Are you tired of seeing your hard-earned savings dwindle due to hefty TDS deductions on your interest income? Well, fear not! Form 15G and Form 15H might just be the solution you’ve been searching for.
Let’s embark on a journey to uncover the secrets of these magical forms that can help you save big on taxes.
What are Form 15G and Form 15H?
Form 15G and Form 15H are crucial documents used by individuals to declare that their income is below the taxable threshold, thereby seeking exemption from Tax Deducted at Source (TDS) on interest income earned from various sources. These forms play a vital role in tax planning and managing cash flows, especially for individuals, including senior citizens, and small taxpayers. Let’s delve into the detailed aspects of Form 15G and Form 15H:
- Form 15G: This form is primarily for individuals below the age of 60 years, Hindu Undivided Families (HUFs), and trusts with the goal of declaring that their total income for the financial year is below the taxable threshold. By submitting Form 15G, individuals can prevent banks and other financial institutions from deducting TDS on interest earned from fixed deposits, recurring deposits, or other savings instruments.
Banks have to deduct TDS when your interest income is more than Rs.40,000 in a year for individuals other than senior citizens (for senior citizens, the limit is Rs.50,000) under section 194A of the Income Tax Act. The bank aggregates the interest on deposits held in all its branches to calculate this limit.
If you earn interest above Rs. 40,000 in a financial year, you need to submit Form 15G at the beginning of each financial year, i.e., in the month of April.
- Form 15H: Form 15H serves a similar purpose as Form 15G but is specifically designed for individuals aged 60 years or above (senior citizens). It allows senior citizens to declare that they do not have any tax liability for the financial year due to their income being below the taxable limit. Like Form 15G, submitting Form 15H helps senior citizens avoid TDS on interest income.
If you earn interest above Rs. 50,000 in a financial year, you need to submit Form 15H at the beginning of each financial year, i.e., in the month of April.
Meet Form 15G and Form 15H
Imagine you’re a young professional in your 20s, diligently saving money by investing in fixed deposits or recurring deposits. You’ve heard about this thing called TDS, but you’re not quite sure what it is or how it affects you. Enter Form 15G! This form is your golden ticket to tax savings if you’re below the age of 60 and your total income for the year is below ₹2.5 lakh.
Now, let’s fast forward a few decades. You’ve retired, and you’re enjoying the golden years of your life. You still have some savings tucked away in fixed deposits, and you’re looking for ways to maximize your retirement income. Say hello to Form 15H! If you’re 60 years or older and your total income is below the taxable threshold, this form can help you bid adieu to pesky TDS deductions.
How Do They Work?
Let’s break it down with a real-life example:
Meet Raj, the Young Professional:
Raj, a 28-year-old software engineer, earns a decent salary and diligently saves a portion of it in a fixed deposit every year. His total income for the year is below ₹2.5 lakh, and he doesn’t want TDS eating into his savings. So, he fills out Form 15G and submits it to his bank. Voila! No more TDS deductions on his interest income.
Enter Priya, the Wise Senior Citizen:
Priya, a 65-year-old retiree, relies on the interest income from her fixed deposits to supplement her pension. She’s well aware of the tax implications but is relieved to discover Form 15H. Since her total income is below the taxable threshold, she fills out the form and submits it to her bank. Now, she can enjoy her retirement without worrying about TDS deductions.
Tips for Success:
- Stay Updated: Remember, these forms need to be submitted at the beginning of each financial year if you continue to meet the eligibility criteria.
- Be Honest: Providing false information on these forms can land you in hot water. Always declare your income truthfully to avoid penalties or legal repercussions.
- Seek Guidance: If you’re unsure whether you qualify for Form 15G or Form 15H, don’t hesitate to seek advice from a tax professional or financial advisor.
Eligibility Criteria:
- Form 15G: Individuals meeting the following criteria are eligible to submit Form 15G:
- Below the age of 60 years.
- Total income for the financial year is below the basic exemption limit, which is ₹2.5 lakh for individuals below 60 years.
- Form 15H: Senior citizens meeting the following criteria are eligible to submit Form 15H:
- Aged 60 years or above.
- Total income for the financial year is below the taxable threshold.
Key Features:
- Submission Requirements: Both Form 15G and Form 15H must be submitted to the respective financial institutions where the interest income is earned, such as banks or post offices.
- Validity Period: These forms are valid for one financial year. Therefore, individuals must submit a fresh Form 15G or Form 15H at the beginning of each financial year if they continue to meet the eligibility criteria.
- Declaration of Income: By submitting these forms, individuals declare that their total income for the financial year, including interest income, does not exceed the basic exemption limit, thereby exempting them from TDS deduction.
- Consequences of False Declaration: Providing false information or intentionally submitting Form 15G or Form 15H when not eligible can result in penalties or legal consequences.
Formats
15G
15H
Conclusion:
Form 15G and Form 15H are powerful tools that can help you keep more of your hard-earned money in your pocket. Whether you’re a young professional or a seasoned retiree, understanding how these forms work can make a world of difference in your tax planning strategy. So, why let TDS take a bite out of your savings when you can take control with Form 15G and Form 15H? It’s time to unlock the door to tax savings and financial freedom!
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Under what conditions, bank will deduct TDS even if you have filled 15H form.