According to the provisions of the Income Tax Act, certain categories of income including interest income, commissions and dividends, among others are subject to Tax Deducted at Source (TDS).
Depending on the nature of the income, the entity making the payment deducts TDS at the specified rate and deposits the same with the Income Tax Department on behalf of the recipient.
Fortunately, there’s a way to avoid the deduction of TDS. All you need to do is submit Form 15G or Form 15H based on your taxpayer category. Continue reading to know all about these two forms.
Also Read More About What is Income Tax?
Applicability of TDS
As per the Income Tax Act, Tax Deducted at Source (TDS) is applicable on certain income if the total payable income for any financial year exceeds the specified threshold. Here’s a table outlining the most common categories of income, their TDS threshold limits and the applicable rate of tax.
|Category of Income
|Rate of TDS
|Applicable if the total dividend income exceeds ₹5,000 in a financial year
|Interest from Securities
|Applicable if the total income exceeds ₹5,000 in a financial year (in the case of debentures) or ₹10,000 in a financial year (in the case of government bonds)
|Interest from Bank Deposits
|Applicable if the total interest income exceeds ₹40,000 in a financial year (in the case of non-senior citizens) and ₹50,000 in a financial year (in the case of senior citizens)
|Interest from Provident Fund (PF)
|Applicable if the total contribution to the PF account during a financial year exceeds ₹2.5 lakhs (in the case of a non-government employee) and ₹5 lakhs (in the case of a government employee)
When Is TDS Not Applicable?
The provisions related to Tax Deducted at Source are not applicable under the following circumstances:
- If the income for a financial year doesn’t exceed the threshold limit specified by the Income Tax Act.
- If the income is paid to the nominee or the legal heir on account of the death of the recipient.
- If the recipient submits Form 15G or Form 15H to the paying entity.
What Are Form 15G and 15H?
Form 15G and 15H are both self-declaration forms that allow you to avoid the deduction of TDS on certain incomes. When you submit a duly filled and signed Form 15G or Form 15H to the paying entity, you essentially declare that you’re not liable to pay tax and that TDS should not apply to you.
The type of form you need to submit to avail exemption from TDS will vary depending on your status as a taxpayer. For instance, if you’re an individual aged below 60 years, i.e. a non-senior citizen, you need to submit Form 15G. On the other hand, if you’re an individual aged 60 years and above, i.e. a senior citizen, you need to submit Form 15H.
Where Can You Get Form 15G and Form 15H?
You can get both Form 15G and Form 15H from the entity responsible for making the payment. Some entities even allow you to download the forms from their official websites. Alternatively, you can also visit the nearest branch of the paying entity to get access to these forms.
Furthermore, you can also find the forms on the official website of the Income Tax Department. All you need to do is simply visit the official website, click on the ‘Quick Access’ tab on the right side of the webpage and then on the ‘Income Tax Forms’ link. You will be redirected to a new webpage where you can download Form 15G and Form 15H in a PDF format.
TDS on EPF Withdrawal
When you withdraw funds from your Employees’ Provident Fund (EPF) account before you complete 5 years of continuous service, TDS at 10% is deducted from the amount withdrawn.
However, TDS will only be applicable if the withdrawal amount exceeds ₹50,000 in a financial year. Even if the withdrawal amount exceeds ₹50,000, you can still avoid TDS deduction by submitting Form 15H or Form 15G for PF withdrawal.
Note: TDS on EPF withdrawals are not applicable if you withdraw after the completion of five years of continuous service.
How To Fill Form 15G or Form 15H
As a recipient and potential taxpayer, you need to know how to fill out Form 15G and 15H. This can help you avoid unnecessary TDS deductions. Here’s a quick outline of the steps you need to follow to complete the forms.
- Step 1: Download and print Form 15G or Form 15H, whichever is applicable to you.
- Step 2: Under ‘Part I’ of the form, enter your personal details such as your name, PAN, date of birth, the financial year for which you wish to make the declaration and your complete residential address.
- Step 3: Enter the estimated total income for the year in which the declaration is being made.
- Step 4: Specify details of any other Form 15G or Form 15H that you filed with other entities during the year.
- Step 5: Enter the details of the income for which you wish to make the declaration. This includes the identification number of the investment account, the nature of income and the amount.
- Step 6: Fill all the fields under the ‘Declaration/Verification’ section.
- Step 7: Affix your signature above ‘Signature of the Declarant’ and submit the form with the paying entity.
Note: You don’t have to fill ‘Part II’ of Form 15G or 15H since it is reserved for the entity paying the income.
Also Read More About How to file TDS return?
Submitting a Form 15G or 15H is a good way to avoid the deduction of TDS from your income. However, it is crucial to note that you should only submit these forms if your total tax liability during a financial year is zero. If you’re liable to pay tax during a year, you shouldn’t submit the forms to claim TDS exemption since it would amount to a false declaration.
Is submission of Form 15G or Form 15H mandatory?
No. Submitting Form 15G or Form 15H is entirely optional. You can still choose to not submit the form even if your total tax liability is zero.
What happens if I don’t submit Form 15G or Form 15H?
If you don’t submit Form 15G or Form 15H, the interest income from your deposits will be subject to TDS at 10%. For instance, if the interest income from an FD in a year is ₹1 lakh, a tax of ₹10,000 (₹1 lakh x 10%) will be deducted if you don’t submit Form 15G or Form 15H.
When should I submit Form 15G or Form 15H?
Both Form 15G and Form 15H should ideally be submitted at the beginning of a financial year to avoid TDS deductions. These forms are valid only for a financial year, which means you need to submit them every year.
Can I submit Form 15G or Form 15H even if my total income is above the basic exemption limit?
Yes. Even if your total income exceeds the basic exemption limit applicable to you, you can still submit Form 15G or Form 15H. However, your total tax liability, after claiming all deductions, must be nil.
To whom should I submit the duly filled Form 15G or Form 15H?
You should submit the duly filled and signed Form 15G or Form 15H, as applicable, to the entity deducting TDS. For instance, if you have a fixed deposit, you need to submit the form to the bank or the financial institution with whom you have the deposit.