The Income Tax Act, 1961 specifies that you are entitled to pay a tax on the income you earn in a financial year, namely Tax Deducted at Source (TDS). The most common example is that of the tax deducted by the bank. When the interest income you earn exceeds INR 40,000 (when you are below 60), the bank deducts a tax on the amount and pays the rest. However, you can declare that you are non-taxable using the form 15g introduced by the Central Board of Directors Taxes.
There are some clauses in the income tax act that saves a person from paying the tax. The clauses are-
- Total taxable income below INR 2.5L.
- When total taxable income is above 2.5L but less than 5L, you can apply for a tax rebate which nullifies your tax liability.
In addition to these, there are certain incomes that are tax exempted.
In these cases, the taxpayer can make a declaration requesting the bank not to deduct TDS from the interest income even if it exceeds INR 40000 using form 15g as his taxable income is nil.
- You must be a citizen of India for the applicable financial year
- Your age should not be above 60.
- Tax liability calculated on the total taxable income for the financial year is nil.
- Total interest income for the financial year is less than the exemption limit.
- Only individuals can use the form 15g, not a firm or company.
You can access form 15g from
- Your bank’s branch
- Official Website of your bank
- Official Website of EPFO
- Official website of the Income Tax Department
The form has two parts-
- The first part contains the details of the taxpayer
- The second part contains the details of the tax deductor
- Make sure that you fill the PAN number correctly otherwise tax will be deducted at a 20% rate.
2. You have to submit two forms, one directed to the bank and one to the IT department.
3. If you have fixed deposits in multiple branches of the same bank, you have to submit one form to each bank.
4. Interest payable in a Savings Bank account is not liable to tax deductions.
5. In the section that asks whether you were assessed for tax under the provisions of the income tax act, state “Yes” if your taxable income exceeded the threshold limit in any of the past 6 years and mention that year.
6. In the section where the income for which you want to claim TDS exemption is asked, aggregate all the incomes under which you want an exemption.
7. If you are filling multiple forms, the total number should be mentioned.
The form is valid for one financial year only. You have to submit the form before the close of the financial year for which you seek tax exemption. Ideally, you should submit the form at the beginning of the year to inform the bank not to deduct tax on the income you earn in that year. If you fail to submit form 15g, the bank will deduct tax on the interest income earned that year.
If the bank pays interests quarterly, you have to pay TDS for the quarters before the submission of the form. Click to know more
Apart from bank interests, there are some other fields where form 15g applies if you want tax deductions. For example, EPS withdrawals, for income earned from corporate bonds, for insurance proceeds, for post office deposits, for rental income, for insurance commissions etc. False declarations can attract penalties under section 277, liable to prosecution ranging from 3 months to 7 years. So be careful while filling the form and don’t overstate your taxable income. Thanks for reading!