TDS: Things Every Taxpayer Should Know!

Banks deduct TDS when a person’s interest income is more than Rs.40,000. But if a person’s income is below the taxable limit, they can submit Form 15G and 15H to request them to not deduct any TDS under section 194A of the Income Tax Act. Let’s understand this IT act and how it can save you money.

What Is Tax Deduction At Source?

TDS is the collection of tax from income sources of people. It is done by the Income Tax Department of the Government of India. TDS is applicable for interest earned on Fixed Deposits (FDs). 

Understanding How TDS Is Deducted

If a person earns Rs. 1000 in FD interest, then the bank might deduct Rs.100 (10%) as TDS. The person must report the entire Rs.1000 and claim the deducted TDS as a credit against tax liability.

TDS On Bank FD

• If the earnings of an individual are more than Rs.40,000, the interest income will be taxable. However, for senior citizens, the taxable interest income has to exceed Rs.50,000. 

• The tax on FD interest is deducted at 10% of the interest income.

TDS On NBFC FD

For NFBC (non-bank) FD, the limit for taxable income on FD interest is Rs.5,000. If a person has an interest income higher than Rs.5,000 and fails to submit PAN details with their NBFC, the TDS will be deducted at 20% and not at 10%. 

Indian residents pay lesser TDS compared to NRIs. Indian residents have to pay 10%, whereas NRIs have to pay 30% of the interest income. Both Indian residents and NRIs can submit Form 15G or Form 15H to claim tax exemption on FDs.

What Happens If The FD Interest Is Lower Than The Tax Limit?

FD is taxable even if the income is lower than the tax limit as interest income is considered as income from other sources. It is taxable as per Income Tax Laws.

But if a person’s total income including interest income is lower than the tax limit, they can be eligible for a refund of the TDS that may have been deducted before. 

What Are Form 15G And Form 15H?

15G and 15H are documents that declare if a person’s income is below the tax limit. Senior citizens are exempted from paying TDS on interest income on FDs if their total income from investments does not exceed Rs.3,00,000. 

A PAN card is compulsory while filling out the forms. Individuals can submit Form 15G and Form 15H to claim a TDS refund on FDs. 

Form 15G and 15H are valid for one financial year and, therefore, should be submitted at the beginning of a financial year. This will ensure that the bank or NBFC don’t deduct any TDS.

Difference Between Form 15G And 15H

The difference between the two Forms is that Form 15G is submitted by HUF (Hindu Undivided Family) and individual taxpayers less than 60 years of age whereas Form 15H is submitted by senior citizens.

Eligibility Criteria For Form 15G

• Income for the fiscal year must be less than Rs. 2.5 lakhs.

• Should be an Indian citizen.

• Below the age of 60 years.

• HUFs with annual income less than ₹2.5 lakh 

To download Form 15G, click here.

Eligibility Criteria For Form 15H

• Senior citizen above the age of 60 years.

• Must be an Indian citizen.

• Annual taxable income must be nil.

To download Form 15H, click here.

How To Claim TDS On FDs?

If an individual is an Indian Resident and their interest income from FD exceeds Rs.10,000 in a financial year, they can claim a refund on TDS. 

• Register on the Income tax website.

• Fill out the Form 15G or Form 15H.

• Submit it to the bank or NBFC.

These forms help to declare if a person’s total income is below the taxable limit or not. If the form is accepted, then a person can avoid a TDS deduction from interest income.

Conclusion

Filling out Form 15G and 15H helps individuals and senior citizens keep all their money without having it deducted for TDS. It is also helpful for retirees who earn mainly from their savings. By submitting these forms to banks or NBFCs, people can ensure they get their complete income without having to claim refunds later, simplifying financial transactions and managing cash flow. 

If you wish to calculate your TDS amount, click here. Call 1800-4250-0025 to check the TDS refund status.