According to section 194A of the Income Tax Act, banks and NBFCs are required to deduct TDS when an individual's interest income exceeds Rs. 40,000 in a calendar year (the ceiling is Rs. 50,000 for senior persons).

However, if you do not fall into the taxable limit and are looking to avoid paying TDS on your income, you can submit Forms 15G and 15H to the NBFC and ask them not to collect any TDS if your whole income is below the taxable threshold.

What is Form 15G and 15H?
Form 15G and Form 15H are declarations that can be submitted by individuals to their bank or financial institution to avoid tax deduction at source (TDS) on interest income earned on certain investments.

Form 15G

Form 15G is a declaration under Section 197A of the Income Tax Act, 1961, that can be submitted by individuals below 60 years of age and Hindu Undivided Families (HUFs) to ensure that no TDS is deducted on interest income earned on fixed deposits, recurring deposits, or other savings instruments. To be eligible to submit Form 15G, the individual's total income for the financial year should not exceed the basic exemption limit.

Form 15H

Form 15H, on the other hand, is a declaration under Section 197A(1C) of the Income Tax Act, 1961, that can be submitted by senior citizens (aged 60 years and above) to ensure that no TDS is deducted from interest income earned on fixed deposits, recurring deposits, or other savings instruments. To be eligible to submit Form 15H, the senior citizen's total income for the financial year should not exceed the basic exemption limit.

It is important to note that the declarations made in these forms should be true and correct, and any false declaration can attract penalties under the Income Tax Act.

Difference between Form 15G and form 15H –

Please note that non-residents cannot claim benefits of Form 15G and 15H

Benefits of Form 15G and 15H
Here are some benefits of these forms:

• TDS exemption: Form 15G and 15H help taxpayers avoid TDS deductions on their interest income. If a taxpayer's income is below the taxable limit, submitting these forms to their bank or financial institution will prevent TDS from being deducted from the interest earned on deposits.

• Cash flow: By submitting these forms, taxpayers can ensure that their interest income is not reduced by TDS. This can help improve their cash flow and financial planning.

• No need to file Income Tax Returns (ITR): If a taxpayer's income is below the taxable limit and they have submitted Form 15G or Form 15H, they may not be required to file an income tax return.

• Easy process: Filing Form 15G or 15H is a simple process that can be done easily by filling up the form and submitting it to the bank or financial institution.

• No need to pay penalty: If a taxpayer fails to submit Form 15G or Form 15H, TDS will be deducted from their interest income. In the case of non-filing, a penalty of 1% per month can be imposed on the taxpayer for non-filing or incorrect information.

Note that not everyone is eligible to submit Form 15G or Form 15H. It is important to check the eligibility criteria before submitting these forms to avoid any penalties or other consequences.

Where can you submit forms 15G and 15H?
If you want to submit these forms, here is a step-by-step guide for the same.

Step 1: Fill out the form with your personal details, including your name, PAN, address, and other relevant information.

Step 2: Attach a self-attested copy of your PAN card with the form.

Step 3: Submit the form to your bank or financial institution before the beginning of the financial year (April 1) for which you are claiming exemption from TDS.

It is important to note that the eligibility criteria for submitting Form 15G or 15H are different for both forms. Form 15G is meant for individuals below the age of 60, whereas Form 15H is meant for individuals above the age of 60. Make sure you meet the eligibility criteria before submitting the form.

Where can you submit Form 15G or Form 15H?
Apart from banks, you can submit Form 15G or Form 15H to other financial institutions such as post offices, cooperative banks, and companies that are responsible for deducting TDS from your investment income. In addition, many of these institutions now offer the option to submit these forms online through their websites or mobile apps, which can save you time and hassle.

If you have invested in Bajaj Finance Fixed Deposit, you can submit forms 15G and 15H to save TDS deduction.

Some of the features of Bajaj Finance FD are:

Use the Bajaj Finserv customer portal to save your TDS on Fixed Deposits if eligible.

Things to keep in mind before submitting Form 15G/15H

• Only those who have a valid PAN can submit Form 15G/15H to a financial institute or NBFC; otherwise, the tax will be withheld at 20%. A copy of the PAN card should be enclosed with the cover letter.

• The person submitting Form 15G/15H should make sure they get an acknowledgement. If a dispute with the financial institute develops, the acknowledgement of the submission of PAN details is helpful.

• According to the updated form, the person must submit the information from Form 15G/15H that they have filed to other financial institutes, along with the information regarding the amount of interest income that is specified in these forms.

• Since the person has provided a PAN, the relevant assessing officer will have access to all the information that person has provided to other banks and will be able to identify any inaccurate information that person has provided.

• If it is shown that a person provided false information on these declaration forms, Indian law provides for a minimum three-month sentence in jail.

In conclusion, Form 15G and 15H are important documents that can help individuals avoid TDS deductions on their income. These forms are especially relevant for those who have low taxable income and would like to ensure that their earnings are not subject to excessive taxation. By submitting these forms to the appropriate authorities, individuals can avoid the hassle of claiming back TDS deductions at a later stage.

It is important to note that there are certain conditions that must be met to be eligible to submit Form 15G or 15H. Individuals must ensure that they fulfil these criteria before submitting the forms to avoid any legal implications.

Overall, Form 15G and 15H serve as useful tools for individuals to manage their tax liability and ensure that they are not unnecessarily burdened with TDS deductions. By understanding the nuances of these forms and their eligibility criteria, individuals can make informed decisions and optimise their tax planning strategies.

Know about TDS on Fixed Deposit here.