In order to do proper tax-planning at the beginning of the year, it is important to look at all investments, take note of all taxes to be deducted at source (TDS) and estimate the total taxable income for the whole year from all sources, including salary, house property, any capital gains and interest income.
While planning the investments, one must take note of all TDS. Investors seeking non-deduction of TDS on interest income from bank or post office fixed deposits, recurring deposits will have to file Form 15G or 15H under the provisions of Section 197 A of the Income Tax Act, 1961. This must be done at the beginning of the financial year and these forms are valid for one financial year. The Central Board of Direct Taxes has made the process of filing these forms simple and even online. However, these forms should be filed if the individual’s total income from all sources is below the taxable limit.
Any resident individual above 60 years will have to submit Form 15H. Resident individuals below 60 years, Hindu Undivided Family (HUF) and trusts will have to file Form 15G. Non-resident individuals or companies cannot file these forms. The bank will then not deduct tax on the interest paid and will assign a unique identification number (UIN). If the forms are submitted electronically, the taxpayer will get the UIN and the details will have to be furnished by the deductor in the quarterly TDS statements.
In the Form 15G/H, an individual will have to mention the name, PAN number, residence address, estimated income and the total number of such forms submitted along with the aggregate amount of income for which the declaration is filed. Investors will have to give details of various investments, the code of the income-tax assessment office, email, phone number, occupation, etc. One must note that while submitting the forms, an individual will also have to mention details of other incomes like dividends from shares and mutual funds, amount of money withdrawn from the National Savings Scheme.
Before signing Form 15G/H, the declarant must ensure that the information furnished is correct and complete. Any false statement made by an individual will be liable to prosecution under Section 277 of the Income Tax Act, 1961. On conviction, in case where the tax sought to be evaded is more than R25 lakh, the punishment is rigorous imprisonment of six months and can even be extended to seven years, with fine.
Banks deduct TDS if the interest from fixed or recurring deposits exceeds R10,000 in a financial year.
This limit is for each branch of a bank and not for all the branches of a particular bank taken together.
The tax is deducted at 10% TDS on the interest paid and if the investor does not provide the Permanent Account Number (PAN) to the bank, then it will deduct TDS on interest earned at 20%. However, interest earned up to R10,000 a year on savings bank account is exempt from TDS. If the bank has deducted TDS for fixed or recurring deposits despite the submission of Forms 15G/15H, then the individual will have to file income-tax returns after the end of the financial year to claim refund.
The amount of TDS deducted on the interest income will reflect in Form 26AS, which contains details of all advance tax paid by the individual in a financial year; it is linked to the PAN number. The bank also issues a TDS certificate, which mentions the details of the payment made with the income tax department. One must also see all the bank statements, scan them for interest entries and calculate the total income for the financial year. If interest income has been shown for a period other than the financial year, one can use a proportion and find out how much interest pertains to the current financial year and pay tax accordingly.
Once the individual has aggregated income from all sources, the tax due can be calculated. From the final tax due, one must reduce TDS which has already been deducted and deposited. If there is any tax payable, ideally, one must pay it before March 31, because clearing all the tax dues timely can save the taxpayer from penal interest which will be charged under Section 234B or 234C of the Income Tax Act.