Form 121 Replaces 15G/15H: New TDS Exemption Rule Every Taxpayer Must Know in FY27

More than a month into the new financial year, a key income tax change has quietly come into effect, one that could directly impact your cash flows. The Income Tax Department of India has introduced Form 121, replacing the long-standing Forms 15G and 15H used to claim exemption from Tax Deducted at Source (TDS).

The move is aimed at simplifying compliance and making the process more streamlined. However, missing this update could mean unnecessary tax deductions and delayed refunds for many taxpayers.

Why Form 121 Matters

Under existing rules, TDS continues to apply to various income streams such as fixed deposit interest, dividends, and provident fund withdrawals. In most cases, at least 10% is deducted at source if thresholds are crossed.

Form 121 allows eligible individuals to prevent TDS at the source itself, ensuring the full amount is credited to their accounts. Without submitting the form in advance, taxpayers would need to claim refunds later through income tax returns, a process that can lock up funds for months.

The new form is more comprehensive yet user-friendly, consolidating earlier requirements into a single format while reducing repetitive disclosures.

Who Is Eligible To File

The benefit of Form 121 is limited to individuals whose total taxable income is nil after deductions and exemptions. Simply having income below certain thresholds (like ₹10,000 interest exemption on savings accounts) does not automatically qualify one for filing.

To be eligible, the taxpayer must:

• Be a resident individual
• Have zero tax liability for the financial year
• Submit the form before TDS is deducted

This makes the form particularly relevant for retirees, low-income earners, and individuals investing in the names of dependents with minimal taxable income.

Coverage And Key Details

Form 121 covers a wide range of income sources, including bank deposits, post office schemes, bonds, dividends, mutual funds, and even rental income. It is also crucial for those withdrawing from EPF accounts, where TDS applies if withdrawals exceed ₹50,000 before five years of service.

The form consists of two parts: Part A for personal and income details, and Part B to be completed by the institution deducting tax. It must be submitted separately for each income source, either online or offline.

Read more: From Income Tax Act 2025 to STT Hike: Major Financial and Regulatory Changes from April 1, 2026.

Conclusion

Form 121 represents a significant shift in how taxpayers can manage TDS obligations in FY27. While it simplifies the process, timely submission is critical to avoid unnecessary deductions. For eligible individuals, understanding and using this form effectively can ensure better cash flow and reduce the hassle of claiming refunds later.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.