April 28, 2015

Rules for submitting declaration forms 15G or 15H to Banks

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Eligibility criteria for submitting declaration forms 15G or 15H to Banks:
 As we know that the income on fixed deposits is fully taxable and its comes under the head “income from other sources”. 


Now, financial year 2016-17 has started, customers who have deposited high amounts as a fixed deposit (Monthly Income Scheme, Quarterly Interest Scheme, etc) in Banks has started submitting 15G or 15H to avoid TDS (Tax deduction at Source). Let’s understand the basics of TDS on fixed deposits and tax liability. 


What is TDS?

When someone deducts tax at appropriate rate before making payment then it is known as tax deducted at sources. In this case, banks deduct the tax on the interest paid to you. 


How and when Bank deduct TDS on your Fixed Deposits?

If interest earnings from your fixed deposits exceed Rs. 10,000 in a financial year, then Bank deducts TDS (Tax deduction at source) as per the following criteria. 

  • If you have provided PAN details to the Bank then Bank would deduct TDS at the rate of 10 %.

  • In case you have not provided the PAN details then Bank would deduct TDS at the rate of 20%.

To avoid TDS, you can submit the declaration forms 15G or 15H (as per the applicability) to Banks.
  • Form 15G- It is applicable for Individual below 60 years, HUFs and Trusts.
  • Form 15H- It is applicable for individuals above 60 years.
Eligibility criteria for submitting declaration forms 15G to Banks:


  1. The final estimated total income calculated as per the income tax rules and provisions should be NIL. 
  2.  Total interests earning should not cross the basic exemption limit of Rs.2,50,000. 
Both the above mentioned  conditions should be fulfilled by you for the submission eligibility of Form 15G.

Eligibility criteria for submitting declaration forms 15H to Banks: 
  1. The final estimated total income calculated as per the income tax rules and provisions should be NIL.
  
Lets understand the above two criteria with the help of examples: 


Income details: Mr. Anand Kumar (Age 52) earns Rs. 2,60,000 from Interest from bank fixed deposits and Rs. 40,000 from other sources. So, his total income is Rs.3,00,000. 


Further, he invests Rs. 1,50,000 in Public Provident Fund (PPF). Now as per the income tax regulations, his income is not taxable (Total Income Rs 3,00,000-Investment Rs 1,50,000 = 1,50,000)-1st rule fulfilled as per above criteria of 15 G or 15 H eligibility. 


But the interest earned by Mr. Anand Kumar is 2,60,000 which is higher than the interest exemption limit of Rs. 2,50,000. So the 2nd criteria are not fulfilled. Hence, he is not eligible to submit the form 15G. In this condition, Banks would deduct the TDS on earning interest and later he can claim the excess tax deducted at the time of filing of his return of income.