scorecardresearchIncome Tax: How to save TDS on your income interest

Income Tax: How to save TDS on your income interest

Updated: 04 May 2022, 07:48 AM IST
TL;DR.

To claim exemption under income tax Act, assesses must submit forms such as 15G and 15H

These forms are meant to inform the banks that they are not supposed to deduct the tax.

These forms are meant to inform the banks that they are not supposed to deduct the tax.

As the new financial year kicked off a month ago, it is seen as a good time to do the income tax planning for the year ahead. This includes submitting declarations to claim exemption under income tax Act which includes filing forms 12BBA, 15G and 15H. Most banks tend to deduct the tax deducted at source before disbursing the interest income to tax payers. 

These forms are meant to inform the banks that they are not supposed to deduct the tax since tax payer falls under exemption bracket.

What is form 12BBA?

A new Section 194P was inserted in I-T Act, 1961, wherein senior citizens above the age of 75 years, who have only pension and interest income from accounts maintained with banks in which they receive pension, are entitled to be exempt from filing Income Tax Returns (ITR).

For this, a declaration in Form 12BBA ought to be made by the senior citizen to the bank declaring both the sources of income.

"Senior citizens above 75 years have to submit a declaration in form 12BBA. The declaration confirming receipt of income only from pension & interest is to be given in this form. Specified bank will then calculate the tax & will deduct the required Tax Deductible at Source (TDS) under section 194P. Post deduction of TDS u/s 194P, senior citizen will not have to file income tax returns," says Rohit J. Gyanchandani, a Pune-based chartered accountant.

“A taxpayer must specify details such as name, PAN, total income, and details of claims. To be able to avail of this benefit, assessee should not have any other income besides pension and interest income. They must furnish a declaration in form 12BBA to the bank to this effect,” says Deepak Aggarwal, a Delhi-based chartered account and financial expert.

Although there is no time restriction for filing this form. But ideally, tax payers must submit them early in the year to avoid deduction of TDS.

How to submit form 15G or 15H?

DownloadTax payer, if senior citizen, can download form 15H from e-services section of net banking 
Regular tax payersIf you are not a senior citizen, you must download form 15G.
I-T website One can also download the form from income tax department’s website.
Fill declarationYou can fill the form, which is essentially a declaration that you are not supposed to get tax deducted at source on the interest or dividend income because you fall under the exemption limit.
SubmitSubmit the form 
Seek refund at the lastIn case you forgot to fill the form, you can do so at the end of the year and claim refund on tax paid via TDS.

Form 15G and 15H

Form 15G is submitted by tax payers who are below the age of 60 and form 15H by senior citizens. The income tax law enables taxpayers, through these forms, to receive interest, dividend and rent etc without getting the TDS deducted.

These forms are a form of self-declaration submitted by an assessee to the bank requesting them to deduct TDS on interest income since their income falls under the exemption threshold.

"Form 15G and 15H aim to enable individuals to claim relief from TDS deductions on income generated from interest. By submitting the form you can ensure that TDS is not deducted," says Neha Nagar, Founder of Taxationhelp.in.

It is vital to note that these forms can be submitted only when their tax liability is nil. This means the individual tax payer’s tax liability should be 2.5 lakh or lower, and for senior citizens, this limit is 3 lakh for year 2022-23.

The non-resident Indians can not avail this facility.

 

First Published: 04 May 2022, 07:48 AM IST