Form 15G to Save TDS on Interest Income

Form 15G is a self-declaration form provided by the Income Tax Department in India. It is used by individuals to declare that their income is below the taxable limit and seek exemption from tax deduction at source (TDS) on certain types of income. Form 15G is valid for one financial year and needs to be filed every year if the individual continues to meet the eligibility criteria. It's important to note that submitting Form 15G does not absolve the individual from paying taxes if their total income exceeds the exemption limit. They must file their income tax returns (ITR) and pay taxes accordingly. Let's discuss in detail what Form 15G is, how to fill it, who can submit it, how to submit it, and the precautions to be taken while filing this form.

What is Form 15G?

Form 15G is a self-declaration form that individuals can file and submit to banks or financial institutions to prevent the deduction of TDS (Tax Deducted at Source) on interest income earned or accrued in a financial year. This form is used when the individual's estimated total income is below the basic exemption limit (₹2,50,000, ₹3,00,000, or ₹5,00,000, as applicable) and there is no tax liability for that particular year.

For non-senior citizens, the interest income must also be below the basic exemption limit to fill Form 15G, even if there is no tax liability on the total estimated income.
According to the Income Tax Act, financial institutions and other organizations must deduct TDS when crediting interest income to an individual's account if the amount exceeds ₹40,000 (or ₹50,000 for senior citizens).

It is a common misconception that interest on fixed deposits is calculated at maturity. In reality, interest is calculated periodically, and TDS on the interest is deducted accordingly, which is reflected in your Form 26AS.

When to File Form 15G?

Form 15G is valid for one financial year and must be submitted every year at the beginning of the financial year to avoid TDS deduction by banks or any institutions liable to deduct TDS from your interest income.

Eligibility to File Form 15G

Any Resident Individual: Must be below 60 years of age.
Hindu Undivided Family (HUF)
Trust or Any Person: Other than a company or firm.
Interest Income Criteria: Must have interest income from Fixed Deposits (FD) below the basic exemption limit of ₹2.5 lakhs.
Tax Liability: There should be no final tax liability.

Additionally, anyone with a valid PAN can submit Form 15G.

Why is Form 15G Needed?

Banks and public financial institutions deduct TDS on term deposit interest income while crediting the periodic interest to your account. Suppose your total income is below the basic exemption limit, and there is no final tax liability in a particular financial year. In that case, you can avoid a TDS deduction by filing Form 15G. Filing Form 15G allows an individual to declare that their income during the financial year is less than the basic exemption limit, ensuring no TDS is deducted from their pay. Note: Banks and financial institutions do not deduct TDS from savings bank accounts.

For Which Transactions Can 15G Form be Submitted?

Form 15G can be submitted by resident individuals under the age of 60 years during the financial year. This form is used when an individual expects to earn interest income exceeding ₹40,000 (or ₹50,000 for senior citizens) during the financial year and requests an exemption from TDS on that income. Here are some everyday transactions where Form 15G can be submitted:

Bank Deposits: To prevent TDS on interest income from fixed, recurring, and other term deposits.
EPF Withdrawals: If the total EPF balance withdrawn is more than ₹50,000 before completing five years of service.
Post Office Deposits: To avoid TDS on interest income from deposits in post office schemes.
Corporate Bonds: To avoid TDS on interest income from corporate bonds.
Income from Securities: To prevent TDS on income from securities if it exceeds the specified threshold.