 15H submitted. So it is advisable to submit these forms personally rather than sending it through post so as to ensure proper acknowledgement for record purposes.

What if the bank has already deducted tax before submission of the form?

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

So even if you have not submitted the form applicable 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.

I hope that from the above discussion it becomes clear that you need to comply certain conditions to be eligible for filing form No. 15G or 15H. Moreover you need to take certain precautions while filing these forms with the bank.

Balwant Jain is a tax and investment expert and can be reached on [email protected], @jainbalwant on twitter.

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