Individual investors fill up Form 15G and 15H to avoid tax deduction at tax. However, one should take due care while submitting these forms.
This being the first quarter of the financial year, it is important, for all the people who want to receive interest without deduction of tax, to submit form 15G and 15H immediately to the banks. Recently information to be furnished and structure of these forms have been substantially amended. Let us discuss as to who can submit form 15G and 15H and the precautions to be taken while filing these forms.
When the bank will deduct TDS
The bank is required to deduct tax at source when interest on fixed deposits as well recurring deposits taken together exceeds Rs. 10,000 in a financial year, for all the branches of the bank taken together, for the bank with core banking. Otherwise the threshold of Rs. 10,000 is to be calculated for each branch. Please note while determining the threshold of Rs. 10,000 interest on your saving bank account shall not be taken into account.
There is an impression in the minds of people that fixed deposit with tenure of more than one year, the tax is deducted only at the time of maturity of the FD, i.e. at the time of payment of the interest. This is not so. The bank calculates proportionate interest for the period ended on 31st March and will deduct tax, in case interest is more than 10,000 for a year. So please bear this in mind otherwise you will be shocked when lower maturity amount is credited due to the tax having already been deducted in earlier years.
Can you submit form 15G?
Any person other than a company and a partnership firm can submit form 15G. So even an HUF can submit form 15G. Only a resident individual can submit the form 15G so an NRI cannot submit this form. For being eligible to submit form 15G you need to satisfy two conditions together. First- your tax liability calculated on your total income should be nil and second - the total of the aggregate of your income for which form 15 G can be submitted should not exceed the basic exemption limit of Rs. 2.50 lakh.
So even if there is very small tax liability as compared to the amount of TDS which will be deducted by the bank on your interest, still you cannot submit the form 15G. It is irrelevant whether any other tax has been deducted or you are willing to pay any tax yourself. Situation may arise where due to various deductions available, the tax payable on your total income may be nil but if the total amount of such income is expected to exceed Rs. 2.50 lakh, you cannot submit form 15G.
Who can submit form 15H?
A tax payer who has completed 60 years of age can submit form 15H but needs to satisfy only one condition that tax liability on total income is nil. The quantum of interest income being received by you is not relevant.
How the forms can be submitted:
As per the revised rules forms 15G and 15H can either be submitted in physical mode or can be submitted in electronic form through the website of the bank. Though these forms can be submitted electronically all the banks are not yet ready with online functionality for submission of these forms. I would advise you not to wait for the online facility becoming available and file your physical Form 15G or 15H immediately.
Care to be taken while submitting form 15G and 15H?
Your form will not be accepted by the bank unless you submit a valid PAN, failing which the bank will deduct tax at the rate of 20 per cent. It is advisable to submit copy of your PAN card with a covering letter. Please obtain acknowledgement while submitting it. So it is advisable to get the form submitted personally and obtain acknowledgement rather than sending it through post. Acknowledgement of submission of PAN details will come handy in case of any dispute with the bank.
As per the revised form you have to submit the details of form 15G or 15H submitted to other banks as well as the total of interest income comprised in such forms, any incorrect details in the form will be immediately detected by the deductor. Since you are submitting your PAN, the assessing officer having jurisdiction over you will have online access to all the details of the forms submitted to various banks and thus will be in a position to find out any incorrect information submitted.
Please note the law provides that in case you made any false statement there is provision for imprisonment for a minimum period of three months for such misstatement. So I would advise you not to play any such trick.
What can you do if the bank has already deducted tax before you submit the form?
Ideally the form 15G or 15H should be submitted at the beginning of the year so as to avoid a situation where bank has already deducted the tax before you submit the form. However in case the tax has already been deducted by the bank before you submit the form or even in spite of having submitted the form, you cannot get refund for such tax from the bank for the tax so deducted. The only recourse available to you is to claim refund by filing your income tax return after collecting the form 16A from the bank.
So to conclude please file your form 15 G or 15H only if you are eligible to file the same and have it filed before the bank actually deducts any tax on it and mention your PAN correctly.
The author is a CA, CS and CFPCM. Presently working as Company Secretary of Bombay Oxygen Corporation Limited. Views are personal., He can be reached at email@example.com and @jainbalwantb