Income Tax Rules on FD : If you are a taxpayer, it’s important to understand how the Indian Income Tax laws allow certain exemptions from Tax Deducted at Source (TDS) on specific types of income. These include interest income, dividends, rent, and insurance commissions, among others. To claim these exemptions, eligible individuals are required to submit Form 15G or Form 15H—declaration forms that inform the income payer (usually banks) that your total income is below the taxable limit. This article provides a comprehensive overview of how TDS applies to fixed deposits (FDs), who can use Form 15G and 15H, and how it helps in saving tax at source.
Income Tax Rules on FD : TDS Threshold on Fixed Deposits Increased
From April 1, 2025, the threshold limit for TDS deduction on interest earned from fixed deposits has been increased. For non-senior citizens, the TDS exemption limit has been revised from ₹40,000 to ₹50,000 per annum. This means that if the total interest you earn from fixed deposits across all branches of a bank does not exceed ₹50,000 in a financial year, no TDS will be deducted. For senior citizens, the limit was already ₹50,000, and it remains unchanged. Additionally, in other cases like interest from bonds or debentures, the threshold for TDS deduction has been increased from ₹5,000 to ₹10,000.
TDS is a tax that is deducted by banks or financial institutions at the time the income is paid or credited. For fixed deposits, banks are required to deduct TDS if the interest income exceeds the prescribed limit. However, if your total income is below the taxable threshold as defined under the Income Tax Act, you can submit Form 15G or Form 15H to avoid TDS being deducted.
Income Tax Rules on FD : What is Form 15G?
Form 15G is a self-declaration form that can be submitted by individuals below 60 years of age or Hindu Undivided Families (HUFs) to request non-deduction of TDS on certain incomes including fixed deposit interest. This form falls under Section 197A(1) and 197A(1A) of the Income Tax Act, 1961. By submitting Form 15G, you are declaring that your total income is below the basic exemption limit, and hence you are not liable to pay income tax. Therefore, there is no need for the bank or institution to deduct TDS on your interest income.
To be eligible to submit Form 15G, you must meet the following criteria:
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You should be an individual or part of a HUF (not a company or firm).
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Your age must be below 60 years.
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You must be a resident Indian.
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Your total income should be below the taxable limit, meaning no income tax is payable on your total income for the financial year.
Let’s say, for instance, you are 45 years old and earn ₹40,000 annually as interest from fixed deposits, and have no other income. If the basic exemption limit is ₹2.5 lakh, you fall well below the taxable limit. In this case, you are eligible to file Form 15G and avoid TDS.
Income Tax Rules on FD : Who Can File Form 15G?
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Only resident individuals and HUFs can submit Form 15G.
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It is not applicable for companies or firms.
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Your age should be below 60 years.
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Your total taxable income, including interest income, must be below the basic exemption limit.
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If your interest income exceeds the TDS threshold but your total income remains non-taxable, you can still submit the form to avoid TDS.
It’s important to note that filing a false declaration in Form 15G to avoid tax can result in penalties under Section 277 of the Income Tax Act. So only submit this form if you are genuinely eligible.
Income Tax Rules on FD : What is Form 15H?
Form 15H is similar to Form 15G, but it is specifically meant for senior citizens—individuals who are 60 years or older. The purpose remains the same: to prevent banks from deducting TDS on your income if your total income is below the taxable limit. If you’re a senior citizen and expecting to earn more than ₹50,000 as interest income from fixed deposits, and your total income is still non-taxable after claiming deductions, you can submit Form 15H to avoid TDS.
Eligibility to file Form 15H includes:
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You must be an individual aged 60 years or more during the financial year.
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You must be a resident Indian.
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Your total income after deductions under Chapter VI-A (like Section 80C, 80D, etc.) must be below the taxable limit.
Form 15H can also be submitted in cases where your interest income comes from other sources like loans, advances, debentures, or bonds. If the total interest from these sources exceeds ₹5,000, and you still fall under the non-taxable limit, you are allowed to submit this form.
How to Submit Form 15G and 15H
Both Form 15G and 15H are typically required to be submitted at the start of the financial year, ideally in April, to ensure no TDS is deducted during the year. These forms need to be submitted to each bank branch or financial institution where you hold fixed deposits or are earning interest income.
Nowadays, most banks offer online submission of Form 15G and 15H through their internet banking portals, making the process hassle-free. You can log in, fill out the required details like estimated income, PAN number, and submit it electronically.
It is important to ensure that you submit these forms every financial year, as the declaration is valid only for the year in which it is submitted. Failing to submit the form on time may result in TDS being deducted, and you would then need to claim a refund by filing your Income Tax Return (ITR).
Key Differences Between Form 15G and 15H
| Feature | Form 15G | Form 15H |
|---|---|---|
| Applicable to | Individuals below 60 years, HUFs | Senior Citizens (60+ years) |
| Income limit | Total income must be below exemption limit | Same, but after deductions |
| Eligibility for Companies | Not eligible | Not eligible |
| TDS Avoidance | Interest up to ₹50,000 | Interest up to ₹50,000+ |
| Applicable for FDs, Bonds | Yes | Yes |
Conclusion
In summary, if your total income is not taxable, but you are still earning interest income from fixed deposits, you should definitely consider filing Form 15G or 15H to avoid unnecessary TDS deductions. The revised TDS thresholds from April 1, 2025, make it even more crucial for taxpayers to stay informed. Make sure to submit the correct form to the bank every year to ensure that your hard-earned interest income isn’t locked away due to tax deductions that could have been legally avoided. As always, keep your financial documents in order and consult a tax advisor if you’re unsure about eligibility.
