Investments in Fixed Deposit is one of the safest forms of investments. But even FDs aren’t immune to TDS. TDS is Tax deducted at source, a means of collecting income tax under the Indian Income Tax Act of 1961. When the interest income exceeds Rs. 40,000 for regular investors and Rs. 50,000 for senior citizen investors in a year, banks deduct TDS at the rate of 10%. However, you can avoid this if you are eligible to fill Form 15G or Form 15 H.
How and when can you avoid TDS on interest income?
Since the interest income earned during the year is to be added to your income during ITR filing, TDS is applicable on it. The amount of TDS paid by you gets adjusted while filing the annual ITR. But, there’s a way to avoid paying TDS on your Fixed Deposit interest income. If your income is below the exempted limit, it means you are not liable to pay income tax. When you are not liable to pay income tax, why pay TDS at all? But your bank doesn’t know that!
That’s where the Form 15H and the Form 15G come in! In order to intimate the bank that you are not required to pay TDS, you need to submit a declaration in Form 15H or Form 15G wherein Form 15G is for individuals below 60 years and Form 15H is for individuals above 60 years of age. Please note, that you are allowed to submit these Forms only if you have no tax liability during the relevant financial year.
Now the question is- How to fill Form 15G and Form 15H? So, the form will have to be filed with the bank at the start of the fiscal year. You can fill the form both online as well as offline.
Here’s how to fill form 15G & 15H online –
Step 1: Log in to the Bajaj Finance online portal with your User ID and Password.
Step 2: Find the list of e-services or e-forms available online.
Step 3: Select form 15G or Form 15H as per your eligibility mentioned above.
Step 4: Fill in the required details and upload the required documents.
Step 5: Submit and download the acknowledgment slip!
These steps can vary from bank to bank and financier to financier. Also, always remember that the form is valid only for one financial year and hence, you need to file a fresh Form 15G/15H in the beginning of every financial year. If you are not comfortable filling the form online, you can always to it physically.
Here’s how to fill form 15G & 15H offline –
Step 1: Download the Form 15G or Form 15H from Income Tax Department website or collect it from your financier.
Step 2: Fill in all the fields of the form.
Step 3: Attach your PAN copy, 3 copies of the declaration along with the original form.
Step 4: Submit the Forms at the office of your financier.
Balance tax deduction with high interest income
Form 15G/ 15H are only meant for low-income investors or senior citizens. If you earn more than Rs.2.5 lakhs in a year, you are bound to pay income tax on FD interest income even if your interest income is less than Rs. 40,000 (or Rs. 50,000 for senior citizens).
To compensate for the tax deduction, you can look at investing in high-yielding company FDs like Bajaj Finance FD which offer interest rate up to 8.70%. This is 1-2% higher than bank FDs. With such high interest earnings, you will earn reasonably good returns even after TDS and income tax deduction.