Sunday, April 14, 2024
Finance

7 Myths Associated With Form 15G and 15H Busted

The Income Tax Act of 1961 specifies that if you earn income during a financial year, the income is subject to taxes. The income can be in various forms such as a salary, rental properties, business, capital gains, interests earned, and so on. 

TDS or Tax Deducted on Source is a concept that is synonymous with income tax. As the name might suggest, certain entities deduct the taxes at the source of the income and pay the remaining amount to you. 

A good example of it is the interest that you earn from banks. For a given financial year, if your deposits earn more than INR 40,000 as interest and you are less than 60 years old, the bank will deduct TDS from the income. The minimum interest earned on income for senior citizens is INR 50,000. If your income is not taxable, you can eliminate the TDS on interests by filling out Form 15G

What is Form 15G?

Before you can start using Form 15G, you should be aware of when to use the form. It primarily is applicable when your income is non-taxable. 

As per the Income Tax Act of 1961, there is some relaxation on tax liability. If your income does not exceed INR 2.5 lakhs for a financial year, you are not liable to pay any taxes on it. Also, if your income exceeds INR 2.5 lakhs but is less than INR 5 lakhs, you can claim tax rebates. These essentially nullify any tax liability that you have. 

For the interests that you earn on fixed deposits, banks usually deduct TDS before crediting the interests to your account. Based on the above, if your income is non-taxable, you can use Form 15G to eliminate any TDS on the interests that you earn. 

Form 15G is simply a declaration that is made by a taxpayer that requests the banks not to deduct TDS on interests earned if the interests exceed INR 40,000 for normal citizens and INR 50,000 for senior citizens. Upon receiving Form 15G, the banks will not deduct any TDS and you will receive the entire interest. Form 15H has a similar function but applies only to senior citizens. 

Myths About Form 15G

The following are some of the myths surrounding Form 15G and the reality behind them.

Myth: 1

Anyone who does not wish to pay taxes can use Form 15G & Form 15H.

Fact: This is not true, since Forms 15G and 15H are only applicable when you have zero tax liability or your income is less than the taxable limits. 

Myth: 2

You must submit Form 15G & Form 15H only once and forget about it.

Fact: This is not true. Your eligibility for Form 15G is evaluated every year, based on your income for that financial year. Thus, you must submit Form 15G & 15H at the beginning of every financial year to bear the benefits.

Myth :3

After declaring your income in Form 15G & Form 15H, you need not pay any taxes on them.

Fact: Irrespective of whether you use the form for declaring your income for the year or not, you must declare the income while filing your tax returns.

Myth: 4

Form 15G & Form 15H must only be submitted to the financial institutions, banks, or payers. 

Fact: This is partially true. The entity that receives Form 15G & Form 15H is responsible for sending a copy of the same to the Commissioner of Income Tax. This ensures that the income tax department has the necessary information.

Myth: 5

One form is enough for all your deposits, even in different branches

Fact: No, if you have accounts and deposits in different branches, you need to submit different instances of Form 15G. For example, if you have four different accounts for deposits in four branches, you need to submit four Form 15G.

Myth: 6

You can use Form 15G & Form 15H for avoiding TDS on contract payments, rent, professional fees, etc. 

Fact: They are valid only for payments of interest on securities, dividends, NSS interest, or interest other than securities such as deposits of banks or companies. It does not apply to any other types of payments.

Myth: 7

You do not have to furnish your PAN details, since your taxable income is less than the limits and tax liability is zero.

Fact: Any individual who is submitting Form 15G & Form 15H, must submit PAN details as it is mandatory. This must be submitted along with the declaration form, otherwise, you are looking at 20% tax on the interest that you earn. 

Individuals who do not have any other source of income apart from bank deposits, or have non-taxable income, need not pay taxes on the interests that they earn on their deposits. The upper cap of the interest earned is INR 40,000 for normal citizens and INR 50,000 for senior citizens. By declaring Form 15G or 15H (for senior citizens), you can avoid the deduction of TDS on these earned interests.

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