Income earned through any source for a financial year is subject to Income Tax, as per the Income Tax Act of 1961. Some of the most common sources for income include business, salary, capital gains, rental property, etc. And this is where TDS or Tax Deducted on Source comes into the picture, on the different incomes.
Usually, the entity which pays the income to you deducts taxes at the source and then pays the remaining income to you. For example, your employer would deduct taxes and then pay the remaining salary to you.
Another common example is the interest that you earn from your bank deposits. If you earn more than INR 40,000 for a financial year as interests on your bank deposits and you are less than 60 years old, your bank would deduct TDS. The limit increases to INR 50,000 for senior citizens.
Individuals whose income is not taxable can take the help of Form 15G to ensure TDS does not get deducted on their interest earned.
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Form 15G is a self-declaration form that an individual must submit to the bank, asking them not to deduct TDS on the interest earned even if it exceeds the INR 40,000 per year limit. With the form, they declare that their taxable income is nil, thus there should not be any TDS deducted.
Once you submit Form 15G to the bank, they would no longer deduct any TDS on your interest earned and pay the entire amount to you.
Understanding when your income is taxable and when it is non-taxable, will help you make the most of Form 15G.
The Income Tax Act of 1961 allows some relief to the taxpayers. An individual earning less than INR 2.5 Lakh for a financial year, is not liable to pay any taxes. An individual earning more than INR 2.5 Lakh but less than INR 5 Lakh is liable to pay taxes. However, they can claim tax rebates and effectively nullify their income tax liability to the government. The Tax Code also outlines some sources of income as tax-exempt incomes.
If you earn income from your fixed deposits, your bank would deduct Tax Deducted at Source (i.e. TDS) before even crediting the interest amount. For individuals whose income is non-taxable, they can submit Form 15G to their respective banks. It will ensure that your bank will no longer deduct TDS on your interest earned.
You must meet the following criteria to be eligible to use Form 15G for TDS exemption.
- The individual must be a resident of India or part of a Hindu undivided family
- The individual must not have any tax liability
- The individual must be less than 60 years of age
- The total interest that you earn for a financial year should be less than the threshold limit set as per the tax slab. Your income from the interest should not exceed INR 2.5 Lakhs
How to Get Form 15G?
It is not all that difficult to get your hands on Form 15G. You can get Form 15G from any of the following places.
- The branch of your bank
- The website of your bank
- The official EPFO website
- The website of the Income Tax Department
When Should you Submit the Form?
Your bank will only accept Form 15G if you meet all the eligibility criteria. If you submit the form otherwise, the bank will not accept the same. It is important to keep in mind that the Form is valid only for one financial year.
If you wish to claim exemption on TDS on interest earned, you must submit the form every financial year. You can submit the form any time before the end of the financial year to benefit from the exemption.
To make the most of Form 15G, you can submit the form at the beginning of the financial year. Thereby, directing your bank not to deduct any TDS on the interest earned for the remainder of the year.
Should you forget to submit the form during a financial year, there are no fines or penalties that would be imposed on you. Your bank would deduct TDS before depositing any of the interest to your account.
If your income is non-taxable for that financial year, you can still get the TDS amount back. All you need to do is, file your income tax returns and claim a refund of the TDS.
Form 15G is a simple mechanism that allows you to save TDS on the interest that you earn on your bank deposits. If you are eligible to submit the form, you can do so anytime during the financial year. Senior citizens can use Form 15H for TDS exemption if their income from interest exceeds INR 50,000. And there is no such clause that the interest amount should be less than INR 2.5 Lakhs.