Investors need to submit Form 15G/15H every year at the beginning of the financial year to ensure that no tax is deducted on the interest income.
Interest income on fixed deposit (FD), recurring deposit (RD) etc are taxable in the hands of investors and an investor gets the interest after tax is deducted at source (TDS) by banks and other financial institutions.
However, in case of senior citizens, banks/financial institutions deduct tax if the amount of annual interest exceeds Rs 50,000 as interest income up to this limit is tax-free in the hands of the elderly people u/s 80TTB of the Income Tax Act.
However, banks and other financial institutions like Post Office etc won’t cut tax at source on the interest income if senior citizens submit Form 15H to declare that his/her net annual income or gross interest income, will not exceed the tax-free limit of Rs 2.5 lakh during the financial year.
For other investors also, banks/financial institutions charge 10 per cent TDS on interest income, if the annual interest exceeds Rs 40,000, although taxpayers below the age of 60 years get deduction of Rs 10,000 only on interest on savings bank accounts u/s 80TTA.
To avoid TDS on interest income, non-senior citizen assessees (individuals and HUFs) need to submit Form 15G, declaring that the net annual income or gross interest income will not exceed the tax-free limit during the financial year.
To avail the benefits, such investors need to submit Form 15G/15H every year at the beginning of the financial year to ensure that no tax is deducted on the interest income.
However, this time, the financial year 2020-21 begins amid nationwide lockdown to contain the spread of highly contagious Novel Coronavirus COVID-19, forcing people to remain indoors.
So, investors may get concerned that the banks and/or financial institutions may start deducting tax on interest on FD, RD, Senior Citizen Savings Scheme etc, if they fail to submit Form 15G/15H on time.
Taking note of the restrictions on movement of people and difficulty in functioning of banks and other financial institutions with limited work force, the Central Board of Direct Taxes, to provide relief to investors, has decided that the Form 15G/15H submitted in Financial Year (FY) 2019-20 will remain valid till June 30, 2020 and banks/other financial institutions won’t deduct any tax on interest income of such investors till June end.
In its order the CBDT said, “Due to outbreak of pandamic Covid-19 virus, there is severe disruption in the normal working of almost all sectors of economy including functioning of the banks, other institutions etc. Amidst such situation, there can be instances that some eligible persons may not be able to submit the Form 15G and 15H timely to the banks and other institutions even where there is no tax liability. To mitigate the genuine hardship of such persons, the CBDT issues following directions/clarifications by exercise of its powers u/s 119 of the Act.”
“In case if a person had submitted valid Forms 15G and 15H to the banks or other institutions for FY 2019-20, then these Form 15G and 15H will be valid up to 30.06.2020 for FY 2020-21 also. It is reiterated that the payer who has not deducted tax on the basis of said Forms 15G and 15H, shall require to report details of such payments/credits in the TDS statement for the quarter ending 30.05.2020 in accordance with the provisions of rule 31A(4)(vii) of the Income-tax Rules, 1962,” the CBDT said.