What is Form 15H and 15G? How can Form 15H help to save income tax for Senior Citizens and from where you can download it? How it is different from Form 15 G?
Over the years, there will be times in your career graph, where there will be gaps. These gaps could signify simple breaks taken from your jobs, the time taken out to study or even the time taken out when you are searching for a different job. During these times, we usually live on whatever we have saved up during those better days. Our investments could be in the form of mutual funds, direct investments in equity, or even something as simple as a fixed deposit or a recurring deposit.
While mutual funds could only give you notional profits, fixed and recurring deposits generally turn over a rate of interest that would be automatically credited to your account. This interest is generally subject to tax. The hard part is not that this is subject to tax, but the fact that this tax is automatically deducted at source.
What is tax deduction at source (TDS)?
The government brought out a regulation, so that individuals and other types of persons do not evade tax. If the government had asked the individuals or other types of persons to separately pay tax on the income while filing of returns, most of them would have evaded tax by not filing returns itself. This is especially painful for the government as the tax is a major source of revenue for the government coffers.
To mitigate this, the government introduced a scheme called tax deducted at source. This scheme put forward the idea that the person paying the income would deduct tax when he pays the income. That is, the government would no longer trust the income earner to remit tax.
How TDS on FD calculated?
If you have savings in bank deposits, the bank will deduct Income Tax at the rate of 10%, if your Interest income is above Rs. 10,000 in a year
Tax Deduction at Source for FY 2018-19 and AY 2019-20- Budget 2018,
The limit has been increased to Rs. 50000 in Budget 2018. TDS will only be deducted if your interest income is above Rs. 50000 in a year.
A Senior Citizen living mainly on Interest income will be looking for ways to reduce his tax burden. Even if your taxable income is less than the basic exemption limit, the bank will deduct tax from your interest income, if it is above Rs. 50,000. You have to file the IT returns and get refund of the tax deducted in such cases. The best option for the Senior Citizen will be to submit Form 15H to his bank and avoid TDS.
Let us look at an example:
If Mr. A deposits Rs. 50,000 in a fixed deposit in his State Bank of India account, he would receive an interest on this fixed deposit. Initially, the onus was on Mr. A to pay tax on interest. With the change in regulation, the onus was on the income payer to remit tax when he pays the interest income to Mr. A. Therefore, with the change of regulation, State Bank of India would deduct tax when the bank pays the interest income to Mr. A.
Why is this a big problem?
The whole issue is that the tax system in India is a slab system. There are different slabs of taxes for people with different incomes. The minimum slab is currently Rs. 2,50,000. This means that anybody who earns less than the minimum income of Rs. 2,50,000 does not have to pay any tax whatsoever.
Since TDS regulations brought forward a rule that tax deduction is going to be at the source irrespective of the income of the earner, there were situations where people earning less than Rs. 2,50,000 were also liable for deduction. This directly contradicted the Income Tax Act and its Rules.
For example, if Mr. A has only interest income of say, Rs. 2,00,000, in the year 2016 he would generally in most cases not be liable to pay a tax. But because of the TDS regulations, his tax is directly deducted from his income without even his consent. This was a huge concern for such taxpayers.
How did the government solve this crisis?
Simple. The government introduced two Forms – Form 15G and Form 15H. The individual taxpayer submits these Forms to the persons deducting his tax at source. These were Forms for non-deduction of tax deduction at source (TDS). If the income payer receives these Forms, he need not deduct tax deducted at source (TDS). Let us look at these a little more in detail.
What is Form 15H?
Form 15H is an undertaking that your taxable income for that year is well within the basic exemption limit and there is no tax liability. If you are submitting it for the current Financial Year, you expect your income for this financial year will be less than the exemption limit of Rs. 3 Lakhs for senior citizens. For very Senior Citizens aged 80 or above, this limit is Rs. 5 Lakhs. If you submit Form 15H to your bank, bank will pay you interest without deducting tax.
What is Form 15H used for?
Form 15H is used only for individuals. Resident Indians who are more than 60 years of age can only use this Form.
When do you submit form 15H?
Form 15H is submitted when the tax calculated on total income is to be zero. That is, there should not be any tax payable at all on the total income. Only then, the Resident Indian can submit Form 15H. It is also essential to note that the total income of the assessee who is submitting Form 15H is to be less than the minimum exemption limit, i.e. Rs. 3,00,000.
Let us look at some examples to understand this better!
Mr. A is 65 years old and now has a total income of Rs. 2,80,000, out of which rental income is Rs. 40,000 and Interest Income is Rs. 2,40,000. He also has a life insurance policy for Rs. 50,000 because of which his total income is reduced by Rs. 50,000 from Rs. 2,80,000, thus ending at Rs. 2,30,000. Have we fulfilled all the conditions here? Is the total income less than the minimum exemption limit? It is Rs. 2,30,000, so yes! Is the total interest less than the minimum exemption limit? This does not matter anymore! Why? The Form 15H does not entail that the interest income has to be less than the minimum exemption limit! Can Mr. A now apply for non-deduction of income through Form 15H?
Now moving on to Form 15G.
What is form 15G and what is Form 15G used for?
Form 15G is for individuals and/or HUF. Form 15G is used only for Resident Indians who are less than 60 years of age as on the financial year for which the taxpayer submits the Form. The tax calculated on total income is to be zero. That is, there should not be any tax payable at all on the total income. Only then, the Resident Indian can submit Form 15G. It is also essential to note that the total income of the assessee who submits Form 15G is to be less than the minimum exemption limit, i.e. Rs. 2,50,000. Also, the interest income is to be individually less than the minimum exemption limit – Rs. 2,50,000.
Let us look at an example to understand this better:
Mr. A is 45 years old and now has a total income of Rs. 2,80,000, out of which the rental income is Rs. 40,000 and Interest Income is Rs. 2,40,000. He also has a life insurance policy for Rs. 50,000 because of which his total income is reduced by Rs. 50,000 from Rs. 2,80,000, thus ending at Rs. 2,30,000. Have we fulfilled all the conditions here? Is the total income less than the minimum exemption limit? It is Rs. 2,30,000, so yes! Is the total interest less than the minimum exemption limit? Rs. 2,40,000 is less than Rs. 2,50,000, so yes! Can Mr. A now apply for non-deduction of income through Form 15G?
Yes, he can!
Form 15 G-Example
Mr. A is 45 years old and now has a total income of Rs. 2,80,000, out of which the rental income is Rs. 20,000 and Interest Income is Rs. 2,60,000. He also has a life insurance policy for Rs. 50,000 because of which his total income is reduced by Rs. 50,000 from Rs. 2,80,000, thus ending at Rs. 2,30,000. Have we fulfilled all the conditions here? Is the total income less than the minimum exemption limit? It is Rs. 2,30,000, so yes! Is the total interest less than the minimum exemption limit? Rs. 2,60,000 is not less than Rs. 2,50,000, so no! Can Mr. A apply now for non-deduction of income through Form 15G?
No, he cannot!
What is the Difference between form 15G and 15H
Essentially, the only difference between Form 15G and Form 15H is the fact that the former is for people who are less than 60 years of age, while the latter is for those who are greater than 60 years of age!
Also, to apply for Form 15H, you need not have interest income less than the minimum exemption limit. This is an additional benefit given to senior citizens.
Due Dates for Form 15G and Form 15H
The CBDT has clarified that the recipient has to submit the self-declaration in Form 15G/15H to the payer/deductor on an annual basis, for each financial year, instead of submission of the same for each transaction. It is better to submit 15G/15H in April of each financial year to avoid any TDS.
Do we use form 15H or 15G for PF withdrawal?
We use both Form 15H and 15G for PF withdrawal. 15H for Senior Citizens and 15G for people less than 60 Years of age.
TDS on PF withdrawal
If PF is withdrawn within the completion of 5 years of continuous service, TDS is liable to be deducted. This is avoided by submitting Form 15G/15H. It is important to note that the other conditions with respect to TDS are also to be fulfilled.
TDS on Interest from Bonds –
For interest greater than Rs. 5,000, TDS is liable to be deducted by the issuer. By submitting Form 15G/15H, this can be avoided.
Which form do you use for fixed deposit – Form 15H or 15G
You can use Form 15H or 15G, for fixed deposits, depending upon your age.
TDS on Post Office deposits and rent
All post office deposits and rent greater than Rs. 1,80,000 is liable for TDS deduction. By submitting Form 15G/15H, this can be avoided.
Who is eligible for form 15G and 15H?
It is important to note that a Hindu Undivided Family can only submit Form 15G, and is not eligible to submit Form 15H. Form 15H is only for individuals! Also, for interest from fixed deposits, it is a best practice to submit one copy of the Form at each branch in which the fixed deposit is being made. These are also not required for income tax purposes. Also, Form 15G cannot be submitted in cases where clubbing provisions are applicable. Interest income earned by a non-earning spouse has to be clubbed with the spouse who is earning an income. In these cases, Form 15G/Form 15H will not be applicable.
How to fill form 15H and Form 15G – Sample Format
Some of the important information that has to be entered to fill Form 15G and Form 15H(Sample Format) is as below:
- Name of Assessee (Declarant) – Name as per PAN
- PAN of the Assessee – PAN Number
- Status – Individual/HUF
- Previous Year – Financial Year for which the Form is being filed
- Residential Status – Only Residents
- Flat/Door/Block No.
- Name of Premises
- Telephone No.
- (a) Whether assessed to tax under the Income Tax Act, 1961? – This is only for the past 6 years. (b) If yes, latest assessment year for which assessed – The year when the income was assessed for tax.
- Estimated income for which declaration is made – Total income on which TDS is not to be deducted.
- Estimated total income of the previous year in which income mentioned in Column 16 to be included – Total Income of the previous year.
- Details of Form 15G other than this Form filed during the previous year, if any; a total number of Form 15G filed and the aggregate amount of income for which the Form 15G filed – All the Form 15Gs filed in the previous year should be mentioned here.
- Details of income for which declaration is filed; Identification number of relevant investment/account etc., Nature of Income, Section under which tax is deductible, Amount of income – Details of the accounts for which the declaration is being filed.
- Signatures – Whether you are signing in your individual capacity, or as a Karta of a HUF or AOP.
How to download form 15H – Post Office
Download form 15G – SBI
How can TDS be avoided- 15H for non deduction of TDS
Form 15H cannot be used for tax avoidance. This is a facility given to the tax payer whose tax liability is Nil. So, you have to exercise this option carefully. At the end of the year, if there is a tax liability, you have to discharge the liability. But Form 15H and Form 15G is a useful tool for those tax payers, who are eligible for this. Otherwise, they have to file the IT returns to get refund of the TDS made by the bank.