The forms 15G and 15H need to be submitted for tax exemptions on interest earned on bank deposits, preferably at the beginning of the new financial year but before June end
Many people prefer to keep their savings in bank fixed deposits (FDs), as such deposits earn higher rate of interest compared with savings account in the bank. However, many of them, especially senior citizens face harassment through tax deducted at source (TDS) by the bank even if they do not have any tax liability. The FD holder, (senior citizen) can be saved from this, if the interest earned on the FD in a financial year does not exceed Rs10,000 and she submits Form 15H
to the bank in time, preferably before June end. Other individual depositors need to submit Form 15G
and copy of their permanent account number (PAN) card.
Since these forms are applicable for a particular financial year, the FD holder will have to re-submit the form, in case, s/he continues with the same deposit in the same bank branch for next FY. This is applicable for renewal of the FD as well. This means, you need to submit the applicable form for renewal of the FD too. In short, even if you had submitted either Form15G or 15H for FY2014-15, you will have to re-submit the form for FY2015-16, for the same FD or renewed FD.
As per the Income Tax (I-T) rules in force, depositors who are not liable to pay any tax on their income can get their interest on bank deposits without any deduction of tax if they submit Form 15-G or 15-H, as appropriate, to the bank concerned in the beginning of every financial year.
However, it has been the experience of several depositors that even when you have submitted these forms; banks continue to deduct tax at source on such deposits putting depositors into considerable inconvenience.
To overcome this issue, the Reserve Bank of India (RBI) on 31 May 2013 came out with an advisory for banks. It says, "With a view to protect interest of the depositors and for rendering better customer service, banks are advised to give an acknowledgment at the time of receipt of Form 15-G/15-H. This will help in building a system of accountability and customers will not be put to inconvenience due to any omission on part of the banks.”
However, this advisory serves a very limited purpose and fails to deliver anything of value to the customers. This turns into harassment to customers, who despite submitting the form are subjected to a TDS of 20%, even if their total income falls within the exempted limit for I-T. In addition, to get back the excess deduction, the hapless customer will have to file an I-T return and claim refund.
Although, there has been a demand from FD holders to refund excess TDS collected by the bank, this appears to have met a deaf ear. The reason is that the banks are mandated to deposit the TDS amount to the revenues within the stipulated time. In such cases, banks can only issue TDS certificate to FD holders.
Earlier, there were views that if you split the FD amount, then you may not be subjected to TDS from the bank. However, the Budget 2015, makes banks, which are core banking solution (CBS) compliant, to aggregate all FDs by the customer across its several branches and deduct tax if the interest on all FDs exceed Rs10,000 in the FY.
Banks deduct TDS at a rate of 10% if the FD holder has submitted her PAN details for interest that exceeds Rs10,000. In case, neither the PAN nor the Forms are submitted and interest exceeds Rs10,000 on FDs, then the bank deducts TDS at a rate of 20%. In both cases, the banks are mandated to provide TDS certificate to the FD holder. The person, who does not have a PAN card, needs to make an application in Form 60