If you’ve ever invested in fixed-income financial products or been fortunate enough to earn high dividends, the TDS must have also scared you. If you fall within the basic exemption limit, you must understand Form 15G and Form 15H as wealth protection tools for saving TDS.
What Are Form 15G And Form 15H?
Form 15G and Form 15H are self-declaration forms that an assessee must provide to a bank/financial institution for no TDS to be deducted on interest on deposits. Individuals under the age of 60 are qualified for Form 15G, while those over the age of 60 are qualified for Form 15H.
The bank issues a TDS certificate in Form 16 A for TDS deducted, which should reflect in the assessee’s IT Form 26 AS. TDS is deducted from the deposit only if the aggregate interest income in a financial year exceeds Rs. 40000. The TDS threshold has been enhanced to Rs. 50000 for senior citizens in Union Budget 2018-19.
If the dividends earned from Mutual funds/ Stocks exceed Rs. 5000 in a financial year, you are liable to pay TDS at 10%.
Eligibility Criteria to submit Form 15G and Form 15H
To submit Form 15G, you must satisfy the following criteria-
- You must be an Indian resident or a member of a Hindu Undivided Family (HUF)
- Age must be less than 60 Years
- The total tax liability for the fiscal year must be zero.
- The total interest income/dividend payout must fall within the scope of your basic tax exemption (Rs.2.5 Lacs in FY 2022-23).
To submit Form 15H, you must satisfy the following criteria-
- You must be an Indian resident of age 60 years or above
- Total tax liability in the financial year must be nil.
- The total interest income/dividend payout must be within your basic tax exemption limit( Rs. 3 Lacs in FY 2022-23).
Rules regarding submission of Form 15G or Form 15H
- Only Resident Indians (Or HUFs in the case of Form 15 G only) are permitted to use Form 15G and Form 15H to acquire TDS immunity.
- Companies, Firms, and Non-Resident Indians are not allowed to use these forms.
- A PAN card is mandatory for submitting these forms else you are liable for TDS payment at a rate of 20%
- Must be deposited before the payment of interest on the deposit.
When should you submit 15G/H?
Both Form 15G and 15H are valid for one financial year only. So, if the tenure of your deposit exceeds one year, you must submit these forms every financial year, preferably in April, to avoid any deductions.
Where can you submit form 15G/H apart from Banks?
Other eligible cases where you can avoid TDS deduction and increase your savings, in turn, are-
Premature EPF Withdrawals
If you withdraw from your EPF before five years of continuous service, you must pay TDS. If the withdrawal amount exceeds Rs. 50,000, you can file Form 15 G/H to EPFO if your total tax liability, including the EPF withdrawal, is nil.
Dividends and Interest on Corporate Bonds
From FY 2020-21, dividend income from equity shares or Mutual Funds are taxable in the hands of the investor u/s 194 K of IT Act 1961. As a result, if the dividend income from shares or mutual funds exceeds Rs. 5000 in a fiscal year, the AMC/Company is required to deduct TDS at 10%. A similar tax rule applies to an investor’s interest income from Corporate Bonds.
You can smartly save tax by depositing Form 15G or Form 15H, as applicable to the AMC / the respective Company.
LIC Policy Maturity Benefits
If the maturity benefits from a LIC policy are not tax-free u/s 10(10d), the insurer must deduct TDS at 2% if proceeds exceed Rs. 1 Lac. According to September 2019 amendments, a TDS of 5% will be levied only on the policy’s taxable value after deducting the value of the premium paid.
If you meet the eligibility criteria outlined above, you can save tax by submitting Form 15G/15H to your nearest LIC office branch.
Post Office Deposits
Post Offices migrated to Core Banking Solutions (CBS) platforms deduct TDS on the interest paid on deposits. You may submit your Form 15G/ Form 15H, as applicable, to your nearest Post Office.
Your tenant may deduct TDS at the applicable rates if your rental income exceeds Rs. 2.4 lacs in a fiscal year. If your tax liability is nil after deducting rental income, you can either submit Form 15 G/H to your tenant or request that tax is withheld.
Suppose the commission paid to the insurance agent on their booked business exceeds Rs. 15000 in a fiscal year. In that case, the insurance company can deduct TDS( 5 % for residents and 10% for domestic companies) from it.
Penalties in case of the wrong declaration in Form 15 G/H
False declarations in Form 15 G/H are punishable under Section 277 of the Income Tax Act of 1961. Prosecution includes imprisonment for three months to two years and a fine. If the tax evasion exceeds Rs. 25 Lacs, the prison term can be extended up to seven years with a fine.
The Final Words
Now you don’t need to worry about how to avoid TDS on dividend and interest income once you’ve read the detailed guide on Form 15 G/H. If you are unlikely to have any tax liability, you can submit these forms to the relevant institution and avoid the TDS burden.
Is it mandatory to fill out Form 15 G/ H?
No, it is no longer mandatory for individuals to fill out these forms. You can claim a refund while filing your income tax returns after collecting Form 16 A from the Bank.
Can a Co-applicant submit Form 15 G/H?
If the co-applicant is your dependent spouse or children, their income will only be added to your taxable income.