Form 15G or 15H has to be submitted by fixed deposit holders at the start of a financial year to the relevant financial entity like a bank. This is done to avoid TDS (tax deducted at source) on the interest income earned. But did you know that you can submit this form even if your income exceeds Rs 2.5 lakh, subject to certain conditions?
Read on to find out how.
Who can submit the Form?
It is important to submit Form 15G/Form 15H to the financial institution (usually banks) to avoid the deduction of tax. Banks usually deduct TDS from the interest income on FDs if it crosses the threshold limit. Form 15G is submitted by a resident individual whose age is below 60 years of age during the year as mentioned in the form.
On the other hand, Form 15H is submitted by a resident individual whose age is 60 years and above, that is, senior citizens and super senior citizens.
Archit Gupta, Founder & CEO, Cleartax.com says, “The wordings on Form 15G/Form 15H mention that an individual is required to declare the total income where tax payable is nil. The total income mentioned in the form is the net taxable income on which the taxpayer’s estimated total tax payable is nil. This form should only be submitted by an individual if tax-liability is zero.”
(Gross total income is the income which is received by you from all sources. Net taxable income refers to the income arrived at after subtracting all the tax-breaks, as applicable to you, from your gross total income.)
Abhishek Soni, CEO, tax2win.in says, “For FY 2019-20, as there is no tax payable if your taxable income does not exceed Rs 5 lakh, such individuals can submit the Form 15G/Form 15H, as applicable. Remember, as per the wordings of the form, an individual is required to provide the estimate of total income where tax payable is zero. This total income on the form is the net taxable income after claiming all the deductions available to him.”
It was announced in the Interim Budget 2019 that individuals with taxable income up to Rs 5 lakh in a financial year will be able to avail full tax rebate and thus, will not be required to pay any tax.
For those with taxable income above Rs 5 lakh
Shalini Jain, Partner, People Advisory Services, EY India says, “Even if the gross total income of a person exceeds Rs 5 lakh and he/she intends to reduce it to Rs 5 lakh or little less by way of claiming eligible deductions, he/she is eligible to submit Form 15G /Form 15H.” Do keep in mind that while submitting the form to avoid deduction of tax, your income should not exceed the basic tax-exemption. For a resident individual whose age is below 60 years, the basic exemption limit is Rs 2.5 lakh.
Jain says, “In order to submit the form one has to fulfil the eligibility criteria as mentioned in Section 197A (1B) of the Income Tax Act, 1961. The eligibility criteria suggests that an individual can submit the form only if the income for which the form is being submitted does not exceed the basic exemption limit applicable to him/her.
She says, “Suppose you wish to submit Form 15G for fixed deposit interest income earned from the bank. This form can be submitted by you only if your interest income does not exceed the tax-exemption level, i.e., your aggregate interest income should not exceed Rs 2.5 lakh in a financial year.”
Suppose your total income from salary is Rs 4.5 lakh, interest from FD with bank A is Rs 40,000 and interest from FD with bank B is Rs 30,000. You have also made PPF investment of Rs 50,000 which is eligible for tax break under section 80C.
From the above example, as your net tax liability is zero and total interest income does not exceed Rs 2.5 lakh, therefore, you can submit the Form 15G.
For senior citizens
Now, for senior citizens, the condition of income not exceeding the basic exemption limit will not apply. Soni says, “The condition of income not exceeding the basic exemption limit is applicable for individuals only who are eligible for submitting Form 15G and not for the individuals submitting Form 15H.”
For FY 2019-20, for senior citizens (aged 60 years and above but below 80 years), the basic tax-exempt income level is Rs 3 lakh. For super senior citizens (aged 80 years and above) the basic tax-exempt limit level is Rs 5 lakh.
Jain says, “The form applicable to senior citizens, i.e., Form 15H is governed by Section 197A (1C) of the Income Tax Act. As per the notes to the form, Form 15H can be filed by a senior citizen even if the income for which exemption is being claimed exceeds the basic exemption limit (i.e., Rs 3 lakh or Rs 5 lakh, as applicable). However, the net income after claiming all the deductions as applicable should be below the applicable exemption limit. The payer of income (usually banks) needs to verify that the tax liability on total income should be nil.”
Therefore, senior citizens and super senior citizens can submit Form 15H even if the income on which tax deduction has to be avoided exceeds the basic exemption limit as applicable to them.
Points to remember
Gupta says, “In case there is change in circumstances and some tax is payable, taxpayers must immediately intimate the payer about it and withdraw their form 15G/H.”
Also, Form 15-G/Form-15H cannot be submitted by non-resident Indians.