When do banks deduct TDS on the interest income earned by an assessee?
Banks are instructed to deduct TDS on the interest earned by an assessee when the amount crosses the benchmark of Rs 10,000 per year. To calculate the total interest earned by the depositor, the bank takes into account various deposits held by him in all the branches of the bank. The bank deducts tax on the income if it exceeds Rs 10,000. However, if the amount earned is less than Rs 10,000 in the given year, the depositor has to submit Form 15H in order to avoid deduction of TDS on his interest income.
However, the assessee must possess a valid PAN in order to apply for this form and reap benefits out of the same. This form can also be submitted via online portals or through the bank’s registered website.
Eligibility for using Form 15H
- Should be an individual and not an entity or an organization
- Should be an Indian citizen residing in India
- Should be minimum 60 years of age
- The tax to be paid by the assessee for the past financial year should be nil
What to do in case one forgets to submit Form 15H on time?
Forgetting to submit the required form on time can lead to deduction of TDS by the bank. However, the taxpayer may claim for the extra deducted tax in the following manner:
Since, the bank or the deductor deposits the deducted amount to the I-T dept; the taxpayer will have to file his income tax return to claim a refund of the excess TDS deducted by the bank. The TDS is usually deducted on a quarterly basis. Hence, one should make sure to submit the required form as early as possible in order to avoid deduction of TDS for the given financial year.
Uses of Form 15H
Form 15H is useful for a variety of purposes. The list of the same is given below :
- TDS on the interest income on Fixed Deposits: Form 15H helps an individual save taxes on the interest earned by him on fixed deposits made by him at all banking institutions.
- TDS on EPF withdrawal: Generally, TDS is applicable on Employee Provident Fund (EPF) balances in case where the EPF is withdrawn before completion of 5 years of regular or continuous service in a particular organization. However, if any individual has an accumulated fund of Rs 50,000 and above and wishes to withdraw the same before completion of the continued service period of 5 years than he may do so and is free to submit Form 15H to avoid the deduction of TDS on his EPF balance. The only thing to be kept in mind is that he should be eligible for submitting Form 15H, which means, that his taxable income inclusive of his EPF balance should not fall in the specified taxable bracket and should be free of tax liabilities.
- TDS on income generated from corporate bonds: TDS is applicable on any kind of income exceeding Rs 5,000 generated from corporate bonds. However, the individual may submit Form 15H to the issuer and place a request for no TDS deductions, subject to his meeting the required criterion in order to submit the form in question.
- TDS on income generated from Deposits made in Post Offices: Certain Digitized Post offices may also choose to deduct TDS on an individual’s income generated via deposits made by them at the respective Post Office. In this case also, the individual is free to submit Form 15H to the Post Office and request for no TDS Deduction, subject to his meeting the required criteria in order to submit the form in question.
- TDS on Rent: Rental payments exceeding Rs 1.8 lakh in a year also attract TDS. However, an individual may submit Form 15H to his tenant and request him to avoid TDS deduction. The only thing to be kept in mind is that the tax to be paid on his total income in the previous year should be zero.
How to use Form 15H to prevent TDS deduction
Form 15H is a self-declaration form which helps individuals above 60 years of age save Tax Deducted at Source (TDS) on the interest income earned by him on his fixed deposits. The assessee is supposed to submit a declaration form to his banker to apply for no deduction or lower deduction for fixed deposits made by him.
It is basically a declaration form which clearly states that the assessee is not liable to pay taxes on the interest income earned by him, as the amount earned by him as interest is lower than the maximum amount of money not taxable under IT norms.
An individual has to furnish the Form 15H to his deductor well on time i.e. either before the due date of the interest payment or before the end of the applicable financial year. This form is an undertaking by the assessee, stating that the income earned by him in previous year does not fall in the taxable income bracket and hence, he is not liable to pay any tax on the same.
Points to be kept in mind before Submitting Form 15H
- Form 15H can only be submitted by an individual who has reached the age of 60 years and above. Other individuals are required to submit Form 15G in order to avoid TDS deduction.
- Form 15H can only be submitted by Indian citizens residing in India. It is not applicable to NRIs or foreigners.
- Form 15H has to be deposited at each and every branch of the bank, which is liable to pay interest to the individual on his deposits.
- Form 15H is just a declaration or an undertaking by an individual that the interest earned on his income should be kept free from any kind of TDS deduction, as his tax liabilities on total income earned is zero.
- An individual must always keep in mind that the income generated on his fixed deposits as well as recurring deposits is always taxable. Hence, this form should only be submitted when the individual is sure that the total income earned by him falls way below the taxation bracket.
- In case an individual has taxable income and still he has submitted Form 15H to the bank, he must immediately inform his bank regarding the same. Upon receiving intimation on time, the bank will make the required changes and deduct the applicable TDS on the generated income.
- Individual need not submit these forms to the I-T department directly. It is the duty of the deductor to prepare a proper layout and submit the same to the I-T department along with all the relevant details.
The I-T Act of India requires various TDS deductors to allocate a UIN or a Unique Identification Number to all individuals submitting Form 15G or Form 15H to them. The tax deductor is supposed to file a statement of the forms submitted to them by all the tax payers on a quarterly basis. This statement consists of the details of all forms submitted to them and a list of all the sources of income which have been exempted from being taxed. These forms must be retained by the tax deductor for a minimum period of 7 years.
How to fill Form 15H
Form 15H is divided into two parts – Part 1 and Part 2.
Part1: This part has to be duly filled by citizens who have crossed the age of 60 years and wish to claim TDS on certain income earned by them.
Let’s understand various points that have to be duly filled by the applicant before submitting the form.
- The name of the individual
His/her PAN, failure of which may lead to the cancellation of the form
3. Date of birth
4. Financial year pertaining to the mentioned income
5. Residential status
6-14: Complete residential address and relevant contact information
15(a): the individual has to enter ‘YES’ if he has been assessed in any of the years out of the six assessment years prior to the mentioned assessed year
16: The estimated total income for which the applicant wishes to submit a declaration
17: The estimated total income for the current year along with the estimated income in the previous point
18: The exact number of Forms filled by the applicant along with the total income pertaining to which the declaration is being filed by the applicant
19: Details pertaining to the applicant’s number of shares, account number of the deposit, NSS details and LIC policy number along with his employee code
The applicant then needs to diligently verify and rectify the errors, if any, before signing the form.
Part 2: The second part of the form has to be filled and submitted by the individual or the institution that has taken upon the responsibility of paying the income. For example: A bank, which is supposed to pay income tax on the interest earned by a depositor on his fixed deposits.
Recent updates on Form 15H
As per changes effective from June 1, 2016, certain rental income can also be declared and included in Form 15H declarations. The various lists of incomes that fall under this category are :
- Amount Received from EPF withdrawals
- Dividend income
- Interest other than the interest earned on securities
- Income received from Life Insurance policies
- Income received from National Savings Scheme, and
- Rental Income
How to Download Form 15H
Form 15H can be availed from any of the banks and its branches. These forms are available at bank counters. Alternatively, the applicant may even choose to deposit the same via various online portals.
Form 15H can be submitted in hard copy as well as in an electronic form.
It is advisable for every citizen to be aware of their tax liabilities, the prevailing income tax slab rates and their income tax liabilities for any given year, so that they can decide in advance whether to submit Form 15H. An aware applicant may save tax deductions on his income with the help of these forms.
Form 15H for EPF Withdrawal
Form 15H for PF withdrawal has to be filled when you withdraw offline. Purpose of form 15H is to request EPFO not to deduct TDS if withdrawing EPF before 5 years of contribution to EPF as EPF withdrawal before 5 years is taxable. But most of employers insist that one submit Form 15H for any EPF withdrawal.
Provident fund withdrawal before five years of completion of service will attract TDS effective June 1 2015.
- TDS on EPF will be applicable if withdrawal is more than Rs 50,000. This is applicable from June 2016. Earlier this limit was Rs 30,000.
- TDS will be deducted at 10 % provided PAN is submitted. Otherwise, TDS is deducted at the rate of 34.608 % if PAN is not submitted.
- If you withdraw offline you can submit form 15G/15H to avoid TDS.
Points to remember
- Form 15H has to be submitted by Indian citizens, i.e., by people who have crossed or reached the age of 60 years. In such a situation, people below the age of 60 years will use Form 15G.
- This form is valid only for a period of one financial year. A fresh form has to be submitted by the depositor (if eligible for the same) every year to avoid any kind of TDS deductions on his income earned as interest.
- The banker or the deductor has to issue an acknowledgment slip to the applicant immediately after receiving the form. The slip must contain a valid acknowledgment.