Exemption of Specific Income under Form 15G

Income under Form 15G

The Income Tax Act, 1961 governs all tax-related matters in India. Any Indian resident has to pay regular tax on their income. To make it easy for common people, the government implemented some of the provisions at their convenience. 

If you hold a Fixed Deposit with your bank, you may be aware that banks deduct a part of your taxable income from Fixed Deposit interest. However, if your taxable income from interest is less than the taxable limit, you can request that your bank not take any TDS from your account by filing Form 15G.

This article focuses on the exemption of certain income categories under Form 15G.

What is Form 15G?

Form 15G can be defined as a self-declaration statement that bank fixed deposit owners (individuals under the age limit of 60 and Hindu Undivided Family) can use to guarantee that no TDS is taken from the interest earned for the financial year. TDS acts as a helping hand in saving money.

Banking institutions are obligated to collect TDS under present income tax regulations if the interest earned on your recurring deposit; fixed deposit etc. surpasses 10,000 INR in a fiscal year. This Tax Deducted at the Source level was raised to 40,000 INR in the 2019 Interim Budget with implementation from Financial Year 2019-20.

Where may Form 15G be submitted?

On the following circumstances, a statement in Form 15G may be submitted to reduce the Tax Deducted at Source burden:

  • TDS on Fixed Deposit or Recurring Deposit Interest Income

If you have earned interest on a fixed deposit or recurring deposit, your bank should have already deducted TDS if the yearly interest on a recurring deposit or fixed deposit exceeds 10,000 INR. You can submit Form 15G to prevent TDS deduction from your banking institutions. 

  • TDS on withdrawals from EPF

If the EPF amount is withdrawn prior to 5 years of constant service, TDS is charged.

If you have fewer than five years of employment and want to receive your EPF amount in excess of 50,000 INR, you can use Form 15G. To register for this document, the taxes on your overall income, including any EPF balance removed, should be zero.

  • TDS on Corporate Bond Income

TDS is charged on corporate shares if your revenue from such bonds exceeds Rs 5,000. You can appeal that TDS not be deducted by submitting Form 15G to the provider.

  • Receipts for LIC Premiums

October 2014: If the sum received from a plan surpasses 1,00,000 INR and the maturity amount payouts are eligible for taxation, the insurance provider must apply 2% TDS before payment.

September 2019: The sum of income included of the funds received or due upon plan maturity, TDS would be charged at an increased rate of 20% if the deductee fails to provide PAN data to the LIC businesses.

You can use Form 15G to seek that no TDS be charged because your overall income is tax-free.

  • TDS on Deposits of Post Office

Post offices that have been digitized charge TDS and you can take help of Form 15G if you fulfil the requirements for filing them.

  • TDS on Rents

April 2019: TDS is levied on rents that exceed 2,40,000 INR per year. If the taxes on your overall revenue are zero, you can ask that the renter not deduct TDS using Form 15G. 

  • TDS on Commission on Insurance Sales

TDS is levied on insurance commissions that exceed Rs 15000 in a fiscal year. Insurance brokers, on the other hand, can file Form 15G for TDS non-deduction if the taxes on their overall income are zero.

Crucial Deductor Data

If you’re a deductor of Tax Deducted at Source, the Income-tax Act mandates you to assign a Unique Identification Number (UIN) to each person who completes Form 15G. This statement must be filed quarterly, and they must be kept for 7 years.

Conclusion

When one bank or other financial institution deducts Tax Deducted at Source, they are not eligible to repay it to you since they are obligated by law to submit the cash with the ITD (Income Tax Department). The sole option is to file an ITR for an income tax reimbursement. Following validation, the Income Tax Administration will execute your reimbursement application and credit the surplus tax charged for the fiscal year. It must be kept in mind that Form 15G is filled before the deadline, as it might land you in trouble.

Typically, banks subtract the Tax Deducted at Source after each quarter whenever the appropriate interest income on the fixed or recurring deposit is computed. 

You must bear in mind that this self-declaration utilizing Form 15G is only valid for that fiscal year. For the upcoming fiscal year, a new declaration must be filed. It is preferable to complete Form 15G as early as possible in order to prevent any further charges for the present financial year. 

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