When you invest in fixed deposits(FD), you receive interest on the principal. In case the interest earned on these deposits exceeds the maximum limit, the issuer will levy a tax deducted at source (TDS).

The maximum limit for regular investors is INR 40,000, and for senior citizens, it is INR 50,000 beyond which TDS is applicable. If you want to avoid TDS, you must submit Form 15G and Form 15 H at the start of the financial year.

What are Forms 15G and 15H?

These are self-declaration forms to ensure that the FD issuer does not cut the TDS on the interest income. These forms state that the deposit holder does not have any tax liability on the interest earned on the FDs, as the amount is less than the maximum available limit.

Regular investors must submit Form 15G while Form 15H is applicable for senior depositors. These forms have a validity of only one year, and you must send the relevant form at the commencement of every financial year to avoid TDS.

Requirements to submit Form 15G and Form 15H

The forms can be submitted by:

  • An individual or Hindu Undivided Family (Form 15G)
  • An Indian resident
  • Anyone below 60 years old (Form 15G) and over the age of 60 (Form 15H)
  • Any depositor whose tax liability on the total income is nil

Earnings based on the fixed deposit interest rates and recurring deposits are liable to tax as per your income bracket. Therefore, you need to furnish either of these forms only when you are certain that you do not have to pay on tax on the aggregate earnings.

Additionally, fixed deposit tax benefits are available when you invest in tax-saving FDs. However, TDS is applicable on these if the interest exceeds the maximum limit.

You need to send these forms to all those issuers where you hold FDs. Moreover, if you submit either of the forms at the start of the financial year and later your income increases resulting in some tax liability, you must notify the issuers. This ensures that the issuers can make the necessary modifications and levy the TDS while paying the interest as per the FD rates.

If the interest income exceeds the maximum limit, TDS is applicable at the rate of 10%. However, if you do not provide a copy of your Permanent Account Number (PAN) card, the TDS will be 20% of the interest income.

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