To avoid the process of ITR filing only to claim back the TDS on FD interests, investors may download and submit these forms, depending on their age.
Interests on fixed deposit (FD) are fully taxable, except for senior citizens, who now get exemption up to Rs 50,000 in a financial year. For investors below 60 years of age, banks/other institutions deduct TDS (tax deducted at source) once the interest earned by an investor crosses Rs 10,000 (a proposal has been made in interim budget to increase the threshold limit to Rs 40,000). For senior citizens, from the last financial year, TDS becomes applicable once the interest on FDs crosses the threshold limit of Rs 50,000 in a financial year.
Once the threshold limit crosses, 10 per cent TDS becomes applicable, which the bank/institution cuts and deposits with the Income Tax Department.
Now, the 10 per cent TDS on FD interest has two implications. Those tax payers, who have the taxable income – including the FD interest – over Rs 5 lakh or Rs 10 lakh, need to pay additional tax of 10 per cent or 20 per cent respectively on the amount of FD interest, as banks/institutions cut only 10 per cent tax, while they fall under 20 per cent of 30 per cent tax brackets. Such additional tax payments may also get higher due to late fee, interest for delay in tax payment or penalty for not depositing tax in advance may be imposed while paying the differential tax at the time of filing the income tax return (ITR).
On the other hand, those persons, whose total income doesn’t cross the taxable limit of Rs 2.5 lakh (or Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens), need to file ITR just to claim back the TDS amount.
To avoid the process of ITR filing only to claim back the TDS, investors may download and submit either Form 15G or 15H depending on their age. Form 15G is applicable to those investors, who are less than 60 years old and have FD interest of Rs 10,000 or more, but total taxable income is less than Rs 2,50,000. A proposal has been made in the interim budget to enhance the threshold limit to Rs 40,000, above which TDS will be applicable for non-senior citizen investors, so that no 15G to be submitted till the FD interests cross Rs 40,000.
Form 15H is applicable to investors with the age of above 60 years, once the interest income exceeds Rs 50,000, but the taxable income remains below Rs 3 lakh for senior citizens or below Rs 5 lakh for super senior citizens.
Any FD investor may deposit the Forms (15G or 15H depending on eligibility), provided his/her taxable income has not exceeded the maximum amount, which is not chargeable to income tax, on the date of submission of the form and he/she believes will not exceed in the financial year. However, if the taxable income exceeds the the maximum amount, which is not chargeable to income tax, he/she should inform the bank/institution and withdraw the form.