Save TDS On FDs! What Are Form 15 And Form 15H For Saving Taxes On Fixed Deposit Accounts?

Taxpayers are liable to pay taxes on their income and income from other sources, as per the law. Now tax rates vary depending upon the type of income and the income limit itself. However, fixed deposits (FDs) which are the most traditional investment available in India and offered by banks and other financial institutions, do face tax deducted at source (TDS) on their interest earned. Simply put, your interest earned on FDs is taxable.

TDS was introduced to collect tax from the very source of income. Under TDS, a person (deductor) who is liable to make a payment of a specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the central government.

TDS is applicable on salaries, interest on Fixed Deposits (FDs), professional fees, insurance, sale of property, interest, commission, brokerage, and royalty among others. But one can claim these TDS payouts from the government in the case of FDs. All they need is to submit two forms at their respective banks.

These two forms are Form 15G and Form 15H!

What Are Form 15 and Form 15H?

As per the Income Tax Department rule, Form 15G is the declaration under sub-section (1) and (1A) of section 197A of the Income-tax Act, 1961, to be made by an individual or a person (not being a company or a firm) claiming certain receipts without deduction of tax.

Form 15H is the declaration under sub-section (1C) of section 197A of the Income-tax Act, 1961, to be made by an individual who is of the age of sixty years or more claiming certain receipts without deduction of tax.

Why Form 15 and Form 15H is important to save taxes on your FDs?

As per ICICI Bank's website, the bank will not charge tax on Fixed Deposit if a depositor's overall income is less than Rs 2.5 lakh in a year. However, some lenders may ask you to submit Form 15G or 15H to claim the deductions.

To claim TDS money that has been deduced from FDs, it is required for depositors to submit Form 15G and 15H to the bank at the beginning of the financial year to avoid additional TDS.

According to the bank, these forms serve as a self-declaration, informing the bank that TDS should not be applied on FD interest as your income is below the basic exemption limit. If your age is below 60 years, use Form 15G and if your age is 60 years or above, use Form 15H. By providing these forms to your bank, you ensure that TDS is not deducted, allowing you to receive your full FD interest without tax deductions provided your income remains within the exemption limit.

Notably, Form 15G is for individuals under the age group below 60 years. While Form 15H is for senior citizens who are above the age of 60 years.

By submitting these forms, individuals can save TDS on interest income from Fixed Deposits (FDs), Recurring Deposits (RDs) and other sources ensuring they receive the full amount without tax deduction, it added.

If your interest income from all FDs is less than Rs 40,000 in a year, the income is TDS exempt. Further, senior citizens have much higher tax benefits to the tune of Rs 50,000.

On the other hand, if your interest income is over Rs 40,000, the TDS would be 10%. Besides, if you do not have a PAN card, the bank can deduct 20% of TDS.

FDs are the safest form of investment option available in the country for generations. They are packed with guaranteed returns, no risk and offer both short and long-term options.