In order to save tax one need to submit Form 15G & 15H to the bank. If the interest earned on Fixed Deposits is more than 10,000 but the total income of an individual does not fall in income Tax slab form 15G & 15H need to be submitted in order to have zero Tax deduction or Lower Tax deduction on the interest earned.
Tax Deduction on Fixed Deposit Interest
Fixed Deposit (FD) is the type of investment where money is invested in a bank for a fixed amount of time, with a predefined interest rate. There are different options available for FD; some of them are Regular FD, Floating FD and Tax Saving FD.
- Regular FD is one in which Time of investment ranges from 1 week to 10 years with a fixed pre-defined interest rate.
- In Floating FD, as the name suggest the rate of interest is not fixed it changes as per the markets ups and down.
- Tax saving FD schemes is offered by banks to attract investor to save tax where in investor has to deposit money for minimum of 5 years.
Few Things to remember while making FD
- Select right tenure to make FD Monthly, Quarterly, Half yearly, yearly as interest paid is different on different tenure.
- Carefully read the Penalty clause, because breaking FD before maturity can cost you high.
- Even though Fixed Deposits are easy option with less risks and high returns, one need to keep watch on the tax applicable on the interest earned through fixed deposit.
- Submitting you PAN details to bank is mandatory to avoid higher TDS deduction.
Non Deduction of TDS on FDR interest
According to Income Tax Act, 1961 Section 194 A, if the sum of interests earned in a financial year exceeds 10,000 then it becomes taxable. Bank deducts Tax and pays it to government on behalf of customer. For a resident individual and HUF the TDS deduction would be 10 % for amount less than 10 lacs.
Tax shall not be deducted at source on any payment of interest payable to a person (other than a company or a firm), who furnishes a declaration in writing (in duplicate) in form 15G/15H (as the case may be) that the tax on his estimated total income of the previous year will be nil.
Note: It is applicable only if you does not fall in income Tax slab.
Some common question regarding Form 15G & 15H
Q. What is the eligibility for submitting form 15G & 15H?
A. Eligibility criteria is total income for the financial year does not fall in income Tax slab.
Q. Who need to submit form 15G and 15H?
A. Form 15H need to be submitted by a senior citizen (Age above 60 years) and Form 15G need to be submitted by individuals other than senior citizen.
Q. What is the validity of form 15G & 15H?
A. Validity of the forms is single financial year.
Q. What is the proof I have submitted the 15G & 15H form I have submitted at the bank?
A. Banker would issue acknowledgement statement to the submitter, also bank issue form 16A stating the deduction of TDS.
Q. What if Individual miss to submit form 15G & 15H to the bank and TDS was deducted, but my income is non-taxable; how can one get my money back?
A.One need not to worry you are eligible for tax refund from government. Individual need to submit the 16A form received from bank while filing tax.