How Forms 15G and 15H used to save TDS on Interest Income

How Forms 15G and 15H used to save TDS on Interest Income
Every body invest money in fixed deposits to get risk less and better returns. If you go through the instructions mentioned on your FD certificate, it usually mentions:
“If the depositor is not liable to pay income tax and the interest to be paid in a financial year does not exceed the maximum amount which is not chargeable to income tax, the depositor may submit a declaration in Form No. 15G / 15H so that income tax is not deducted at source.”
Banks normally ask depositors to submit Form No. 15G and Form No. 15H each year. There are different rules as to who can submit Form No. 15G and Form No. 15H.
All banks and financial institutions will deduct TDS on all interest payments exceeding Rs. 10,000 on fixed deposits in a financial year.
If a customer receives more than Rs. 10,000 per annum on his FDs as interest from a bank, the bank deducts tax on such income arising in the hands of the customer. The tax deducted is directly paid to the government on the behalf of the customer.
Form 15G / H is a self-declaration, which is provided by a person resident in India (not being a company or firm) to their deductor that the tax on his estimated total income for the previous year, will be nil. The duty to submit these forms with assessee before end of the financial year or first payment of interest whichever is earlier.

The declaration in writing should be collected by the deductor in duplicate.
  • Form No. 15H: For senior citizens
  • Form No. 15G: For other than senior citizens
  • Previous year income should not be taxable
No TDS is deducted by banks on interest earned in saving bank accounts and recurring deposit accounts. Interest on fixed deposits is subject to deduction of tax as per income tax rules.
According to Section 197A of the Income Tax Act, 1961, an individual who is resident in India and whose estimated total income of the previous year is less than the minimum liable to income-tax will receive interest on securities, dividends and other interest without deduction of tax at source. The facility of claiming payments of interest on securities, dividends, etc., under section 197A is available only in the case of individuals who are resident in India. Accordingly, it is not permissible for Hindu undivided families and other categories of taxpayers to claim payments of interest on securities, dividends, etc., without deduction of tax at source on furnishing the declaration in Form No. 15G or 15H.
All banks and financial institutions will deduct TDS on all interest payments exceeding Rs. 10,000 on fixed deposits in a financial year. If a customer receives more than Rs. 10,000 per annum on his FDs as interest from a bank, the bank deducts tax on such income arising in the hands of the customer. The tax deducted is directly paid to the government on the behalf of the customer.
The bank issues a TDS Certificate called Form 16A which mentions the details of the TDS payment with the government. The bank will deduct tax at source once the amount of interest to be credited in respect of all the fixed deposits taken together exceeds Rs. 10,000 in a financial year.
This limit of Rs. 10,000 is applicable for each branch of a bank and not for all the branches of a bank taken together. So each branch of the bank will see whether the interest for the whole year on all the FDs exceed the threshold of Rs. 10,000.
In case of FDs made for longer duration where the interest will be paid to you only on maturity, the bank will deduct tax at source on the interest accrued for the year even though no interest in fact has been paid to you.

Conclusion :
Please ensure to submit your PAN details to the bank while submitting the Form No. 15G or 15H. In case you fail to include your PAN number to the bank, the bank will deduct TDS @ 20% against the applicable rate of 10% even if you have submitted Form No. 15G and 15H.
Please take an acknowledgement from the bank for Form No. 15 G or 15H while submitting it. Form 15G and Form 15H have the validity of only one financial year.
These forms are valid only for the financial year in which you have furnished these forms.