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2021

Non-Deduction of TDS on Interest Income – Form 15H/15G

Non Deduction of TDS on Interest Income

It is common for many of us to have a fixed deposit in banks which earns some fixed amount of Interest. However, if the interest earned on such investment is higher than certain threshold limit, it is subject to Tax Deducted at Source. TDS on Interest income from such fixed deposits is governed under Section 194A of Income Tax Act, 1961. TDS on Interest income is applicable at the rate of 10% if amount of interest in a financial year exceeds Rs. 40,000 (prior to FY 2019-20, the limit was Rs 10,000). Banks are liable to make such deductions. These deductions take place at the time when the interest is paid by the financial institution to its customers.

TDS on Fixed Deposits Interest (Section 194A):

• Section 194A deals with deduction of TDS on interest other than interest on securities like Interest on Fixed Deposits, Interest on Loans and Advances other than banks.
• This Section is only applicable to a resident. Thus, the provisions of section 194A are not applicable in case of payment of interest to a non-resident.
• Payments made to non-residents are also covered under TDS mechanism. However, tax in such a case is to be deducted as per Section 195.

Source of Interest Income:

• Deposits with banks;
• Deposits with post offices;
• Fixed deposit schemes;
• Recurring deposit schemes.

Deductor

Deductee

Threshold Limit

Rate

With PAN

Without PAN

1.       Banking company or any bank or a banking institution.

2.       Co-operative society engaged in the business of banking.

3.       Post office (on deposit under scheme framed and notified by Central Government).

Resident Individual < 60 years

Rs. 40,000

10%

20%

Senior Citizen

Rs. 50,000

10%

20%

All Other Cases

Any

Rs. 5,000

10%

20%

 

Application for Non-Deduction of TDS by Submission of Form 15H/15G:

Form 15G/15H are declaration that can be filled out by fixed deposit holders (individuals and HUFs) to ensure that no TDS (Tax Deduction at Source) is deducted from their interest income in a year.

A Senior Citizen needs to file Form 15H while all other eligible assesses can file Form 15G.

The bank shall not deduct TDS on interest income if Form 15G/15H is furnished by the Deductee.

If a declaration is submitted under Section 197A by the recipient to the payer along with his/her PAN, then no tax is deductible subject to following conditions:

  • Recipient is a person other than a company OR firm.
  • Tax on total income of the previous year (PY) is NIL.
  • Total income does not exceed the exemption limit (i.e. for AY 2020-21, Rs.2,50,000 or Rs.3,00,000 or Rs.5,00,000, as applicable).
  • Such a declaration shall be given in duplicate Form 15G (15H for senior citizens).
  • In case of Senior Citizens Saving Scheme, 2004 (SCSS), investors can submit the declaration.
  • Nominees of investors of SCSS can also produce the declaration at the time of payment after the death of the depositor.
  • On submission of declaration to the bank, bank shall not deduct tax (subject to the conditions) on payment of interest.

Who can file Form 15G?

Can be submitted by a resident individual, HUF, Trust, or any other assessee but not a company or a firm.

Must be less than 60 years of age.

Nil Tax Liability in the relevant financial year.

Total Income in the relevant financial year is less than exemption limit.

Having a valid PAN.

Who can file Form 15H?

Only a resident individual can file this Form.

The age must be at least 60 years.

Nil Tax Liability in the concerned financial year.

Having a valid PAN.

Time of Submission of Form 15H/15G:

Form 15G/15G can be submitted at any time during a financial year. However, generally it should be submitted at the beginning of the Financial Year i.e. in the month of April.

Form 15H/15G is valid for one financial year and needs to be submitted for every financial year in which interest is due.

Steps to Submit Form 15H/15G:

Fill up different fields in Form 15G/15H.

Attach a photo copy of your PAN.

Submit the Form to your financer and get an acknowledgement copy.

Deduction of TDS at Lower Rate by Submission of Form 13:

As per provisions of Section 197, the recipient can apply in Form no.13 to the Assessing Officer to get a certificate authorizing the payer to deduct tax at lower rate (or deduct no tax, if certain conditions are satisfied).

There is no time limit for application and it can be filed at any time before actual deduction of tax. If the recipient does not have PAN, he cannot apply for the certificate.

The certificate shall be issued, directly to the person responsible for paying income, on a plain paper, under an advice to the applicant.

The certificate cannot be issued with retrospective effect.

The recipient may furnish copy of such certificate to the person responsible for paying the income for lower/no deduction of tax at source.

Appendix:

1. Form 15G;

2. Form 15H.

 

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